Zillow’s Shut Down

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On Wednesday Zillow announced the shut down of its iBuying program because of mounting financial losses and increasing complexity in the real estate market.

The goal of this program was to buy properties directly from Sellers and then re-sell them for a profit.

Before looking at the interesting facts and numbers associated with this news, we want to acknowledge the people who are affected by this.

Zillow’s workforce will be reduced by 25%.  Many people will be laid off and our heart goes out to them.  We certainly wish them only the best.

Within our company we are not surprised by Zillow’s announcement.  We observed many cases where they over-paid for a property, re-listed it for an unrealistic price, dropped the price over time to meet the market, and then sold at an amount much less than what they paid.

It actually became difficult to find specific scenarios where they sold the home for more than their acquisition cost.  It was not uncommon to see losses of $50,000 per home or more.

Here is a quote from their CEO:  “Our observed error rate has been far more volatile than we thought possible.  Fundamentally, we have been unable to predict future pricing of homes to a level of accuracy that makes this a safe business to be in.“

In the third quarter of 2021 alone, their iBuying division lost $328 million.

Bottom line, their valuations were off.

It is a reminder that pricing requires a hyper-local scientific approach versus a generic algorithm

Homes are not commodities.  Each home is highly unique.  Each has its own highly unique location, features, amenities, condition and timing.

Homes can’t be priced like a book or a plane ticket.  Every unique feature must be taken into account.

Nationally, Zillow has about 7,000 homes in backlog which it hopes to sell over the next several months.

Other players remain in the iBuying game and we are more than happy to help you understand those options if you are curious.

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What ‘s My Home Worth? The Downside to Home Valuation Tools

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What’s your home worth?

 

It is a seemingly simple question. However, discovering the worth of your home is more complicated than it might seem. Sites like Zillow, Redfin, Eppraisal, and others have built-in home valuation tools that make it seem easy, but how accurate are they? And if you get three different answers, which one do you believe? Online valuation tools have become a pivotal part of the home buying and selling process, but they’ve proven to be highly unreliable in certain instances. What these valuation tools have made clear is that real estate agents are as vital to the process of pricing a home as they ever were—and maybe even more so now.

 

Every online valuation tool has its limitations. Most are readily acknowledged by their providers, such as “Zestimate” from Zillow, which clearly states that it offers a median error rate of 4.5%. That may not sound like a lot, but keep in mind that 4.5% amounts to a difference of about $31,500 for a $700,000 home. For Redfin and Trulia, there are similar variances. When you dig deeper into these valuation tools, it’s no wonder that there are discrepancies. They rely on a range of different sources for information, some more reliable than others.

 

Redfin’s tool pulls information directly from multiple listing services (MLSs) across the country. Others negotiate limited data-sharing deals with those same services, relying on public and homeowners’ records alike. This can lead to gaps in coverage. These tools can serve as helpful pieces of the puzzle when buying or selling a home, but the acknowledged error rate is a reminder of how dangerous a heavy reliance on them can be.

 

Nothing compares to the level of detail and knowledge a professional real estate agent offers when pricing a home. An algorithm can’t possibly know about the unique characteristics of neither a home nor its neighborhood. Curious about what improvements you can make to get top dollar or how buyer behaviors are shaping the market? They cannot provide an answer there, either. That can only be delivered by a trusted professional whose number one priority is getting you the best price in a time frame that meets your needs.

 

If you’re curious about your home’s value, Windermere offers a tool that provides a series of evaluations on your property and the surrounding market. And once you’re ready, we’re happy to connect you with a Windermere agent who can clarify this information and perform a Comparative Market Analysis to get an even more accurate estimate of what your home could fetch in today’s market.

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How Reliable Are Home Valuation Tools?

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Posted in Selling by Kenady Swan 

 

What’s your home worth?

 

It seems like a simple question, but finding that answer is more complicated than it might seem. Sites like Zillow, Redfin, Eppraisal, and others have built-in home valuation tools that make it seem easy, but how accurate are they? And which one do you believe if you get three different answers? Online valuation tools have become a key part of the home buying and selling process, but they’ve been proven to be highly unreliable in certain instances. One thing that is for certain is that these valuation tools have reinforced that real estate agents are as vital to the process of pricing a home as they ever were – and maybe even more so now.

 

There are limitations to every online valuation tool. Most are readily acknowledged by their providers, such as Zillow’s “Zestimate”, which clearly states that it offers a median error rate of 5%, with varying accuracy across the country. That may not sound like a lot, but keep in mind that amounts to a difference of about $35,000 for a $700,000 home. For Redfin and Trulia, there are similar ranges in results. When you dig deeper into these valuation tools, it’s no small wonder that there are discrepancies, as they rely on a range of different sources for information, some more reliable than others.

 

Redfin’s tool pulls information directly from multiple listing services (MLSs) all over the country. Others negotiate limited data sharing deals with those same services, but also rely on public records, as well as homeowners’ records. This can lead to gaps in coverage. These tools can serve as helpful pieces of the puzzle when buying or selling a home, but the acknowledged error rate is a reminder of the dangers of relying too heavily on them.

 

Home valuation tools can be a useful starting point in the real estate process, but nothing compares to the level of detail and knowledge a professional real estate agent offers when pricing a home. An algorithm can’t possibly know about a home’s unique characteristics or those of the surrounding neighborhood. They also can’t answer your questions about what improvements you can make to get top dollar or how buyer behaviors are shaping the market. All of this – and more – can only be delivered by a trusted professional whose number one priority is getting you the best price in a time frame that meets your needs.

 

If you’re curious what your home might be worth, Windermere offers a tool that provides a series of evaluations about your property and the surrounding market. And once you’re ready, we’re happy to connect you with a Windermere agent who can clarify this information and perform a Comparative Market Analysis to get an even more accurate estimate of what your home could sell for in today’s market.

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Windermere and Zillow Economists Come Together To Discuss Housing

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Earlier this week, nearly 200 Windermere brokers came together at Windermere’s monthly luxury breakfast at Overlake Golf Club in Medina, WA. The featured speakers were Windermere Chief Economist, Matthew Gardner, and Zillow Senior Economist, Skylar Olsen. Matthew interviewed Skylar on a number of topics related to the housing market and economy, including interest rates, inventory levels, Millennials, and where they predict Amazon will open their second headquarters (they both are betting on Austin, TX).

The two economists discussed the overall health of the housing market. Both predict sales to soften a little this year, but still remain strong overall. When asked about interest rates, Skylar stated that she believes they will land just below 5 percent by the end of 2018 and rise to around 6 percent by early 2019. They noted that luxury home prices have slowed a little in certain cities, with the exception of places like Seattle and San Francisco, where the economies and job growth are very strong.

On the opposite end of the spectrum, Matthew and Skylar addressed first time buyers – and more specifically – Millennial home buyers. Both say this generation will play an increasingly important role in the health of the housing market, but their biggest obstacle is saving enough money for a down payment. Skylar stated that more than 25 percent of first time buyers end up borrowing from the “bank of Mom and Dad” in order to be able to afford a home. With rapidly rising prices in many cities across the US, both agree that there probably isn’t much relief in sight in the near term for these buyers.

It was an honor to have two such well-respected economists on hand to provide their insights into the housing market. For more information about Matthew Gardner, and to read his analysis of regional markets throughout the Western. U.S., please visit: https://www.windermere.com/economics.

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