iBuyers Say They’ll Soon be Back in Business

iBuyers Say They’ll Soon be Back in Business

Zillow and Redfin announced  that they will both restart their home-flipping programs despite forecasts for falling revenues. The two companies both informed investors of the decision on earnings calls during which they also warned that the past quarter’s stronger-than-expected revenue numbers were based mainly on the early part of the year. The end of Q1 2020 found both digital brokerages deep in the red.

Zillow reported it had sold six times as many homes during Q1 2020 as it had during the same time a year earlier and its revenue was up 148 percent. However, the quarter ended with the company losing about $163 million, more than double the amount it lost in 2019. Redfin’s Q1 2020 revenue was up 73 percent year-over-year, beating expectations of $178 million by about $19 million, but Redfin Now, the company’s flipping operation, did not turn a profit in Q1 2020.

Despite the relatively gray outlook for both Zillow Offers and Redfin Now, both companies said they plan to reopen their instant-offer programs in certain areas of the country. Redfin will reopen in Austin, Denver, and parts of California’s Inland Empire. Zillow did not specify where the its programs would reopen, but said it would restart “within the month.”

Home flipping programs had stopped

Most i-buyers stopped making cash offers on sellers’ homes sometime in March of this year, and many of them were harshly criticized for invoking terms in many sellers’ contracts that allowed them to retract recent offers. Redfin noted it would buy fewer homes, pay less for those homes, and “flip homes faster to trim costs,” according to the Seattle Times.

“By May, we’ll know whether homeowners will pay a premium for liquidity in an uncertain market,” said Redfin CEO Glen Kelman at the time. Redfin has already brough back 135 employees of the roughly 1,400 it laid off or furloughed in early April. Zillow said it would cut operating expenses by 25 percent, freeze new hiring, and slash marketing spending to near zero.

The big issue for i-buyers, real estate investors, and retail buyers alike will be reduced listings this summer. Although home-buying demand appears to have returned to pre-pandemic levels, new listings are down nearly 40 percent. This places real estate investors working with firms that have established sources of off-market leads in a prime position to flip for top dollar this summer. Even the i-buyers, who tend to play on a completely different level (and for different reasons) than traditional investors, realize they have to take the risk of losing millions of dollars in order to not be left behind.