I think you should also consider first and foremost the CEO's primary stated reason, which is introducing too much volatility for the company. He's said that Zillow aimed to be a market maker with +/- 200 basis points, but that Zillow Offers ended up swinging +/- 700 basis points. This volatility makes Zillow less like a reliable publicly traded company with regular growth and earnings, and more like a housing hedge fund where they need to hold onto a huge pool of capital to cover liquidity swings.
> We have been unable to accurately forecast future home prices at different times in both directions by much more than we modeled as possible, with Zillow Offers unit economics on a quarterly basis swinging from plus 576 basis points in Q2 to an expected minus 500 to minus 700 basis points in Q4.
> Put simply, our observed error rate has been far more volatile than we ever expected possible and makes us look far more like a leveraged housing trader than the market maker we set out to be.
> We’ve got these new assumptions that we’d be naïve not to assume will happen again in the future, we pump them into the model and the model cranks out a business that has a high likelihood, at some point, of putting the whole company at risk, not just the business, but in the more normal case, just causes a ton of volatility in earnings, which is not a great look for a public company. That’s basically what it boils down to.
He also acknowledged the operational issues, but in reality it seems like the volatility + scale of the capital needed is too much for Zillow to risk on top of their existing business and status as a public company.
Stratechery had a good article on this which is where I pulled those quotes from, but it is behind a paywall.