Technology is revolutionizing in every direction it goes. And since it’s on the horizon of real estate investment, it’s now rapidly shifting to competing in a sprint through the landscape. Its swift and efficient movement, coupled with the rising clouds of dust that indicate its advance, cannot deny the approach to our doors.
The momentum of rapid progress on the iBuying platform is beginning to change computer-savvy sellers.
We ignore this change in the market at our risk.
What is iBuying?
Many people may be asking, “What is iBuying?” This question is valid because iBuying’s first identified platform was just established in 2014 by the creation of the website Opendoor.
In a nutshell, iBuying is an evolution of the latest cutting-edge technology in buying and selling real estate. Backed by the deep pockets of large corporations, iBuying uses quick escrow with instant offers, home “trade-in”, all cash payments, and closings scheduled for the seller to choose.
Now, this is a brief description of the technique, but it’s comprehensive enough to be broadly understood. Basically, iBuying is designed to be easy, convenient, uncomplicated and fast for sellers. Many options for personalizing a transaction are built into the structure.
How is it different?
John has taken on a new job that minimizes the constant long-distance travel required in his previous job. He decided to sell his current home if he had more time to enjoy being at home. He liked the idea of abandoning the cookie cutter’s house in the early 21st century, sitting straight in a suburban neighborhood with a quiet dead end, with stamp storage and block wall fences.
He always wanted an early 20th century artisan cottage in the heart of the city. This cottage is within walking distance of an energy- and activity-filled neighborhood hangout and is surrounded by a wraparound landscaped garden. He believed that it was time.
With a view to his new job and home transition, John did a lot of work to get started. First, he decided to sell his existing home immediately, so he was able to focus on his new position. His buddy gave him the name of the realtor he used, and John set up a meeting.
Members of the National Association of Realtors explained what John needs to do to prepare the house for the necessary screenings, open houses, and tours. It wasn’t too expensive, but it still required the contractor to schedule, bid, and repair. John needed to schedule around the people passing through his house. In many cases he only notified one hour in advance.
As his realtor explained, he had to take a dog scraper with him because his pet had to be off the premises during the show. Not surprisingly, this would be really difficult if he was notified of the screening during his work.
Besides, he had to start looking for his potential new home. But to see the list, set up a tour with a realtor, and walk around the house one after another, he needed more time he didn’t actually have.
Also, John didn’t have the cash to buy another house until he sold the house he lived in. This put him in a difficult place when he found the property he wanted. He couldn’t close his new home until he got his money from the sale of his existing home.
Suddenly, the exciting idea of buying a new home became more of a job than his new job. Finally, out of frustration, John decided that he had to just wait until he had more time in his daily life to continue his dream of buying a new home.
About two months later, John was chatting with Monica at work. She was excited to buy a new item for her recently purchased home and felt her joy. John confided to her about her experience and how depressed it was. He asked her how she found the time and energy to put all her parts in place in her place.
Monica told him she didn’t experience any of those problems, or, as she explained them, those “old style” problems in selling her home. rice field. She explained to him that she used iBuyer. She went to their website and plugged in information about her home. Within 48 hours, she offered and explained their charges. The offer was more than she expected. She accepted it because she liked it.
iBuyer has scheduled a convenient time to get affiliated National Association of Realtors members to do a walkthrough to check their home condition. When her visit was completed, they asked her when she would like to close her transaction and receive her funds. They also gave her the option of receiving all the cash or, if she so desires, using her home as a “trade-in” for another home to make her financing easier.
Monica chose to get paid for her profits, but she wanted to stay in the old house until she chose a new one. iBuyer was fine with that. So Monica took another six weeks to find her new home.
Once she was able to give iBuyer a move-out date, her sale was complete and she arranged for her move. This freed her from the discomfort of thinking about where to live between closing an old house and closing a new one. She found the whole process easy and relaxing, and she told John that she did most of the whole process from the comfort of the sofa.
You can definitely see the benefits for the seller.
iBuying: A brief history
I have been interested in watching this industry for several years. This is a natural result of the type of buying and selling that we have always done as real estate investors.
The classic formulas that we all have learned and are familiar with in the industry are:
- Add value
- Sale or hold
Objectively, that’s exactly what iBuyers are doing, except on a large scale.
This same simple formula was extensively automated in 1989 by Home Vestors and its brand We Buy Ugly Houses. They took the same process as defined in these four steps and mechanized the offer and purchase transactions.
