Zillow has its worst day in nearly 7 years

To supplement the new strategy, Zillow announced Tuesday its plans to acquire Mortgage Lenders of America. Terms of the deal were not disclosed, but Wall Street did not look favorably on the tie-up.

Analysts for Bank of America/Merrill Lynch downgraded the stock Tuesday, warning its move into mortgage lending could hurt profitability next year.

CEO Spencer Rascoff defended the move Tuesday on CNBC’s “Squawk Box.”

“It allows us to monetize the Zillow Offers business a second way,” he said. “First, we can make money from buying and selling. Second, we can make money from mortgage origination. Third, we can make money by passing the homeseller, who doesn’t want to sell their home to us, off to a premier agent.”

He noted that Zillow’s practice of purchasing and selling homes, which can take months, results in delayed revenue. That contributed to the tech real estate company’s weak third-quarter guidance, he said.

Shares took a similar beating in April when the company announced the strategy. But Rascoff maintained in May the strategy would pay off.

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