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Why Zillow Couldn’t Make Timber Algorithmic House Working

Zillow’s Zestimate of house prices have become a staple for US homeowners. But when Zillow tried to use it algorithm buying and selling real estate, it is wrongly wrong in the market.

Hand of the iBuyer company (or “instant buyer”), where technology companies use algorithms to profit, purchase, and sell real estate, which was launched in 2018 in Phoenix. He has entered the Arizona city-wide market: Opendoor, Redfin, and Offerpad have been buying and renovating homes there since 2014.

The underlying reason for iBuying is simple: Using the power of big data, technology companies compare the price they think they can sell on a site, which determines what they want to buy. They tend to offer lower prices than traditional buyers, but attract sellers by promising faster, more money.

Once Buyer owns a home, it works quickly to renovate the item and re-record it – in terms of value. Analysis of millions selling homes across the US between 2013 and 2018 and students at Stanford, Northwestern, and Columbia Business School found that eBuyers earned around 5 percent turnover in home improvement.

Zillow believes it has a secret in the world of iBuying: Zestimate. Established in 2006, a well-known method was taught to count millions of homes in the US before it was used to compare the price Zillow bought. Ideally, it was a natural combination of two things: Zillow’s expertise in real estate, and a new way of buying goods that relied on accurate comparisons.

For three years it worked, according to John Wake, who has been researching businesses and the area around Phoenix since 2003. problems and subprime debt. But they have not seen anything like 18 months ago.

“I don’t know if anyone in 2020 predicted that the market would do what it did,” he said. “No one has ever seen it rise and become so powerful.” In March 2020, all activity on the housing market in Phoenix came to a standstill as the country closed and economic uncertainty. By October 2021, sales had risen sharply, including among eBuyers.

Technology companies have chosen the Phoenix area because of the proliferation of cookie-cutting homes. Unlike Boston or New York, well-known roads make prices easier. The market share of iBuyers in Phoenix grew from about 1 percent in 2015 – when professional companies first entered the market – to 6 percent in 2018, says Tomasz Piskorski of Columbia Business School, who is also a member of the National Bureau of Economic Research. Piskorski believes the Buyers-Zillow plus-expands their share since then, but still operates less than 10 percent of all events in the city.

Real estate agents are afraid of the arrival of iBuyers, says He. In early October 2021, Zillow wrote his own article a very active week buying a house in Phoenix, part of its purpose buy 5,000 per month by 2024. Then, suddenly, he stopped buying. Wake had one question: “What happened?”

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