Zillow Axes Algorithm-Assisted Home Flipping: What Does it Mean?

Category: How-tos

American real estate technology company Zillow recently announced the end of their massive home flipping operation and instant offer platform, and subsequently the drop in their share price, and other not-so-good financial news. The news is making headlines because it’s truly a shock for them to take a step back from a wing of the business they had put much investment and effort into. 

The algorithm-assisted home flipping model has been a big part of the real estate conversation over the last 3 years, and this latest development definitely changes things. The question is, how does this affect the world of business, real estate and also the lives of consumers? 

What It Means for the World of Tech Disruption 

The biggest lesson we can learn from Zillow’s struggle in the home flipping space is that not every model can be fully disrupted by tech, and that the human element is still critical to many aspects of real estate. An algorithm isn’t able to walk through a home, see the fixes that need to be done and make the changes that enhance its value. You would still need someone to actually look at the home, and that’s something technology on its own can’t do. The best way to leverage platforms like Zillow is to bridge the online and offline experience to create more convenience for the consumer. We have to use technology to enhance the human experience, not replace it. 

What It Means for the Consumer 

The idea of selling your home through an algorithm was truly a revolutionary one for the consumer because it just added a lot more convenience and one more option. Many people didn’t like iBuyers and instant offer platforms because it felt like they were low balling the consumer, but the truth is, many homeowners actually preferred that type of transaction if they wanted to sell the home faster or not deal with things like open houses. 

Homeowners have so many options when they have built up a lot of equity in their property. They can sell the traditional way, use a reverse mortgage calculator to find out if they can get a loan, and even opt to add value to the property. The iBuyer model just enriched the opportunity you have as a homeowner, and just because Zillow has axed their program, doesn’t mean that the instant offer model is gone. Actually, there are more companies bringing this model into the real estate market. Many lessons have been learned, and the great thing is that all the innovations are being done for the benefit of the consumer, so we should always take it as a good thing.

What It Means for Real Estate Agents

iBuyers and instant offer platforms were a source of great panic for a lot of Realtors because they thought this technology might just put them out of business. Even though that ended up not being the case, agents did learn that they need to become versed in other ways a real estate transaction can be carried out, and that they need to focus on what brings the ultimate convenience to the consumer. Many agents were able to make more money by simply partnering with iBuyers and bridging the gap between them and the customer. 

Some agents were even able to start offering their seller clients the iBuyer treatment by buying the house as an investor in their own right. The lesson is that some disruptions don’t have to be seen as threats, but just as another natural progression in a world where technology is permeating just about every aspect of human life, from how we work to how we buy and sell homes. If you can see it as an opportunity, you can actually win. 

Zillow sent shockwaves through the real estate industry when they launched their instant offer platform, and they equally sent shockwaves through it again when they pulled the plug on it. There are key learnings and takeaways we can glean from Zillows adventure into home flipping from the angle of businesses and tech startups, along with lessons for consumers and even the real estate agents who are willing to shift their thinking about tech disruption. 

Zillow’s setback aside, we have to accept that this model isn’t going anywhere, we’re going to see more disruption in the space of buying and selling homes, not less. We’re actually going to see companies learn from the mistakes Zillow made and improve on them to create an even more convenient service offering for consumers. Tech is going to keep changing our lives, and if we welcome it, we can actually get something out of it, as consumers or as business owners. 

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