Why are the most experienced real estate investors so excited about Zillow’s recent collapse?
We should never relish in others' failures or distress. It is far better when we can all win together. Or when someone else is hurting, it is great if we can step in and help them out. Even if we are well compensated for that help in the process.
However, in this case, Zillow’s demise comes as no surprise. It may only be shocking that they survived this long. True real estate pros are excited because they are glad that Zillow can no longer fool people with their product and business practices.
After throwing everything it had at trying to flip houses with its iBuyer program, Zillow recently announced that it was admitting defeat.
They pulled the plug on this venture, after putting all of their resources into it, and making it their main business. This also means they are laying off around 25% of the staff involved. Their stock crashed, erasing about 75% of its value this year.
This comes after years of losing many millions of dollars, despite bringing in billions each year.
The company finally admitted that their downfall has come out of their inability to understand house prices.
Eliminating The Competition
Many are very happy Zillow has been removed as competition from the market. Not only are they out of the game, they are expected to be shedding around 7,000 properties for less than they paid for them. And it could well be more than that.
In turn, other investors may also be thinking twice about the funding they have provided to similar iBuyers and funds which have become notorious for grossly overpaying for assets.
That should leave more room for acquisitions that really make sense.
Bad Business Will Always Catch Up With You
Maybe big marketing campaigns and pulling in billions of dollars from the public can help cover up some major flaws for a while. Yet, you can’t fool everyone all of the time.
It is no secret that Zillow was built on one of the most flawed tools or products we’ve ever seen. It has not only caused a lot of stress, but it has done immense real harm to millions of home buyers, sellers and investors.
The whole business model was clearly flawed too. It wasn’t making money no matter how much they threw at it. Their Zillow Offers program tried hammering home sellers with far higher fees than even full priced Realtors charge. It failed to offer value or an improvement for anyone.
The more bad apples that can be removed from this industry the better – for the more trust and efficiency that can be gained.
Turning To Real Experts & Expertise
Not everyone has been willing to fall in line and overpay for properties by double digits, or to keep on throwing away billions of investor money on losing models. Now that this has been removed from the equation, regular investors can get back to common sense investing. They’ll turn to those that have been around even longer than Zillow. They will choose wiser investments.
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