Zillow Offers iBuying algorithm

Property and technology company Zillow Group has shuttered (pdf) its i-Buying home flipping business, saying (pdf) it has lost $881 million on the business.

Zillow Offers uses big data and automated valuation algorithms to make offers on homes across the US. These acquistions are quickly sold for a profit.

At least, that is - or was - the theory. In reality, the company appeared to lose faith in the ability of its algorithm to make reliable predictions, including during so-called 'black swan' events such as COVID-19.

In a letter to shareholders, CEO Rich Barton explained Zillow Offers was 'too risky, too volatile to our earnings and operations', and provided 'too low of a return on equity opportunity, and too narrow in its ability to serve our customers.'

Zillow says it will lay off 2,000+ employees. The company has also been hit with two class action lawsuits claiming it had misled investors about the true nature of its financial performance.