iBuyers are companies that buy houses for cash, do minor repairs and maintenance and then relist and sell those same houses. The entire process can happen within a few weeks or a few months. The process values hassle-free expediency, defined “buy” prices, defined closing dates, low or no-touch human interactions and speed,
In order to make the process work, iBuyer companies are heavily financed by investors in order to buy and “fix” the houses quickly and to build and tweak the algorithms that go into the backend analytics which guide the company’s decision making.
Peter Flint, the former CEO of Trulia, said, “The premise around these iBuyers is to use capital and technology to reduce friction. There’s a significant amount of consumer demand for this type of service.”
Is there a difference between iBuyer companies and house flippers? You bet!
- iBuyers look for “livable properties,” according to Tyler Hixon, Open Door’s real estate investment strategy lead, and them make “cosmetic” improvements.
- Flippers look for the cheapest, most rundown, distressed properties and make upgrades.
- iBuyers offer 98% of the home’s value when they buy the house and look to make 1%-2% profit when they sell it.
- Flippers offer 70% of the home’s value when they buy the house and look to make 20% – 25% profit when they sell it. (Most make an average profit of 18%.)
According to Hixon, the 1%-2% profit margin works because of the volume of iBuyers’ transactions. “The velocity at which we can buy and sell homes completely changes the paradigm for us.”
Who are iBuyers at this point in time, December 2018, and, according to Inman?
OpenDoor – launched in 2013 and now operating in 20 cities across the country.
OfferPad – launched in 2015 and now operating in 9 cities.
Knock – Atlanta-based and also operating in Texas and North Carolina.
Bungalo Homes – backed by Amherst Holdings and operating in Texas in Florida.
Redfin Now – lunched by the tech company, Redfin, in 2017.
Zillow Offers – initially launched in 2017 as Zillow Instant Offers and then re-launched in 2018 with its current name. The program is now operating in multiple cities in the US and Canada.
Keller Williams is testing a fast-cash iBuyer program. KW launched OfferDepot in Phoenix in 2017 however KW sees the program as having symbiotic relationships with other iBuyers, such as Zillow’s Offers in North Carolina.
Realogy announced in December 2018 its Listing Concierge, a comprehensive marketing program exclusively for Coldwell Banker affiliated agents.