iBuying Explained: How Zillow’s Algorithm Tried to Disrupt Real Estate

When you hear iBuying, a system where tech companies buy homes directly from owners using automated valuations. Also known as instant home buying, it promised to turn selling a house into a 48-hour transaction—no showings, no repairs, no waiting. But behind the flashy ads was a flawed model built on guesswork, not real market data. Companies like Zillow used algorithms to estimate home values, make all-cash offers, and flip properties fast. It sounded perfect for busy sellers who wanted out. But the system didn’t account for local quirks—a neighborhood’s sudden drop in demand, a roof that looked fine from a drone but needed $15,000 in repairs, or a buyer who suddenly backed out after the offer was accepted.

What made iBuying different from traditional real estate? It removed the agent, the negotiation, and the human touch. Instead, it relied on home valuation, automated estimates generated by data models that analyzed recent sales, square footage, and location. These tools worked okay in stable markets—but in places like Phoenix or Austin, where prices swung wildly in 2021 and 2022, the algorithms were way off. Zillow bought homes at inflated prices, then got stuck holding them as the market cooled. They lost over $1 billion before shutting down the program. That’s not a glitch—it’s a systemic failure.

And it didn’t just hurt Zillow. It hurt sellers too. Many got offers that seemed fair on paper, only to find out later that the final payout was lower than what they could’ve gotten through a regular listing. Buyers got burned too—Zillow’s listings sometimes showed homes as "ready to move in" when they needed $50,000 in upgrades. The whole system was built on speed, not accuracy. Now, other companies are trying again with better data and slower models. But the lesson is clear: if a home buying process feels too easy, it’s probably hiding something.

Below, you’ll find real cases, legal battles, and insider breakdowns of how iBuying really works—or didn’t. From Zillow’s lawsuits to what replaced it, this collection cuts through the hype and shows you what happened when tech tried to rewrite real estate rules.