Back in the news and causing buzz in the real estate world again, iBuyers have had major success in Q2, 2021. In addition to the success of the major companies in this space, the last year has also seen a jump in the number of iBuying platforms. What are the implications of the rise of iBuyers?
iBuyers or “instant buyers” are platforms that promise to smooth out the process of buying and particularly selling your home. To sell to an iBuyer, homeowners can fill out extensive forms online. Then the iBuyer calculates the market value of the home and gives the homeowner a cash offer based on that calculation. There’s no need to list the home, do open-houses, or pay commission. Applications that are accepted by the iBuyer usually get offers very quickly and the whole process can be completed within a couple of weeks.
Historically, iBuyers have made most of their revenue not through actual sales but through lead generation. To apply to sell your home to an iBuyer, you need to fill out a lot of information. iBuyers only give offers to a small percentage of the applications they get, but can turnaround and sell the data they collect on people interested in selling their homes to traditional real estate agents.
iBuyers came onto the scene around a decade ago and have had an uneven existence. In terms of the number of homes purchased, iBuyers peaked in 2019 before purchasing activity declined in 2020. Now, they’re back. In Q2, 2021, the biggest iBuyers—Opendoor, Zillow, and Offerpad—have seen a huge jump in purchases.
Opendoor, for instance, purchased just under 4,000 homes in the first quarter of 2021. In Q2, that number went up to over 7,000. This is despite the fact that the median purchase price for iBuyers has gone up to $350,000 from the historical average of $250,000.
With the increase in purchasing and selling activity, the number of different tech-based iBuying platforms is also going up. In addition to the giants like Zillow and Opendoor, there are also more aggressively innovative platforms like, Knock, which works off of a house swapping system.
Keller Williams has recently launched their own iBuying platform, Keller Offers. This program has two main features Cash Offer and Ready to Sell. The former is a competitive iBuyer service, where the Keller Offer team does the work and gives homeowners a lot more flexibility. It is currently launched in select markets across the South and Southwest, including in St. Louis. The Ready to Sell program helps homeowners with inspections and home improvement to maximize its market value. It has also been released in select markets.
At the end of the day, there’s always a lot of hype around new platforms angling to disrupt the industry. The amount of money being poured into iBuyers and other breakthrough, tech-based brokerages is truly staggering. The startup Compass, for example, received approximately $1.6 billion in venture capital funds prior to its IPO earlier this year. While these platforms are really powerful, the hype should not distract from the basic fact that real estate is ultimately about people and relationships. iBuyers are a powerful tool, but their rise is not as apocalyptic or revolutionary as it may seem.