Speculating on the Future

Even before the pandemic, Zillow was losing money on each house it bought and sold. During the fourth quarter, the company lost $6,407 on each resale after paying interest on a revolving line of credit it uses to purchase homes. (Zillow lost $1,512 per resale before interest payments.)

In the post-pandemic world, another consideration for iBuyers is “what the VC world will look like next time they need to raise funds,” Duranton said. “Limiting the ‘burn’ for now probably makes sense.”

While Barton, who serves on Netflix's board, argues that Zillow's iBuying platform is akin to Netflix making the shift to digital streaming, it's probably more in the mold of Netflix's first model - taking something normally done in person, and switching it to an online platform. That is, Zillow isn't generating its own content like Netflix yet. What would it take to make iBuying truly innovative (would it have to be building their own homes, like Netflix developing its own shows)?

The One Stop Shop

Many iBuying companies counter that this is just the beginning, and that the key will be "vertically integrating the category." What if you could get the following from an iBuyer?:

• Home Purchase
• Financing
• Title & Escrow
• Home Insurance
• Remodel Work
• Moving Services

What affects does this vertical integration have on underwriting?