Zillow Offers – Why Real Estate is So Much More Than Algorithms

Earlier this month Zillow announced they would be ending their ibuying program “Zillow offers” ⁠and laying off 25% of their workforce. 

In the real estate industry this was big news and we wanted to break down the information we took from this announcement. 

Zillow offers was an algorithm based program from Zillow to buy homes directly from sellers and resell them back on the real estate market. In essence, flipping houses. 

Many people have heard of “zestimates” which is what Zillow’s website thinks a home is worth. The problem we, as realtors have had with zestimates is that it’s fully based on an algorithm and does not account for the specifics of the home, or know the local boundaries / streets. 

As realtors, there have been many times we’ve had to discuss pricing homes with sellers who believe their home is worth the zestimate. 

As it turns out, the Zillow offers program ran into the same problem. In their November earnings call, they made the announcement that they have too much “unpredictability in forecasting home prices” and it “far exceeds” what the company had expected. 

The company finally experienced in the hardest way possible, why realtors always had to fight the zestimate. They were always over shooting. In a market that has gone up 20% in the last year, they still managed to lose money. 

To us, feet on the ground, in the real estate industry this felt very validating. Real Estate is a personal experience. Knowing and understanding the markets we work in is our job at the most basic level. What Zillow Offers didn’t take into account was all the human contributions to a real estate transaction. 

Having a human to talk to, through what will likely be the biggest financial transaction of your life really does make a difference. Understanding how the process works. Having someone to ask questions to. This is what we do. 

What we took from this, is that real estate is about personal relationships, and a understanding of ‘on the ground’ real estate treads and activity. AI, Algorithms, data are great but real estate is so much more.