When Zillow announced last week that it was shutting down its iBuying business and was desperate to offload $3.8 billion in unsold inventory, the grave dancers appeared almost instantly.
Zillow’s failure was not simply a matter of an algorithm gone haywire; it was an indictment of the entire business model. The economics of iBuying don’t work at scale, not profitably anyway, the naysayers declared.
Brian Bair, the founder and CEO of Offerpad, says that simply isn’t true. It can be done, he claims, and sustainable profits can be achieved so long as strong business fundamentals are in place – local industry expertise, robust technology, strong operational know-how, and adaptable-but-rigorous underwriting.
“I think the news that came out was shocking to a lot of people,” Bair said on Wednesday’s third quarter earnings call, in which the iBuyer sold 1,673 homes across 21 markets, down from 2,025 in Q2. “What I keep saying – and I’ve tried to shout this from the rooftops for years – is that it comes down to execution and operations and logistics. This is as much a logistics business as much as it is a real estate technology company. So, like any business, the execution is going to be key.”
Now, to be clear, Spencer Rascoff-backed Offerpad was not profitable in the third quarter. The startup suffered a net loss of $15.3 million, about $13.2 million of which was incurred through the merger with a special purpose acquisition company and subsequent IPO. …Article continued on HousingWire.com.
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Correction: A prior version of this story misspelled CEO Brian Bair’s name.