Zestimate to double as Zillow’s iBuying offer

Zillow is putting their money where their Zestimate is, at least to a point.

The “Zestimate,” Zillow’s catchy (and soapy) name for estimated home values, will sometimes be used as the initial offer Zillow plans to pay to purchase a home, the company said on Thursday.

Zillow’s own estimated home value is to guide the company on a “limited subset of homes” in 20 markets. The largest of these are Los Angeles, Houston and Phoenix.

The firm’s announcement is an intriguing turn, because it folds up two company priorities into one – boosting consumer faith in the Zestimate, and highlighting Zillow Offers, the company’s instant homebuying, or ibuying, platform.

Even setting aside the various lawsuits that it has spurred, the Zestimate has had bumpy a 15-year journey, such as when former CEO Spencer Rascoff sold his Seattle home for 40 percent below its estimate (Rascoff would continue his seeming battle against the Zestimate, listing an L.A. home last year at $7 million more than its Zestimated price.)

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In response to a lawsuit over the accuracy of the Zestimate, Zillow in 2017 said the tool was within 5% of the sale price 53.9% of the time, within 10% 75.6% and within 20% nearly 90% of the time.

Still, the Seattle-based firm responded with efforts like computer vision to analyze aerial photos of a home, which followed a public competition, complete with $1 million prize, to improve the Zestimate.

Zillow Offers, meanwhile, came into focus in 2018 when Rich Barton stepped back into the CEO chair. In 2020, the business line accounted for the majority of the company’s revenue and expenses.

Zillow Offers is currently in 25 markets. Though the Zestimate may now dictate an initial offer, a final offer is predicated on a company representative actually visiting the home.

Source: housingwire.com

Weiss Analytics launches AVM powered by geospatial AI

From thousands of feet above your home, a high-tech camera snaps pictures of your roof, the mess of debris in your yard, and that pool you hate cleaning. Pictures like these could cost – or save – you thousands of dollars when deals are about to close. It could also have big implications for appraisers, who are already nervous about the continued rise of automated valuation models.

With ValPro+, Cape Analytics and Weiss Analytics have created what they say is the first automated home valuation engine that uses geospatial imagery and artificial intelligence to integrate current home conditions – like a damaged roof or a pool – into valuations.

Cape Analytics’ AI system instantly extracts property condition from images, which is then run through Weiss’ valuation model, Raj Dosaj, Cape Analytics’ head of real estate, explained. The systems have condition data sets for 110 million buildings across the United States. Previously, an appraiser would need to make an in-person visit to note the condition of the property, Dosaj said.

The rise of AVMs over the years has waxed and waned based on the perceived risk of the product, but it’s caught fire over the last year with the COVID-19 pandemic and new initiatives by the Federal Housing Finance Agency. Condition data is the latest frontier, according to Cape and Weiss.

“One of the key missing ingredients which this now answers is, how do you know what the condition of the house is?” said Allan Weiss, head of Weiss Analytics and co-creator of the Case-Schiller Index. “Because most of the data is very out of date that you can get in computerized form – you can get assessor data, which could be a year more out of date, and does not tend to focus on condition of the house.”

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Cape Analytics and Weiss Analytics are primarily targeting real estate investors, real estate brokers and mortgage originators with the ValPro+ tool to help them identify undervalued purchase opportunities. The two companies claim their ValPro+ engine has shown a 7.7% improvement in PPE-10 predictions of on-market valuations. The model can also flag homes in distressed condition and will accurately predict they will sell at a 10% off-market discount, the companies said.

But the companies are especially interested in hooking loan traders, refinance and HELOC loan originators and iBuyers, who often want to bid on a home that isn’t on the market and doesn’t have an asking price. Overall, off-market houses sell for about 2.5% below their on-market peers, but Cape and Weiss say investors using their product achieved a median discount of 10% compared to their on-market peers.

Weiss wasn’t shy in saying the product represents a direct threat to appraisers and broker price opinions (BPOs), whom he says are both slow and expensive.

