Zillow Quits I Buyer

Zillow Gives Up Instant Offer I-Buyer After Failure to Launch!

Zillow has ended “Zillow Offers,” an iBuyer program that promised an easier way to sell with an instant offer.

In February, Zillow, released a new option for home owners to sell their property, quick, for cash. Zillow Offers used Zillow’s “Zestimate” software to develop offers. The offers were often higher than seller’s anticipated. The sellers could pick their ideal close date and skip all the marketing prep and showings. The industry was keeping a very close eye on this disrupter.

November 2nd Zillow announced they would be laying off 2000 employees and closed the doors of Zillow Offers. Currently holding more than 7,000 properties, Zillow is currently liquidating to offset record losses for the company.

Many of Zillow’s homes have sold for less than acquired. Zillow seems to have over estimated the accuracy of their Zestimate as well as the real world logistics that come with acquiring, preparing homes for market (marketing, carrying costs and finding reliable labor e.g.).

Homeowners frustrated this year with the difficulty of being able to purchase a home were often beat out by cash offers from companies such as Zillow, RedFin and IBuyer who purchased the homes to markup at a profit which reduced the availability of affordable housing. Inside sources expect all 7,000 homes to be sold to a single large holding company as rental properties at a substantial discount. Worst of all none of these homes are expected to be available for individual homeowners to purchase.

Zillow’s Zestimate has become the go to for home owners to quickly determine their value. In our (Kansas City) market Zillow rates their service as a 1 star for reliability and for entertainment purposes only.

This begs to question why can’t such a high tech algorithm has not been able to produce reliable valuations while service such as Kelly Blue Book have had a reliable record for valuation of vehicles.

Real Estate is unique in that every property is uniquely individual. When valuing real estate we much first start with the land. Like fingerprints, there are no two identical lots or pieces of land. Short of a subdivision built of identical stamped out homes that are nearly new almost all types of construction vary from home to home. Algorithms like Zillow Zestimate are unable to analyze the difference that cannot be seen from the street of assessors data. Keep in mind the assessor only assesses your property from the outside. They usually do not know the finishes or often even the exact square footage if it can’t be accurately measured from the outside. Zillow uses this in combination with realtor MLS listings which often are fluffed to insinuate larger homes.

Often we will list a home, higher than the Zestimate, only for Zillow Zestimate to immediately adjusted closer to our list price, blindly relying on the agent Zestimate was trying to replace.

Fannie Mae has recently produced a similar system to allow for automated underwriting and appraisal waivers. Real estate agents have learned to over price a property to trick the algorithm into falsely allowing appraisal waivers if the contract price is below the list price. Other agents purposefully underpriced homes this year to drive buyer leads for the agent and crippled their own selling clients ability to have accepted contracts that may have allowed for an appraisal waiver.

There are countless impacts to consider on real estate values. Most importantly is understanding that the buyer is not a robot. They are buying their home. As experienced agents we recognize what tugs at the heart strings of the typical buyer and until robots grow a heart, we will still be here to clean up the robot’s messes.