Recently I was on an esteemed panel of ibuyer companies with their key people at the IMN Single Family Rental Conference in Arizona this past December. We discussed the many potential impacts this new model has on the real estate market and how rapidly these companies are gaining market share.
The real estate market is affected by multiple factors: the money supply, employment, demographics and the Federal Reserve System to name a few. These determinants have long histories with the buying and selling of property. However, in recent years, technology inserted itself among market variables in the form of iBuyer online platforms. How do these companies change the equation? Do their streamlined procedures make successful closings more likely or less so? Such questions warrant a look at these internet-based enterprises. Whether they can entirely replace the traditional broker/agent is a different question altogether.
1. Zillow — Seattle-based Zillow opened for business in 2006. Marketing itself as a central clearing house, this company offers services relative to more than buying and selling. Zillow also directs customers to resources for renting, renovation and home financing. They recently came out with Zillow direct offers but its only available in limited markets: Phoenix, Las Vegas, Atlanta, Denver and Charlotte with plans to be in Dallas, Raleigh, Houston and Riverside in the near future.
2. OpenDoor — Planning on expanding to 30 metropolitan statistical areas, OpenDoor now does business in 20 regions of the U.S. At six years of age, OpenDoor has transacted 50,000 deals and now employs 1,800 professionals across the country.
3. Knock — There is a niche market on which Knock focuses: the simultaneous sell-purchase transaction. In fact, under the right conditions, Knock will buy a new home on behalf of a customer for whom this company sells the current one. Launched in 2015, Knockaway, Inc. does business as Knock.
4. Redfin — This is an iBuyer committed to combining mapping technology with buyer advocacy. Founded in Seattle in 2006, the Redfin name stands for “real estate defined.” This particular iBuyer promises lower commission charges than the typical six percent.
5. Entera— Entera unlocks access to all on and off market properties from every source: MLS, iBuyers, auctions, pocket-listings, portfolios and more. Our comprehensive database of 225,000+ homes is updated in real time. Entera’s recommendation engine uses rich proprietary transaction data and artificial intelligence tools to match you to your ideal home.
6. Point Acquisitions — Last but not least – Yours Truly… Our company is one of the very first players entering the commercial i-buyer market with a presence in Philadelphia, North Jersey (Essex, Hudson, and Bergen Counties) in addition to the secondary and tertiary markets of New York City ie: Bronx, Brooklyn, Harlem, and Queens. We pride ourselves upon 24-48 hour offers in all asset classes: Multifamily, SFR portfolios, Vacant Land, Commercial, Industrial, and Office. Point Acquisitions has plans to enter the South East in 2020 starting in Florida with more markets to come in the future. Within only two years we have become the fastest growing commercial real estate buyers in our respective markets.
How They Work
The new iBuyer companies propose to take the blood, sweat and tears out of selling a property. The headaches of fixing, staging, negotiating and making it legal are a drain on time and emotion. Visiting an iBuyer’s website and answering a few questions about the property in question can result in a cash offer the very next day. The attractiveness of the offer can depend, all real estate offers are a function of price and terms but it gives the seller an idea of what the house is worth as-is based on technology known as Automatic Valuation Models (AVMs). From there, sellers can still retain a realtor if they decide the old fashion way is preferred or make any necessary modifications or concessions; or simply accept the iBuyer — “i” for “instant” — offer as it stands. The best part about it is that you don’t have the 1-year exclusive many agents and brokers insist upon and you save significant money with not paying the standard real estate commission that ranges from 5-6%
Do iBuyers Change the Way Real Estate is Conveyed?
The swiftness with which iBuyers can bring in an offer is definitely a new phenomenon. Traditional brokers and agents recognize that a glacial pace for negotiating and contracting will become increasingly less tolerable as iBuyers proliferate and increase in technological capacity. Still, the old-fashioned camp can play on its traditional strengths. Once an instant offer is accepted by a seller, the iBuyer sends out an inspector to evaluate the property condition.
How Do and Will iBuyers influence the Real Estate Market?
Although iBuyers can change how properties are sold, real estate markets are still driven on demographics, the economy, government policy and interest rates. Whether or not realtors/brokers become a thing of the past is uncertain, however, one thing’s for sure, the antiquated model of year long exclusiveness and high commissions will soon be a thing of the past.
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