“There’s been a decades-long process by which the traditional appraisal has been, in some cases, augmented, in many cases, replaced by technology,” said Weiss. “And that’s been something that’s been going on since at least around the mid 1990s. Because of the cost of appraisals, and because of the delay that appraisals create and various transactions, they’re just not practical for all the ways that investors, lenders, and homeowners require in order to go about transacting the way they want to.”

Cape Analytics and Weiss Analytics said they spent about a year integrating the image data into the the home valuation models. Their model allows investors to get lists of all houses discounted below market value due to condition factors. The system also automatically scans real-time MLS listings and screens houses so bids are priced appropriately to maintain credibility with local agents.

“We now know if we have a house in South Florida, that has a pool and would otherwise be worth $600,000 versus a house that doesn’t have a pool, what that means in terms of the value of the house,” Weiss told HousingWire. “We didn’t know things like that before. We didn’t know what it meant if there was a lot of yard debris, or there was a lot of vegetation overgrowth or what it meant if the condition of the roof was very good versus very bad in a given market.”

Source: housingwire.com

iBuyer revenues slump amid high market demand

iBuying companies are experiencing a slump in sales during a time when many thought the opposite might happen, as they provide a contactless way to sell a home.

Opendoor, the biggest iBuying company, has seen its revenue fall by almost half in the past year, and said it doesn’t expect its business to recover properly until mid-2022, according to the Wall Street Journal.

When the COVID-19 pandemic emerged last spring, most iBuyers, which buy and resell homes electronically, halted their businesses. By summer, they had come back online and resumed making instant cash offers to people who wanted to bypass the traditional homeselling process.

But it seems the high demand for homes from a flood of buyers enticed by the pandemic into making a move has worked against iBuyers. Selling on the open market is more appealing as the high demand means most can fetch good prices for their homes, and they don’t have to wait long to do so. Most iBuyers offer prices that are below market value with the promise of a fast sale, but that is no longer such an enticing prospect.

Opendoor, which launched its business in 2014, is still the leader in the iBuying space, but it is facing challenges from numerous competitors, such as RedfinNow and Zillow Offers. While the company’s revenue surged 158% to $4.7 billion in 2019, Opendoor cut more than a third of its workforce in April 2020 due to economic hardship during the pandemic.

Opendoor has responded by expanding its business model to include escrow, title and other services.

iBuyers have managed to sell a large number of their home portfolios during the pandemic. Opendoor said it sold 80% of its housing stock in the first six months of last year. But that has meant rivals have been able to gain a bigger market share.

Still, Opendoor insists that other iBuyers aren’t its primary competitors, seeing traditional brokerages as its main rivals instead.

Source: realtybiznews.com

Orchard expands to Houston, East Coast

Orchard announced Tuesday its immediate availability to consumers in Houston, as well as future expansion into Charlotte, Raleigh-Durham, and the Washington, D.C. suburbs in the upcoming months.

Court Cunningham, chief executive officer and co-founder, said he’s excited for Orchard to help consumers in the new markets, where demand has outpaced inventory.

“We’ll make it easier for home buyers in these markets to secure their dream home as soon as they see it, while still selling their old home for top dollar,” he said.

Cunningham added that the Move First initiative, Orchard’s program allowing homeowners to buy their next home before selling their old one, proved popular during the COVID-19 pandemic because it let consumers avoid living in their old home while potential homebuyers toured it.

“Buying and selling homes the traditional way isn’t sufficient in today’s hyper-competitive market,” he said. “With demand at an all-time high, people need to make offers – ideally in cash – without contingencies.”

Houston, according to multiple listing service data, is selling homes above price at triple the rate of 2019, and Cunningham added that the number of homes going under contract within 30 days of listing has increased by 50%.

Orchard adds Houston to a service area that includes Austin, Dallas-Fort Worth, San Antonio, Denver, and Atlanta.

Originally called Perch, Orchard branched into the lending business in July. This followed the creation of a title and escrow unit, dubbed Orchard Title, in the fall of 2018. It also closed on a $69 million Series C round led by Revolution Growth in September.

In October, Orchard announced the launch of a digital platform that enables homeowners to manage the entire real estate transaction in one place.

Source: housingwire.com