Zillow Offers iBuying algorithm
November 2021
Updated: February 2022
Property and technology company Zillow Group has shuttered (pdf) its i-Buying home flipping business, saying (pdf) it has lost $881 million on the business.
Zillow Offers uses big data and automated valuation algorithms to make offers on homes across the US. These acquistions are quickly sold for a profit.
At least, that is - or was - the theory. In reality, the company appeared to lose faith in the ability of its algorithm to make reliable predictions, including during so-called 'black swan' events such as COVID-19.
In a letter to shareholders, CEO Rich Barton explained Zillow Offers was 'too risky, too volatile to our earnings and operations', and provided 'too low of a return on equity opportunity, and too narrow in its ability to serve our customers.'
Zillow says it will lay off 2,000+ employees. The company has also been hit with two class action lawsuits claiming it had misled investors about the true nature of its financial performance.
Operator: Zillow Group
Developer: Zillow Group
Country: USA
Sector: Real estate
Purpose: Estimate and predict real estate value
Technology: Automated valuation model
Issue: Accuracy/reliability
Opacity: Black box; Marketing
Reference
Research, audits, investigations, inquiries, litigation
News, commentary, analysis
https://www.economist.com/finance-and-economics/2021/11/13/a-whodunnit-on-zillow
https://www.geekwire.com/2021/ibuying-algorithms-failed-zillow-says-business-worlds-love-affair-ai/
https://www.fool.com/investing/2021/11/11/the-biggest-reason-zillow-went-sideways-in-ibuying/
https://edition.cnn.com/2021/11/09/tech/zillow-ibuying-home-zestimate/index.html
https://www.wsj.com/articles/zillow-offers-real-estate-algorithm-homes-ibuyer-11637159261
https://www.americamagazine.org/politics-society/2021/11/17/zillow-housing-algorithm-241864
https://www.foxbusiness.com/lifestyle/zillow-federal-lawsuit-home-flipping-business