What do you think about the breaking news on Zillow?
“What do you make of the news around Zillow?” This is the question I’ve been asked and will address today, Day 27 of a 30-day series looking at the top questions in real estate.
Just a few days ago Zillow broke the news they were suspending their iBuyer program. Yesterday they announced they were ending it and they would be selling roughly 7,000 homes (and laying off 1/4 of their workforce).
With that news the Zestimate also went the way of the dodo bird. Does anyone actually know what that reference is? It sounds right…which is kinda how the Zestimate worked. It might be in the ballpark or it may be 40% off.
I did a video earlier in the series – Day 6 – on “Can you trust the Zestimate.” I encourage you to check it out.
Here’s my take on it. When iBuyers come in, whether Zillow or some other biggie, things are bound to go wrong – watch Day 8. They overpay for homes to control them and the result is potential market manipulation. Do you think the markets Zillow bought the 7,000 homes they’re now trying to offload won’t see some impact from a tech company’s push to correct their losses? Ask folks in Phoenix, Atlanta and Dallas, among others.
In an opinion piece he penned this morning, real estate journalist and publisher Brad Inman writes, “Access to too much capital often blurs good real estate investor judgment. Over-leveraged investors can easily lose everything. Tech entrepreneurs can come to believe that they are invincible.”
That statement takes me back to the dot.com bust back in 2000.
I’m a big believer in scaling. You take an idea and prove it…and then go bigger and larger with it. But when you’re dealing with billions of dollars, profits and losses for the average buyer and seller in local markets takes a back seat to Wall Street P&L statements. No big deal for a company like Zillow to undervalue their now excess inventory to get it off their books for a much needed tax writeoff. Doesn’t work quite the same for mom and pop.
My recommendation: stay away from the iBuyers and work with a professional Realtor to help you price your home or buy your home based on fair market value.
Time for those iBuyer turkeys to get stuffed for Thanksgiving.
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