Technology is driving another growing trend in real estate: iBuying. Also known as instant buying, the trend emerged in 2013 as an alternative to conventional real estate buying and selling. Using technology and aggressive marketing, iBuyers buy and sell properties quickly.
Much like Uber and Lyft disrupted the transportation world, iBuying in real estate uses automation to change the way consumers do business. The iBuying company offers cash for a property so the seller can exit quickly. iBuyers then re-sell these homes to investors, flippers or consumers.
The length of time between listing and closing in the conventional real estate system can be as long as 70 days, so consumers may see the iBuying process as an attractive alternative. Although they may get less for their homes, they don't have to deal with repairs, showings and other steps that they may see as aggravating and time- and cash-consuming.
The Current iBuying Landscape
The main players in the iBuying world are:
- Zillow, which just announced it is also offering more traditional brokerage services via Zillow Offers and Zillow Homes
- Opendoor, which is viewed as the pioneer of iBuying and is now hiring conventional brokers
- Offerpad, which operates in more than 800 cities and now offers a fully integrated real estate solutions center and concierge services
- RedfinNow, which markets itself as "a home sale without the headache"
These companies are backed by venture capital and have an opportunity to scale rapidly.
The iBuying trend varies widely by region. Hot markets for iBuying currently include Phoenix, Las Vegas, Atlanta, and more. Still, in the third quarter of 2019, only 3% of sales resulted from this process and that number dropped in early 2020 as a result of the COVID-19 pandemic. Some real estate experts believe that these are simply the "pioneer days" of iBuying and that the trend is here to stay. In markets such as Phoenix (where iBuying has been prevalent for a while), sales rates sit at 6%.
Broker Beware?
As with any technology disruption, people in the industry who have been doing business "the old fashioned way" need to pay attention to new competition. Conventional brokers, agents and investors will need to compete with online buyers and sellers, look for opportunities to speed up transactions, and even collaborate with iBuyers to ensure they don't miss out on deals.
In markets where iBuying is emerging, the big companies are spending marketing dollars to attract consumers who don't want to deal with the selling process. Although consumers may be getting less for their homes, sales move rapidly.
Big brokers such as Keller Williams, Coldwell Banker and Century 21 have seen the writing on the wall and are launching their own instant buying programs to compete with the tech-driven companies. The iBuying market is estimated to represent as much as $3 billion in opportunity, compelling people who may not have otherwise thought about selling their homes to take rapid action.
Critics of iBuying believe that the system could result in the "big four" companies owning inventory that may not ultimately sell, but the trend is nonetheless pointing toward instant buying.
Reliable Data Is Timeless
From a consumer perspective, understanding home values and the trade-offs between conventional home sales and iBuying is essential. If you are a broker or agent, you must up your game today, proving to sellers that dealing with a knowledgeable professional can add value to real estate transactions. Develop a deep understanding of market trends and potential, along with rehab costs.
iBuying will prompt our industry to value speed and service more than ever. Sellers will choose local professionals over big brand tech companies if they see a value-add, so local sellers must work hard to keep up.
