The death of Zillow 2.0

The most common refrain I hear from people who are long on iBuying is that the end goal isn't about flipping houses. They say it's really about companies like Zillow or Opendoor establishing a marketplace through which they can digitally package services like home financing, title/escrow and concierge services.

Was this newsletter forwarded to you? Sign up here. Good afternoon —   The most common refrain I hear from people who are long on iBuying is that the end goal isn't about flipping houses. They say it's really about companies like Zillow or Opendoor establishing a marketplace through which they can digitally package services like home financing, title/escrow and concierge services. If it's easy, convenient and reasonably priced, homebuyers and sellers will pay those fees. And the old way of doing things will disappear. There's logic to that.    For the iBuyers to establish themselves as viable businesses, they have to be darn good at all of those components, especially valuation. But if those companion services are tethered to a failed valuation model, as is the case for Zillow, what becomes of them?    Plenty of companies that only do mortgage or title & escrow or appraisal/valuation fail to persevere through cycles of the housing market. Even during its best-ever quarter, Zillow's mortgage business generated $70 million in revenue and lost $6 million. Pretty much every other mortgage company out there made money in the third quarter. (Even the embattled LoanDepot, for example, reported a $154 million Q3 profit.) None of the iBuyers have yet cracked the code on mortgage or title and escrow, though it should be noted that Opendoor and Offerpad also insist Zillow's problems were isolated to Zillow.

What do you think the future holds for iBuying? What will Zillow 3.0 look like? Please share your thoughts with me at jkleimann@housingwire.com.

 

James Kleimann

Managing Editor, HousingWire

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