Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Zillow slapped with first federal lawsuit from shareholders over home-flipping business flop

Zillow slapped with first federal lawsuit from shareholders over home-flipping business flop

Zillow is facing a new federal lawsuit alleging the real estate company misled investors and caused them great financial losses before its house flipping business folded amid increased unpredictability in the market.

The lawsuit filed Tuesday in U.S. District Court for the Western District of Washington at Seattle alleges that Zillow made "materially false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects." The filing is the first federal case opened regarding Zillow Offers, as two other Boston-based law firms have also asked additional shareholders to come forward as they investigate lost money by investors, the Seattle Times reported.

An investor named Dibakar Barua and others allege Zillow failed to disclose that, despite operational improvements, the company experienced significant unpredictability in forecasting home prices for its Zillow Offers business. That issue, combined with labor and supply shortages, led to a backlog of inventory.

Despite knowing the company was reasonably likely to wind down its Zillow Offers business, which would have an adverse impact on its financial results, Zillow made "positive statements about the company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis," the lawsuit filed in Seattle claims.

"As a result of Defendants’ wrongful acts and omissions, and the precipitous decline in the market value of the Company’s securities, Plaintiff and other Class members have suffered significant losses and damages," the lawsuit continues.

The allegations came a day before Zillow announced it is moving forward with a plan to place Denver’s homeless population into vacant units, as city leaders cited housing affordability as one of the leading factors contributing to homelessness in the Colorado region.

Yet, Zillow Offers is among a group of so-called "iBuyers" companies – which include Redfin and Opendoor – that buy homes, typically from sellers who want to sell their home quickly, and then put the homes back on the market. These companies have been competing with regular homebuyers as the housing market superheated over the past year amid a shortage of properties on the market.

The lawsuit also comes approximately two weeks after Zillow, an American online real estate marketplace company based in Seattle, announced its Zillow Offers unit would stop buying and selling homes, citing the "unpredictability" of forecasting housing prices. Winding down the unit will take several quarters and will result in about a 25% reduction in the company’s workforce, which is now at about 5,300.


About a month ago, Zillow said it would pause buying homes through the end of 2021, citing a backlog in renovations and other operations due to labor and supply constraints. The idea was to temporarily stop buying homes and focus on selling those it had already purchased. But the company decided since then to shutter its home-flipping business altogether.

In announcing company's third-quarter results, CEO Rich Barton pinned the reason for closing down Zillow Offers on how difficult home-prices forecasting has become. "We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility," Barton said.

The company disclosed it took a write-down of about $340 million because it bought homes during the third quarter at prices that exceed Zillow's estimates for what those properties will fetch in the future.

The home-flipping business has helped juice Zillow's revenue this year. For the nine months ended in September, Zillow Offers' revenue increased 88% to $2.65 billion versus the same period of 2020. Zillow said it expects to book an additional $240 million to $265 million in losses in the fourth quarter primarily on home transactions expected it close this quarter.

Shares in Zillow fell 10.2% before the release of its earnings amid published reports about the company's plans to shutter the home-flipping business. The stock slumped another 12% in after-hours trading following its announcement.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Hungarian Prime Minister Viktor Orbán stated that Hungary will not adopt the euro because the European Union is falling apart.
Mayor in western Germany in intensive care after stabbing
Australian government pays Deloitte nearly half a million dollars for a report built on fabricated quotes, fake citations, and AI-generated nonsense.
BYD’s UK Sales Soar Nearly Nine-Fold, Making Britain Its Biggest Market Outside China
Latvia to Bar Tourist and Occasional Buses to Russia and Belarus Until 2026
Wave of Complaints Against Apple Over iPhone 17 Pro’s Scratch Sensitivity
Munich Airport Reopens After Second Drone Shutdown
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
×