Zillow Group, Inc. announced that it will discontinue Zillow Offers, its iBuying service, and lay off a significant part of its workforce, a decision made clear by the company’s third quarter financial results.
The company announced consolidated financial results for the three months ended Sept. 30, 2021, earlier this week and detailed its plan to wind down Zillow Offers.
“We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility,” said Zillow Group co-founder and CEO Rich Barton. “While we built and learned a tremendous amount operating Zillow Offers, it served only a small portion of our customers.”
The wind-down is expected to take several quarters and will include a reduction of Zillow’s workforce by approximately 25%.
Included in the company’s third-quarter financial results is a write-down of inventory of approximately $304 million within the Homes segment as a result of purchasing homes in Q3 at higher prices than the company’s current estimates of future selling prices.
The company further expects an additional $240 million to $265 million of losses to be recognized in Q4 primarily on homes it expects to purchase in Q4. Additionally, Homes segment Q3 revenue is below the company’s previously provided outlook range due to resale capacity constraints that pushed a number of closings into Q4 that were previously expected to close in Q3.
The company reported a consolidated GAAP net loss of $328 million for the quarter on revenue of $1.7 billion. A bright spot for Zillow was its mortgages segment, where it saw revenue growth of 30% year-over-year to $70 million, exceeding the high end of the company’s outlook range.