Feels like home... But isn't. Online real estate platform Zillow expanded its virtual reality feature Monday so you can tour that cozy 1-bedroom without schlepping there. But shares fell 4% on a WSJ report that its "iBuying" house-flipping strategy may "flop."
- The iBuying concept: Zillow will buy your house, often without seeing it, based on the price its algorithm says it's worth. Then Zillow sells it so you don't have to.
- Your benefit: Speed. Convenience. No dressing up your studio to let strangers in to judge it.
- Your cost: You pay Zillow a higher selling fee for that service.
iBuying is like an affordable 2-BR NYC apartment w/ washer/dryer & AMAZING view... Maybe too good to be true. Zillow stock jumped 25% in Feb. when the CEO announced it was doubling down on iBuying. But shares are back down now on word Zillow's not making as much off the higher fee — And on the increased risks of owning tons of homes.
- 2018: 4% of Zillow's revenue came from iBuying.
- 2019: The percentage of revenue from house-flipping is predicted to rise to 41%.
Not all middlewomen can be cut... It's worked for mattresses and razor blades. But home selling is a unique, life-changing, big-money event. People may just want the handholding of a real estate agent, even if it costs money and time, to make sure the sale goes down smooth. Zillow's betting against that.