In 2006, Zillow appeared and released “Zestimate”. For the first time, this gives homeowners direct and immediate access to information about the value of their home. With just a few clicks on the keyboard, both buyers and sellers were able to quickly get a large amount of valuable data to help them make decisions.
Neither the seller nor the buyer relied on the realtor to provide the valuation anymore. You no longer have to hang out on your county office computer and browse through previous sales screens in your neighborhood to define the asset value of a potential offer. This shift has become a great equalizer for both sellers and buyers.
Time moves fast in the digital world
Towards 2014: Opendoor has launched a full-service platform to provide sellers with a variety of conveniences.
For home sellers, the “troublesomeness” associated with selling was wide-ranging. IBuyer like Opendoor has directly targeted these annoyances. Opendoor has motivated sellers to use the platform for their sales process by reducing seller problems and simplifying the process.
Here are some of the benefits that Opendoor offers to sellers:
- Spot sale
- All cash offers
- Hassle-free sales
- Short escrow
- Quick close
- No need to wait for buyers to qualify
- There is no risk of the buyer being disqualified
- No staging
- There is no open house
- No continuous screening schedule or last minute notification
- You don’t have to keep your house untouched all the time
- As-is sales that do not require repair (iBuyer will repair after the seller moves out)
- No external evaluation
- No need to list properties
- There is no sign in front of the house
- Complete privacy
Opendoor has been offering home buying and selling since its inception in 2014. In 2016, they added a “trade-in” option.
The seller quickly understood this option because it is an accurate purchase model that they are accustomed to buying a car. Bring your old car and trade it in when you buy a new one. They were familiar with the process, so homeowners were reassured and trusted.
Opendoor has already bought and sold more than 50,000 homes since its launch just five years ago. It currently operates in 23 cities and more are planned. But this is the real kicker. This year alone, we plan to buy $ 5 billion worth of homes. Indeed, they are some deep pockets.
Wait a minute….There are more
Today, Opendoor is not the only player in the iBuying area. Currently, in the field of SFRs (houses), the established iBuyer players are:
These brands are collaborating with each other under the banner of the lead-generating website on iBuyer.com’s funnel. This website captures seller information and connects directly to the iBuyer portal (or multiple portals) operating in a particular region.
Do you have iBuyers in apartments?
The tsunami of this change in the real estate industry has revealed that no sector of the asset class will remain unaffected by the iBuyer phenomenon.This is also housing complex..
There are already several iBuyer in the stadium of the apartment building. With the apparent success of the original class of iBuyers specializing in SFR, these start-ups gained traction and venture capital very quickly.
Currently, the most established apartment iBuyers are:
And that’s not the end of it.
How about a vacant lot?
Yes, we already have iBuyers for vacant lots.
- Pacific Land Buyers
iBuyer’s trajectory is changing the current paradigm of real estate transactions. This impact will continue to cause turmoil and change throughout the industry.
Consider that Amazon has changed retail forever
In 1994, a company with the formal fallacy of South American rivers opened an online bookstore, Amazon. And it was the only product they sold: books.
Since then, Amazon has become the dominant retailer on the Internet. In the process, the long-standing retail retail industry has been dramatically reduced. As more and more retailers moved to the Internet only, “Main Street” stores were closed. The rest of the physical retailers had to be more creative or driven by customer demands for convenience, ease of use, and less hassle.
Amazon’s entry into the retail industry has changed the world of retail sales forever.. It is important to see this fact in a clear and uncompromising vision.
Today, Amazon sells over 606 million products and owns Whole Foods, Ring, Zappos, Alexa, PillPack, Goodreads, IMDB, Audible, and many others. Oh, I still sell books.
Where does this leave us as real estate investors?
I believe that the turmoil that Amazon has brought to the retail industry could serve as an object lesson for us as real estate investors. After all, hindsight is the vision of 20/20, and knowledge creates the opportunity to make bold choices to make positive and effective changes.
Just as retailers wanted to believe, in the first decade of Amazon’s entry into retail space, Amazon and online purchases were just fads and never disappeared. Instead, it has grown. To be honest, iBuyer is not fashionable.
They will not disappear. And they are already growing.
To work in preparation for the rising reality of iBuying, you first need to not deny that it is happening, and then you need to make a long-term game plan to move forward.
So how effectively is the new turmoil in iBuying an opportunity to make the real estate investment business stronger, more effective, more profitable, more resilient and more sensitive to what the seller is looking for. Will you use it?
Let’s discuss in the comments.