Zillow Group took a lot of risks in the last year, but its latest is seen as one of the most uncertain. On Monday, Zillow announced plans to enter the mortgage business with its acquisition of Mortgage Lenders of America.
Zillow plans on utilizing Mortgage Lenders of America for its Zillow Offers program. The Zillow Offers feature started last year as Instant Offers and allows Zillow to buy and sell homes. The program began as an outlet for buyers to receive offers from investors and buyers, but is now solely a program for Zillow to sell the homes, according to HousingWire.
Zillow Offers is currently active in Phoenix, Atlanta, Denver and Las Vegas. The feature debuted in late May when Zillow purchased its first home in Phoenix to directly sell the property.
All of the recent changes and acquisitions from Zillow came with a goal to create a more efficient process for homebuyers, especially the purchase of Mortgage Lenders of America.
“Now that we are buying and selling homes through Zillow Offers, 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,” said Greg Schwartz, Zillow Group president of media and marketplaces.
While Mortgage Lenders of America takes part in the Zillow Offers program, it will still offer mortgages to other customers. The company is keeping its headquarters in Overland Park, Kansas and the current president, Philip Kneibert, is continuing his role in the organization as general manager.
Zillow investors didn’t accept the news well at first. Despite the company’s 22 percent year-over-year share price increase, Zillow’s stock dropped nearly 20 percent after the acquisition announcement on Monday, according to Fortune. Eventually, losses moderated, only falling by 16.3 percent at closing. Some stock market experts criticized Zillow’s risky move, while others believed it would bring higher earnings to the company and predicted stocks would eventually rise again.
Financial details of the deal have not been disclosed, but the transaction is expected to close by the fourth quarter of 2018.