Zillow, the operator of online real estate listings, signalled its intent to reshape the US homebuying market with plans to start issuing mortgage loans just months after the $7.8bn market cap company said it would begin flipping houses.
Investors sent its shares down 16 per cent in after-hours trading after it disclosed the acquisition of a home lender alongside second-quarter earnings, in which it lowered profit forecasts for the year.
Zillow announced a net loss in the quarter of $3.1m. Before interest, tax, depreciation and amortisation, and adjusted for other items, earnings were $56m.
The company behind the popular websites Trulia and StreetEasy, as well as its eponymous Zillow brand, disclosed an agreement on Monday to buy Mortgage Lenders of America as it accelerates its shift away from media.
Zillow said the home loans plan was “consistent” with its “strategy to create a better homebuying experience by building products that ease and simplify the transaction”.
The Seattle-based company did not disclose the terms of the acquisition. Mortgage Lenders of America, based in Kansas, issued only 4,400 mortgage loans last year, making it a relatively small part of its new owner.
It is the latest business model shift by Zillow, which traditionally has generated most of its revenues from fees charged on sales and rental listings, along with advertisements purchased by estate agents.
Executives set out plans in April to start buying and selling houses for a profit, holding properties on its own books for several weeks. Zillow plans to launch that service in Denver and Atlanta, having already started the business in Las Vegas and Phoenix.
Greg Schwartz, president of media and marketplaces at Zillow, said in a statement: “Now that we are buying and selling homes . . . we believe that having our own mortgage origination service as an option for consumers will allow us to streamline the process for people who buy a Zillow-owned home.”