Maybe you’ve seen highway billboards or street signs advertising “fast cash” for “ugly houses?” Or maybe you’ve heard rumors about “fast cash” people who could “bail out” newly widowed, divorced, and/or unemployed homeowners who may no longer afford to pay their monthly or underwater mortgage payments?
If you answered yes to either/both questions, all those fast cash billboards, signs and rumors about individual houses are quickly becoming past tense. What is taking their places? A new breed of high-tech house flippers…house flippers who supposedly have sophisticated home valuation algorithms and who in reality have vast quantities of Silicon Valley and Wall Street venture capital funding to buy, fix and flip your house, my house, and everyone else’s house on a massive scale.
These high-tech house flippers are called iBuyers. And these iBuyers aren’t limiting themselves to ugly houses or houses owned by people who may be having trouble paying their mortgages or owners of houses with negative equity. These iBuyers want to buy, fix and flip every house that may potentially come onto the market for sale, regardless of the homeowner’s circumstances or the house’s cosmetics.
Just look at what’s happening in Phoenix AZ as a case in point regarding iBuying. In 2018, there were three main iBuyers in Phoenix, OpenDoor (the pioneer in this business), OfferPad and Zillow. Those three iBuyers collectively captured 4.5% of the Phoenix housing market, according to the Real Estate Department at the University of Colorado. In 2019, Knock opened its iBuying door, website, mobile apps, algorithms and funding source in Phoenix. The University of Colorado predicts that however iBuyers there may be in Phoenix, they will capture 20% of the Phoenix housing market by 2020.
Why this tremendous growth spurt prediction in iBuying? Home sellers don’t want the stress, hassle and uncertainty of hiring an agent, figuring out the sales price, deciding how much time and money to put into making home repairs/renovations that could have been too expensive/inconvenient for their own benefit, opening up their homes to parades of agents and strangers, keeping their houses “show perfect,” getting themselves, their children and their pets out of their houses for “viewings” and hoping their agent can deliver the price they need in order to buy another house.
In other words, iBuyers make it easy for sellers to sell their houses. iBuyers tell sellers up front how much they’ll get for their houses and when they’ll get it so they can move on with their lives. iBuyers are valuable to sellers.
And iBuyers are REALLY scary to real estate agents, big data cynics and anyone who remembers what can and did go wrong with “innovations” in housing financing just 10 years ago.
Bottom line regarding these high-tech house flippers, be they OpenDoor, OfferPad, Redfin, Knock, Perch, Zillow, subsidiaries of Coldwell Baker and who know what other name(s) will emerge as iBuyers? The ball is in your court, real estate agents. You have to be as, if not more, valuable to sellers than iBuyers.
Even Glenn Kelman, CEO of Redfin, admitted as much when he said, “You could argue that because our algorithms are so powerful, we understand real estate prices better. You could also argue that the person who has lived in that house for 10 years has a pretty good algorithm in their own head.”