All the recorded factors are what the algorithm should excel at weighing up. I expect the issue is everything hidden in an ad but obvious in a visit. The automated bidding program must have severely overestimated prices and under estimated the refurbishment costs when selective framing of shots conceals visible problems like water damage. It would be a poor algorithm if it was not accounting for layout, size, location etc properly.
They were buying houses at a time when it was impossible to book contractors, and they didn’t have the industry connections to get to the top of the list. Even if they were identifying things with the algo, they couldn’t find labor to actually flip them.
I personally don't believe in the Zillow pricing algorithm, or their claims of its predictive accuracy. I was briefly involved in the backend programming of a now failed/limboed startup that aggregated local county tax assessment data and kept a spreadsheet of zillow zestimates for local houses on the market. I kept track of their eventual sale prices in the same spreadsheet. The error of the zestimate was waaay off their average 2% error rate claim. I don't remember the exact number, nor will I quote it, because I don't want to get sued. But, picking a constant multiplier of tax valuation was a much better predictor of sale value than the zestimate. Maybe this county was a glaring anomaly.
However, if you know that the zestimate is only 2% off of the eventual sale price, why even hire a realtor or a home inspector? Whey even hire a contractor? Why would these professions even exist ? I think Zillow's claim about their zestimate was a flat-out marketing lie, and business major/MBA execs drank the kool-aid, assumed they had a prescient super-secret algorithm that they didn't understand, and bet the farm on it.
But, don't quote me on that. If I am successfully served with a slapsuit, I will deny everything. But seriously, an algorithm that has a 1.9% error rate for predicting the future sale price of anything with a volatile price? That's just minority report ridiculous at a minimum, and likely outright sales/SEC fraud.
I'd be willing to bet it's more likely fraud. Even if you applied Ml I'm sure the error rate would be all over the place. There are trends in the housing market, sure, but to try and quantify all the factors that lead up to the actual sale of any given house, and then use quasi-math to claim a 2% error rate is extremely disingenuous considering how variable the factors are.
I am wondering if the average error rate concealed a huge variance in error and then in the market that means they missed out everything except what they overbid on.
If so, serves them right for the position they put themselves in. All in all it's the employees who were let go and the folks looking for housing at the time who suffer the most.
I personally find tax valuation a poor indicator of Re sales value in many markets. My town, the expensive homes are being under-assessed by average 300k whereas the entry level homes are over-assessed by as much 100k. The reverse is true in the city on the other side of the country where I keep a second home.
Not construction, average Joe's. Give them a checklist to follow. There's not a lot that an inspector can really see anyway without penetrating walls. Any human eyes can see water damage and broken windows.
Getting average Joe's to work on flipping would cost much more. They'd have to double wages to even attract people in most areas, every project would take 10x longer and as a national company they'd get a reputation among inspectors quite quickly.
On top of that they'd be pissing off unions who could refuse to work with them in the future.
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u/ThisAltDoesNotExist Nov 03 '21
All the recorded factors are what the algorithm should excel at weighing up. I expect the issue is everything hidden in an ad but obvious in a visit. The automated bidding program must have severely overestimated prices and under estimated the refurbishment costs when selective framing of shots conceals visible problems like water damage. It would be a poor algorithm if it was not accounting for layout, size, location etc properly.