Are you getting freaked out by these giant iBuyers in the real estate market yet?
Giant tech and real estate companies are moving into the market. They want to own it. It’s a major shift every investor and business in the industry should be paying attention to. Here’s the good, the bad and ugly of what you need to know about them and their impact.
The Who, What & How Big of iBuyers in the Real Estate Market
There are three really big players in this space, with even bigger funds behind them. We’re talking about this new breed of supersized online home home buyer who is offering sellers cash for their homes and the promise of a quick transaction.
In addition to Facebook and Amazon who still very much want to get involved and stake their claim to the US housing market, there are OfferPad, Opendoor and Zillow.
OfferPad recently inked a deal with Keller Williams to buy up homes. Opendoor has forged a similar partnership with Redfin. They’ve also hooked up with Lennar to promise movers one seamless transaction for trading up from their old home to a newly built one. Opendoor has raised hundreds of millions of dollars from very powerful venture capitalists. Zillow is notorious for being willing to lose billions of dollars just to buy up market share and drown out the competition.
What They are Doing Well, and Not
These companies are doing great about making noise, getting in the press and raising money. If you just giant companies like these, then they may also carry a lot of credibility.
They have mountains of cash to buy homes. They have great infrastructure for turning around and wholesaling or flipping these homes for a small profit in just days. The amount of capital they have and authoritative voice on prices also gives them a lot of power to manipulate home values and the market in their favor.
Of course, with all giants, they are pretty slow moving as well. Each focusing on expanding to a few major metro areas at a time and have very tight buying criteria.
The numbers show at least half of sellers have been rejecting their offers, so they may not have nailed this model yet. At least not at scale.
How Big iBuyers are Helping You
No small company or individual real estate investor should be wanting to take a billion dollar giant head on. It will get ugly.
However, these companies may be helping wholesalers and house flippers more than you realize.
They are making selling your house online to a wholesaler normal
They are leaving plenty of properties un-served
Their heavy 7% plus fees leave room for better offers
They are still essentially working as Realtors, and many sellers don’t like that
They could be your biggest end buyers
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