Are you one of the many who starts their research online? When considering buying or selling your home, would you first consult Zillow to get an idea of what is out there, or what has recently sold in your neighborhood to get an idea of value? I have long had the conversation with my clients about why it’s so important NOT to depend on a computer/algorithmic method of calculating the value of one of their most valuable assets. If Zillow were my client, I would have told them the same thing….and they would have done well to heed my advice, too!
Zillow is one of several, but perhaps one of the biggest corporate entities that launched into iBuying. Others include Offerpad, OpenDoor, and RedfinNow. These companies buy homes in select markets for cash, upgrade them and resell them for a profit, also known as “flipping.” They rely on software to tell them which homes to buy and for how much, with the goal of conducting enough of these transactions to make billions.
Zillow launched in to flipping properties 3 years ago, having bought almost 10,000 homes nationwide in the third quarter of 2021 alone, (with the majority of these purchases occurring in both San Diego and Phoenix). Out of those 10,000, they have sold only about 3,000 with an average loss of $80,000 per home due to inaccurate predictions of value, or Zestimates, as they are often referred to. The fact that they continually paid more than the actual value of the home, and then sold it for a substantial loss has affected appraisals and the average consumer on so many levels.
Zillow as an iBuyer competed with a real human buyer, paying more than anyone else could (or would), and more often than not, paid significantly over actual market value. At the end of the day, there really is no competition with Zillow’s deep pockets and sellers were lured by the smell of money. This would drive the price up, pushing the dream of homeownership even further out of reach for our local buyers.
They have done the same to real estate agents over the last decade, as they inched toward attempting to replace what we do. The fact is that when you hire a real estate professional to assess value on your home, there is so much more than just gathering data algorithmically to give you a number. We look at location, condition, flow, significant defects such as drainage, strong pet/smoke odors, neighboring properties, noise, and other factors that may have affected nearby recent sales (a recent Zillow-owned property sold at a loss, for example). An algorithm can’t do that. Nor can it put together a strategic plan for marketing for you…and don’t kid yourself, the pricing of a home is part of the marketing plan.
Well, Zillow is finally calling it quits in flipping due to substantial losses, with roughly a $1.15 BILLION pile of mortgage bonds tied to their iBuying business. They blame it on faulty algorithmic calculations. Plainly said, they relied on their own “Zestimates”, and they were wrong. Don’t fall victim to a Zestimate. Or to Zillow. When it comes to buying or selling real estate, contact a real, live human real estate professional to assist you. What you think you may be saving by doing this online could cost you tens of thousands of dollars whether a buyer or a seller. I would be happy to talk with you about this topic as well as the value I bring to the table (and your pocketbook) when working with me. Call me at (619) 944-2798 to set up an appointment to talk about your real estate future.