In a surprising move, massive real estate site Zillow suddenly stops its direct home buying program

By staff real estate journalist

Zillow Inc. announced on Monday that it will pause buying homes directly from sellers until at least the end of this year.

The surprising announcement was not a result of changing real estate market conditions, but rather due to construction labor shortage. Zillow stock was down 9 percent on the news during Monday trading, adding to the 55 percent drop since its peak in February.

Until now, the Zillow Offers program has been buying homes directly from sellers (a form of iBuying), renovating them to increase value, and then reselling them.

The Offers program has thrived in recent market conditions because it makes sense: According to Chicago real estate expert Tom Campone when Estate Monthly interviewed him in October, the number one home selling tip is to “do the small home improvement projects that will return the highest ROI—this is normally cosmetic updates to kitchen and bathrooms.”

Zillow has been relying on local contractors to complete those renovations, but the current construction labor shortage has made that difficult, increasing held inventory awaiting renovation.

This industrial-scale house flipping has been controversial among real estate agents because of Zillow’s inherent buying advantage, and the price-raising effect it has on markets.

This article is opinion and not a substitute for professional advice. Disclaimer

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