Zillow’s iBuyer Program Closes
Zillow Group had a division that would make computer generated offers on a homeowner’s home, with the goal of reselling that home at a profit a little later. On November 2, 2021 Zillow announced the permanent closure of their iBuyer program.
As a result of errors in their algorithmic buying of homes, Zillow is planning to take a loss on the 7,000 homes it now owns.
Zillow said Tuesday in its latest quarterly earnings report that it will write down real estate worth $304 million after buying homes that are now worth less than the company’s current estimates of their future sales prices. The company also expects to recognize an additional $240 million to $265 million in losses on homes it expects to finish purchasing in the fourth quarter.https://www.cbsnews.com/news/zillow-layoffs-closing-zillow-offers-selling-homes/
iBuyers in the Bay Area?
I had a client ask me a really great question regarding the closure of Zillow Offers their iBuyer program.
My client’s question was, “With Zillow stopping their iBuyer program, are there going to be a lot of properties that come on the market from Zillow?” She had seen an article that said Zillow was going to actually sell them for loss.
It’s a great question. And I told her, I don’t think Zillow will be selling many homes here in the Bay Area Market.
I don’t think Zillow was actually very active in our market. And I found a report from September of 2021. In the report on the major Metro areas where iBuyers, in the United States bought at least 30 properties.
The major iBuyers had a lot of the activity Atlanta, Phoenix, Dallas area. Reading through the list of major metros with significant iBuyer activity, you will notice very few California markets: Riverside, CA , the Los Angeles/Long Beach area, Sacramento, California, & San Diego, California.
But as I mentioned before, the Bay Area is not on this list of major markets where iBuyers purchased more than 30 homes in the second quarter according to these numbers by Zillow.
And also, if you look on the website ibuyer.com, you can see here which market this is, a past grab of something where they’re active. Again, if you go through this, a lot of them are in the Midwest and Sunbelt States. Not a lot here. Los Angeles a little bit. I think they have Riverside, California, Sacramento, and San Diego. But again, the Bay Area is left off this list.
Why were Bay Area homes avoided by iBuyers?
I have a theory with two reasons that iBuyers avoided the Bay Area housing market.
First, the Bay Area entry level home prices are so high compared with other parts of the country.
Second, due to the political challenges of building new homes, the Bay Area has a lot of older homes built after World War II. Many of the homes have been remodeled, expanded, and renovated. While they were often based upon the same models, over the years much of the housing stock has been modified and is unique.
Areas like Arizona, Atlanta, Nevada, & Texas have less restrictive development practices and have experienced large tract home developments in recent years. For computer algorithms to accurately predict the value of a home, the algorithm must compare similar home plans. A computer predicting an accurate value is easier done in newer tract homes where the models are newer and have undergone fewer modifications.
However, it appears that Zillow is having to exit the market because their algorithm didn’t accurately predict housing values.
Don’t Expect a Wave of Cheap Houses
So I would not expect to see a number of homes from Zillow come on the market. So don’t expect to see a bunch of good deals hitting the market because Zillow is shutting down their iBuyer program.
The bottom line is, a full-time licensed real estate agent is going to provide you a more accurate value of your home and a plan to market your property.
If you would like a Professional Equity Assessment Report of your Bay Area Real Estate and how you can utilize the equity, please call Peter Maclennan, Bay Area Real Estate Broker. DRE #01801793
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