Zillow's iBuyer program hit the scene like a bull in a china shop. The real story is that they rushed into this space, had underdeveloped algorithms, overpaid for homes, and now the chickens are coming home to roost.
(The negative signal was equivalent to an email hard bounce for an email marketing AI. Like, if that signal is there, the customer is gone forever)
This reliance on AI magically figuring things out is pretty annoying.
The reason you fire-sale that house at loss, is because you believe market value is unlikely to catch up.
The price you pay when entering the housing market is substantial. It corresponds inversely to the capital you'll have later to do other things. If you pay $900k for the same house your neighbor paid $600k for, your neighbor has an extra $300k to work with over 30 years, which is significant.
But inflation being as high as it is today...that $300k will be worth much less over time, and you aren't saving it all at once if the down payments are the same.
That isn't even to mention selling at a loss or close to it if you have a pressing need, which will hurt your chances of getting into the next house.
it's a bit tautological - because the expectation of value not catching up is the definition of overpaying!
Zillow hasn’t ever bought and sold homes (until now). That’s not their business.
But one day we hit a period with high volatility, lots of price crashing and spiking. The handheld systems and the servers that drove them were too laggy to keep up, so the monkeys would get taken advantage of both on the way up and on the way down. It was a very expensive lesson for the execs who put too much reliance on the tech and not enough on the expert humans.
It seems so wild to me that not only are people making the same mistake, but at a much, much larger scale. Half a billion dollars lost. So far!
> In April 2018, the company entered the fledgling on-demand home buying market (often referred to as ibuying) with a service called Zillow Offers. Prospective sellers in 11 markets (and growing) can go to the Zillow listing for their own home and ask for an offer. Within two days they’ll be sent a price derived from the Zestimate and other algorithms. Two local experts also provide input on each house, and if the seller likes the initial offer, a Zillow employee comes to inspect the property. (If a home is in poor condition the offer may be withdrawn or lowered.)
https://www.forbes.com/sites/samanthasharf/2019/07/01/rich-b...
It really calls into question their pricing algorithm, but I give them credit for actually trying to get into buying and selling properties.
The reason? No comparable homes that were recently sold AND available via MLS (private sales are ignored). The rules for appraisals breakdown when there is no liquidity. At least Zillow still considered private sales. The Zestimate was much more correct than the "expert" appraiser.
I don't think it's hyperbole to say Zillow has more data on residential real estate than any other company in the US.
My understanding is that Zillow relies on realtors to add their listings, so that means, maybe-it-happens, maybe-it-doesn't, entry errors, maybe-it's-updated, maybe-it's not...
Source: worked on MLS ingesting software.
If you could statistically trade houses people would have been doing it before we were born.
That's quite a statement. The head of a company with a privileged view of the US residential real estate sector says that the market is "unpredictable." Not the good kind of unpredictable where you can't figure out how heavy the money bags that get dropped at your door will be. No, it's the bad kind of unpredictability where you can... lose money.
Reading between the lines, I conclude that Zillow sees a major shakeout in real estate on the horizon. They've already been hit with losses and see a lot more where that came from. In an effort to get ahead of whatever is approaching, the company is making an abrupt exit from the home flipping business.
Zillow was founded in 2006, as the last US housing market bubble was furiously inflating. It has seen a complete cycle of boom/bust. If anybody knows the US residential real estate sector, it is Zillow.