There were an array of stories related to iBuying in 2021, but the topic which earned top place in Inman’s Real Estate Journal year-end review, were Zillow Offers, their iBuying program.
As a way to diversify, Zillow entered the world of “real Estate “flipping” or iBuying. They offered home sellers, the opportunity to sell their house, flip them by fixing them up and to their way of thinking, earn a larger profit on the sale. To determine the real estate value of these houses for purchase, they used their own ‘Guestimate’.
Guess what happened?
They lost money because their own ‘Guestimates’ were not accurate. While it’s not shocking to the average Real Estate practitioner, who often counsel sellers to beware of these estimates because they are wrong 60% of the time. Zillow doesn’t have ‘boots on the ground’ to know whether a house sits on a busy street or not. Or, if the house has a weird floor plan despite the square footage. Or, if the house has deferred maintenance. Or, any number of reasons that affects home valuation. It makes comparing homes to past sales, a bit like comparing oranges to apples especially in areas like the North Bay.
Zillow announced the end of its iBuying efforts during an earnings report in November. Its stock price plummeted, once again proving that perhaps Wall Street is not the market solution to sell or buy one’s home but to instead use a competent and professional local Realtor to achieve the greatest Return on Investment.
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