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Violation of Real Estate Economics Blew-Up Zillow Division
Saturday, June 11th 2022, 12:00 AM

Zillow Ignored The Two Most Important Rules In House Flipping In Philadelphia

Philadelphia, United States - June 10, 2022 / Dr Cash Home Buyers /

"It was a spectacular 'train wreck'. An explosion of artificial intelligence, computer analysis, and too much human optimism resulted in Zillow's iBuyer business, named Zillow Offers, falling to Earth in a heap of smoldering and broken dreams," stated Robert Lowry of Dr. Cash Home Buyers based in the Philadelphia metro area.  "The company had to lay off 25% of its workforce and its stock price was hammered. On October 25, 2021, Zillow's stock price was at $103. Seven months later it is sitting at $39. Home sellers in Denver were the winners because they sold their homes at above-market prices to Zillow. The losers are the local real estate investors who were out-bid by Zillow."

Dr Cash Home Buyers In Philadelphia

Although other divisions of Zillow, such as the home-listing and advertising, have been profitable the Zillow Offers division racked up an $881 million loss in 2021. Zillow declared a consolidated net loss in 2021 of $528 million. 

Zillow has become a huge factor in the real estate business in the United States. It is an "aggregator" in that it combines data from different sources and presents the data in their format. They are the largest residential real estate coverage business in the country with a huge and well-known internet presence. They also estimate the value of houses across the United States using their algorithms and machine learning but Philadelphia real estate experts have little confidence in these estimates.

What Was Zillow Offers?

Zillow Offers was a house renovation and resale company commonly referred to as "flippers" or "home-flipping". Their goal was to buy houses, make the repairs and renovations, and then sell the houses to retail buyers at a profit. Unfortunately for Zillow, they found themselves owning thousands of houses that were worth less than their investments in the houses. Real estate investors who find themselves in this position usually have three options as follows.

  1. sell the house at a loss
  2. rent the house and hope that house values improve over time
  3. hold a vacant house hoping that values improve while having to pay for taxes and insurance

So What Happened With Zillow Offers?

There are some very obvious reasons Zillow Offers was losing money. Real estate investors and realtors could see the three-year train wreck in slow motion. The major flaws in their strategy are as follows.

The Business Plan

It was either a poor plan or it was a good plan that was poorly executed. Most real estate critics believe it was a poor plan from the start.

They Paid Too Much For The Houses

They purchased many houses in Philadelphia. Making the highest offer for a house usually will result in a contract for sale but it is no guarantee for a house-flipping profit. Local real estate investors know that their success in having a profitable real estate deal begins with a purchase price that has room for at least six months of holding time plus a realtor's commission at the time of sale.

They Underestimated The Cost Of Repairs And Renovations

Every city in the United States has a different "Cost of Living" and real estate costs in Philadelphia are different from other cities.

Difficulty Of Hiring Contractors

They underestimated the difficulty of hiring contractors in local markets. Finding reliable and fairly priced contractors is one of the keys to the success of a real estate investor. Every city, including Philadelphia, is a challenge because contractor relationships are usually built over time.

Seasonal Trends

They failed to account for the seasonal nature of the real estate industry. For example, the last six weeks of the year are the slowest because people are busy with Thanksgiving and Christmas.

Trying To Sell Over-Priced Houses

With their higher purchase price and generally higher repair/renovation expenses, they had to sell their houses at prices that were higher than the market.  Home buyers in Philadelphia simply were not interested in buying over-priced houses.

Philadelphia house


What Is Next For Home Sellers and Home Buyers in Philadelphia

According to Robert Lowry, the residential real estate market in Philadelphia will continue to experiment with artificial intelligence to "standardize" the home selling and home buying process. However, the list of variables is long and a successful real estate transaction that includes repairs and renovation requires individuals with a history of home buying experience and renovation experience. There are a lot of "moving parts" and any one of them can turn a profitable scenario into a losing one. House-flipping is not easy and plenty of people have lost money and left the profession.

Contact Information:

Dr Cash Home Buyers

100 N 18th St Suite 300
Philadelphia, PA 19103
United States

Raymond Campbell
(215) 800-0900

Original Source: https://drcashhomebuyers.com/zillow-ignored-the-two-most-important-rules-in-house-flipping-in-philadelphia/

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We are CASH home buyers and we buy houses in the Philadelphia metro area. We buy houses in any condition, even if it needs major repairs to the foundation, plumbing, roof, or HVAC system. And we will make the transaction as hassle-free as possible.


Raymond Campbell
Dr Cash Home Buyers

100 N 18th St Suite 300
Philadelphia, PA, 19103, United States

Phone (215) 800-0900


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