The iBuyer Game
FREE MONEY FOR SALE CHEAP!
This comes up today because Zillow just paused its iBuy campaign as they are losing mountains of money. They'll get it figured out sometime next year, most likely, but most of us in real estate are thinking "couldn't have happened to a nicer guy."
So what is an iBuyer? First, there's a couple of players here - larger ones are Zillow, Redfin, Homelight, We Buy Ugly Houses, etc. The concept is simple: they buy the homes at a discount, fix them up a bit, and resell them at a profit. Another model is to pay below market for the property, and then assign the sales contract to another party for slightly more. Either way this works, the homeowner ends up taking less for their home as there is no free money anywhere (I think we've all learned this the hard way).
- No agent commission, which saves 6% of the price
- On market time is zero.
- No people touring your home or open houses.
- No fixing of anything.
- Sellers take anywhere from 15% to 20% less for their home according to a MarketWatch survey of iBuyer transactions (I mean, iBuyer companies have to make money somehow, right???).
- No agent to represent or advise sellers as they are dealing directly with the buyer.
- Sellers will never really know what their home would have fetched on the open market.
The iBuyer may be perfect for some sellers, though. If the seller needs to get out of town quickly, they are great. No time, no fixing - it's perfect. There's a premium to pay for this convenience, but some sellers have no choice.
Is this a real estate industry disruptor? Not really, it's another avenue that is useful in some cases (in the few markets iBuyers are big, they are under 1% of sales as they are expensive), but due to the large amounts of money moving around, and the complexity of the transaction, those of us in the business plan on staying here.