So I've gotten a lot of requests to speak about the whole iBuying craze. Essentially an iBuyer platform markets their ability to provide all-cash offers to a seller for a "fair price" with a friendly closing time frame. One of the platforms called Offerpad even offers to pay for a local move. In a vacuum, this sounds great but in reality, of course, there is a catch. I found most charge a 6-7% fee but this can even go up to 14%. This is to cover closing costs (including 3% to a buying agent), carrying costs of the home, and profit. For example, if the iBuyer platform determines it takes 3-months to sell, they will factor in the carrying cost into their fee. Additionally, iBuyer's will want to make repairs which will be deducted from the selling price. So for a seller sure they get to sell quickly but they're either selling at a below market value price and/or paying for repairs on top of the 6-7% average fee. Think about it this way, sellers are paying for the upgrades that will ultimately increase the price which the iBuy platform sells for. So iBuy makes their money on that spread, fees, plus whatever price they can negotiate from the seller. Not a bad model however it will be very interesting to when a sudden downturn comes and they're stuck with a ton of inventory. The average program only buys homes up to $600k.
In recent news, Keller Williams decided to partner with Offerpad who will be marketing the homes for sale. They receive 1% of the front end and 1% on the backend for deals.
Here are the top iBuyers as of early 2019:
Opendoor: Launched in 2013, Opendoor is the original iBuyer. The company both buys and sells properties and operates in nearly 20 markets across the U.S.
Knock: Knock is technically an iBuyer, but it’s mostly designed for homeowners looking to sell one home and buy another simultaneously. Its trade-in program helps sellers essentially “swap” properties without dealing with the open market.
Offerpad: The second iBuyer to market, Offerpad works essentially the same as Opendoor, both buying and selling real estate. It operates in 11 markets and includes free local moves.
Zillow: Zillow branched into iBuying with the launch of its “Instant Offers” program in 2018. It’s currently only available in a handful of markets, but the company plans to expand to more in the future.
Redfin Now: Redfin Now is similar to Zillow’s Instant Offers. The discount real estate brokerage announced the program in mid-2018 and has been expanding it ever since.