When Zillow (ticker: Z) started buying homes, it followed the same model as other iBuyers. Homeowners submit information about their home online and request a discount. The property is appraised by a proprietary algorithm, and a first offer is provided. Zillow will physically appraise the home and make a financial offer. If the seller accepts, you set a closing date. Zillow does repairs and upgrades, then lists with an agent. If the seller does not accept the offer, Zillow will refer the homeowner to a partner agent for a traditional sale.

For sellers, the process saves time and provides flexibility. Zillow’s goal was to make a small profit by selling the home and charging sellers a fee, and put homeowners through services like mortgages and closings.

Everything had to go right. “It’s a relatively low-margin business, even if they’re moving along very successfully,” BTIG analyst Jake Fuller said. “No. 1, you want to maximize. No. 2, you want to push partners in the transaction because that’s where the margin comes in.”

Zillow has misled the market in its efforts to grow. The company bought 9,680 homes between July and September, more than double what it bought in the previous quarter. The company has sold 3,032 homes and has contracts to buy an additional 8,172 homes.

The move comes as the country’s housing market is showing signs of slowing. Although the average annual home-price gain in September was the highest, it slowed from the pace recorded earlier in the year, according to existing home sales data from the National Association of Realtors. The share of homes that received more than one offer fell to a nine-month low in September as competition among buyers eased, real estate brokers said.

Redfin

(RDFN) says.

“They probably stepped on the gas at the wrong time,” said Ed Yruma, managing director at KeyBanc Capital Markets.

Speaking on Zillow’s earnings call, CEO Rich Barton attributed the discrepancy in part to the difficulty in predicting home-price changes. The company used historical data and models that could not accurately predict housing prices three to six months in advance. Cramped supply chains, on the other hand, have hurt Zillow’s ability to renovate and sell homes in its inventory.

Zillow’s home buying business lost $381 million in the third quarter, which is the company’s adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA. According to Zillow, $304 million worth of homes sold for more than expected. Zillow sees an additional write-down of between $240 million and $265 million in the fourth quarter. The earnings sent Class C shares down 24 percent through Friday’s close.

Other iBuyers say they will move on. Their success depends on how they manage value. “These are big purchases that come with a lot of leverage, and ultimately, if you buy wrong, you’re going to get results like Zillow,” says KeyBank’s Yiruma.

Redfin, the $5.4 billion brokerage, said homes it bought through its RedfinNow division sold for more than estimated sales prices in the third quarter. In an earnings call on Thursday, Redfin CEO Glenn Kelman said the company had begun to reduce its discounts in anticipation of a slowdown in home-price gains in March.

Redfin’s earnings suggest Zillow’s flop isn’t a sign of larger housing-market issues, although supply chain problems are hurting some parts of the business, Wedbush analyst Yigal Aronian wrote in a note late Thursday.

Redfin has less exposure to iBuying. Sales from its properties segment, including RedfinNow, were 44% of total revenue in the third quarter. Zillow’s Homes segment, including Zillow Offers, accounts for 68 percent of its total revenue.

The biggest player is iBuying.

Open technologies

(open up). The $14.5 billion market capitalization company It was founded in 2014 and went public late last year in a merger with a special purpose acquisition company. Most of Opendoor’s $1.2 billion in revenue in the second quarter came from home sales. Opendoor has outperformed Zillow in tracking housing prices, said Wedbush’s Aronien, citing the companies’ adjusted gross profit margins.

“There’s definitely going to be movement in the housing market, but we feel very good at identifying and adjusting to those movements,” said Eric Wu, CEO of Opendoor. Baron. Opendoor operates in 39 markets as of July and is expanding its services. The company said on Friday it had acquired Reddoor, a digital mortgage broker.

Offerpad solutions

( OPAD ), a $1.8 billion real estate platform focused on iBuying, is growing. It operates in 21 markets, seven of which were added this year.

The next test will come on November 10, when Opendoor and Offerpad report earnings. Analysts expect guidance on fourth-quarter gross profit margins at home.

Zillow, meanwhile, is focusing on developing new services for buyers and sellers and growing its Internet, media and technology divisions.

Write Shaina Mishkin at shaina.mishkin@dowjones.com