How AI Failed Zillow and Its Future in Real Estate

If you follow the real estate industry closely then you probably have heard about Zillow’s million-dollar mistake and the closing of its AI-driven home buying platform that resulted in cutting 25% of their workforce.

But what exactly went so wrong? In a world increasingly utilizing AI in almost every branch of business, will this hit stop people from using AI in real estate moving forward or just change the way people think about it?

Where Did AI Go Wrong With Zillow?

First, let’s cover what went wrong at Zillow and what we can learn from their mistake when considering the future of AI in real estate.

What started as an exciting aspect of their business became a nightmare due to errors from AI when making expensive predictions and decisions based on a market that is known to be unpredictable with prices based as much on feel as on facts.

Zillow’s CEO Rich Barton listed “unpredictability in forecasting” that “far exceeds” what they’d expected.

A Zillow spokesperson talked with CNN Business about the closing of the Zillow Offers program. “The challenge we faced in Zillow Offers was the ability to accurately forecast the future price of inventory three to six months out in a market where there were larger and more rapid changes in home values than ever before, Shelton said.

Essentially, Zillow’s AI and machine learning algorithm couldn’t accurately predict changes in home value, something many in real estate probably can relate to.

Can AI Be Used Effectively In Real Estate?

This begs the question: if AI can’t predict pricing or home values, how can it still be used effectively in real estate?

One of the benefits of AI and machine learning is removing the need for human input in tasks that take a long time or that can be repetitive, but it can’t remove the need for the ‘human touch’ on things that require a bit of brainpower or intuition, something many experts believe Zillow leaned too heavily away from.

AI may well be able to help someone predict the price or value of a home, but it became clear that this is something that a human can do better. Many businesses and industries are also running into the issue of deciding where to draw the line between algorithms and human work, including social media, self-driving vehicles, and more.

For legal guidance on Illinois real estate, schedule an appointment with the attorney at Lee Scott Perres, P.C.