Sources: Zillow is pitching institutional investors on the sale of 7K homes for ~$2.8B to recover from buying too many, which it blames on its bidding algorithm (India 2.8b 4bchaudharybloomberg)

India 2.8b 4bchaudharybloomberg: Zillow, the second largest online real estate company in the US, is currently pitching institutional investors on a sale of over 7K homes worth $2.8B to recover from buying too many homes earlier this year. This is over twice as big as a previous batch of 4,000 homes Zillow sold for $1.07B to Credit Suisse Group AG in November 2017 that was rumored to be because it was bidding aggressively on properties with its algorithm, something that could have led it to purchase properties at inflated prices.

Zillow paid $2.5B for Trulia in 2015. Since then it has been having trouble integrating the two companies and growing its revenue at the same time, which led to its decision to purchase a fraction of the US home listings for $3B from News Corp earlier this year. The company is now struggling to find buyers for some of its listings that are too expensive and done poorly, which is leading to even more costs as it needs to lower their prices.

The company is using the same playbook it did before and is focusing on selling houses in areas with lower property values. This would allow it to continue operating its bidding algorithm without having to pay more for properties. Zillow is offering institutional investors the chance to buy these homes at a discount and then rent them out, or fix them up if they find the right opportunities. The company already showed institutional investors homes that were purchased at a discount earlier this year and was able to find buyers for 90% of them. It is now showing these homes with an offer of a 75% discount.

The company intends to release another batch of 2,000 homes for sale later this year, which it hopes to sell for a total of $1.6B. The goal is to sell all 7K homes by 2020 and recover $5B in capital investments Zillow made to purchase the properties. In addition to the capital investment, Zillow will take another $1B charge as they look to offload the properties by the end of 2018.