What impact will Zillow dropping their iBuyer program have on our market?
Zillow is no longer buying properties; they’ve ceased their iBuyer program. Thankfully, it won’t affect our local real estate market too much because Zillow didn’t buy many homes here. They were mostly buying homes in larger areas like Atlanta, Houston, and Phoenix and didn’t buy many in rural areas.
Zillow was buying properties sight-unseen and using only their home valuation algorithm (Zestimate) to determine value. They had no one looking at the homes in person but spent billions of dollars on hundreds of thousands of houses. They purchased these houses as investment properties with the intent to flip and sell them, but their Zestimate proved inaccurate in determining a home’s true value. They had to quit buying properties so they wouldn’t get any further into debt. They lost upwards of $3 billion on their iBuyer program.
Their Zestimate can only calculate certain things; it can compare square footage and bedrooms and bathrooms because those are all numbers. It can also compare those things to other homes within a certain radius of your property.
However, the Zestimate is unable to take into account the condition of a property and any upgrades made to it because it’s a mathematical algorithm. It also can’t accurately calculate the value of a property’s surrounding area. It may know that a certain property is three miles away from yours, but it likely won’t know, for example, that you’re in the best neighborhood in our area and the other property isn’t. **Plenty of things can change from neighborhood to neighborhood and market to market. **
Zillow found out the hard way that when you can’t use those components to get a true market value, you’ll lose a slew of money. The moral of the story is that while a Zestimate provides a general idea of a home’s value, an in-person valuation from a professional is much more accurate.
If you have questions about how your home fits into the market or anything else concerning real estate, don’t hesitate to reach out to me via phone or my website. I’m all about helping people in any way I can.