A new trend in US real estate – iBuying
iBuyers have become a significant force in the US real estate market. Will their operation come to Australia?
In 2019, an estimated 60,000 homes were sold to real estate companies known as iBuyers (short for “instant buyers”). That represents about 1% of all homes sold in the US.
This number was more than double the estimated sales to iBuyers in 2018, which had in turn more than doubled the estimated number sold to them in 2017.
The first iBuyer commenced operation in 2014. There’s now an increasing number of them. Big companies with odd names like Zillow Offers, Offerpad, Opendoor, Knock and RedfinNow. And their operation is being copied by some real estate agency companies in areas not serviced by these big companies.
An iBuyer’s operation is highly sophisticated, but very simple for a seller. You send a standard form proposal asking what they will pay to buy your home. They will quickly (usually within 24 hours) respond with a figure. If you accept, they ask when you want to settle and, if you’re ready, they will settle on that date (typically between 1 and 6 weeks after you accept the offer).
The big company iBuyers use “automated valuation model” (AVM) software programs to assess home values. With these programs, they can almost instantly analyse the individual features of hundreds of comparative properties and adjust a valuation to match the features of any particular home on offer.
Comparative websites (called “offer optimizers”) have now been launched enabling sellers to receive simultaneous offers from several iBuyers.
Many sellers are also believed to submit proposals to iBuyers simply to obtain what is then a free appraisal from a real buyer.
iBuyer commissions are high (typically 7-8% of the assessed property value), so persons who sell to an iBuyer know that the net price they receive will almost always be less than if they market their properties in a traditional fashion. But they accept this as a trade off against the speed and certainty of the iBuyer process.
Will this operation ever be brought to or adopted in Australia (with appropriate local market modifications)? It’s an intriguing question and, as usual, only time will tell!