Zillow shuttering home buying business

If you’ve ever looked at Zillow’s “Zestimate” of your home’s value, this probably won’t come as a shock to you.

Zillow’s home buying business is being shuttered, and the blame is being placed on the algorithms used to determine pricing on homes purchased and sold.

From GeekWire:

Just because a business process can be automated, doesn’t necessarily mean it should be automated. And maybe — just maybe — there are components of business that are not better served with AI algorithms doing the job.

That’s a key takeaway after Zillow Group made the unexpected decision on Tuesday to shutter its home buying business — a painful move that will result in 2,000 employees losing their jobs, a $304 million third quarter write-down, a spiraling stock price (shares are down more than 18% today), and egg on the face of co-founder and CEO Rich Barton.

Zillow’s move also represents a big loss for the algorithms that powered its nascent iBuying business, and it is a warning sign to other businesses — both in real estate and other industries — that rely heavily on the all mighty algorithm.

– John Cook, GeekWire

It’s hard to gloat about such a spectacular failure when thousands of people are going to lose their jobs due to Zillow’s irrational exuberance in relation to using algorithms to drive this business. That said, hopefully Zillow will learn the lesson and take a good hard look at some of their other algorithms, like the Zestimate.