Most real estate agents have warned their clients of the wisdom of using Zillow’s proprietary “Zestimate” for years now.
A top-secret algorithm developed by the company, the Zestimate® was touted by Zillow as an accurate and important tool to allow home buyers and sellers to instantly obtain home valuation information.
Like any algorithm measuring home values, it was not particularly accurate. From a real estate agent’s point of view, it was often embarrassingly so. This information shows just how rarely the Zestimate got it right. Take a look at the data for Seattle. If my team was this inaccurate in assessing home values we would not remain in business!
Based on their belief in the power of their Zestimate, Zillow jumped feet first into an iBuyer program, which they called Zillow Offers. I’ve spoken about iBuying in previous posts and it’s no secret I’m not a fan of these programs.
Zillow experienced first-hand the inaccuracies of their Zestimate tool, which was a cornerstone of their Zillow Offers program.
Zillow Offers went like this: Zillow used their Zestimate tool to calculate anticipated future sales prices of homes. Using this data, the company made offers on homes, paid cash for the properties, and then updated or repaired those homes prior to putting them on the market.
Zillow intended to have several profit points in these transactions. The obvious one is the actual net profit on the sale of the home. Others, which are less obvious to those not in the industry, was to drive buyers and sellers to ancillary service providers in which they might have a financial stake, such as title, escrow, and mortgage. Many consumers weren’t interested in Zillow telling them who they should use for these important services, and when they chose other service providers even more of Zillow’s profit margin vanished.
Sadly, with the failure of Zillow Offers, approximately 25% of their workforce will be terminated.
Does Zillow’s shuttering Zillow Offers mean the death of iBuying programs? Apparently not. Other players in the market claim they are profitable and intend to continue their programs. But with earnings reports due soon, the public relations statements currently out there may change as hard data emerges about the profitability of these programs from a corporate point of view.
And I continue to maintain that there’s not an algorithm out there that can accurately predict a home’s value. That’s because buyers purchase homes emotionally and will often pay dearly for intangibles that can’t be measured by an algorithm.
Yes, buyers care about brick and mortar issues such as floor plans, bedroom/bathroom count, and commutes. But they also tap into many issues that aren’t easily quantified by logic. That’s where an experienced real estate agent can provide extraordinary value.
So, if you’re interested in determining the current market of your home, let’s talk today. Our decades of experience will provide you better, more accurate data than any algorithm out there.
Feel free to call me at 253-246-8938, or make an appointment using my online calendar now: https://www.teammarti.com/contact-me/