Most searches for homes and mortgages now start online. Further, the ease and comfort of digital searches are supposed to create a competitive landscape that ultimately favors the borrower’s experience, and pocket book.
But, according to this Quora blog by Joseph Alongi, founder at SoldNest, Redfin’s business model is leading to homebuyers being overcharged for some of their homes.
SoldNest, like Redfin, is a real estate brokerage website, so the two firms are in competition for a shrinking homebuyer base.
But what’s interesting about Alongi’s blog is he posts screenshots that appear to support his theory. And in one case, a borrower ended up paying 20% over that home's original asking price, Alongi states.
Alongi, however, can only show prices shifting on the public record. What he can’t prove is that Redfin is actively increasing prices in market where it has a larger footprint than competitors.
But he has his theories:
“MANY buyers will look at the Redfin estimate when determining what to offer. In fact, there are many buyers who strictly base their offer on the Redfin estimate.
I think Redfin figured this out a little more than a few years ago. So… In my opinion… They adjusted their algorithm to fix this “issue”.
They came to the conclusion that they can “predict” what a home might sell for by the user activity on the property details page of a listing.”
The story has since been picked up by real estate news website Inman and The Real Deal.
Redfin, like Zillow and all the other home listing sites, state that their values are merely estimations, not a viable home valuation. They say homes should be properly appraised before purchase.
According to Patrick Kearns at Inman, a spokesperson for Redfin confirmed that the Redfin Estimate is updated frequently:
“When a home is newly listed on the market, we have more data points and more-up-to-date information about it compared to a home that hasn’t been on the market for a while,” the spokesperson said. “In an effort to provide the most accurate home value estimate, we take into account the freshest, most relevant information available to us at a given time.”
“The Redfin Estimate uses more than 500 data points, including market data and neighborhood information, to generate an estimated value for a property,” the spokesperson added. “We can’t share more explicit details about the kind of data the algorithm analyzes.”
And that’s where the story ends. Even Alongi notes that there’s not much more that can be added to the issue and even stops short of saying he’s on to something big.
“Here’s my opinion… And this is only my opinion,” Alongi states. “I have no evidence to back any of this up.”
