Here’s why Zillow was forced to eliminate their iBuyer program.
You may have heard that Zillow dropped its iBuyer program (or instant-offer program). So what happened?
Zillow was going out into the marketplace, buying homes, fixing them up, and putting them back onto the market. They were using their Zestimates to price homes when they both bought and sold them. The problem is that their Zestimates were just desktop evaluations; they bought homes without seeing or inspecting them. You could have two neighborhoods close together, so the home values from one neighborhood are used to determine the other’s, but the other homes could have been built by another builder or built 20 years earlier. That especially affects rural areas; the house could be close to an airport or train tracks.
So their Zestimates weren’t accurate enough, the program didn’t work, they experienced mass money loss, and all that affected their stock value—and not just theirs, it affected many other real estate stocks too. So they finally decided to eliminate the program.
We’ll see some of Zillow’s homes on the market for several quarters, but the downside is that they’ve had a negative effect on their comparables. Luckily, I think this will have a positive effect on our real estate market overall.
If you’d like to chat further about this or have any questions, please call or text me. I would love to speak with you.