iBuying got the attention of the real estate industry when Eric Wu launched Opendoor in 2014.
2022 – Pivotal Year for Disruptive Concept of iBuying
Now that Zillow has bowed out of iBuying, this sector of the real estate market may be at a crossroads.
This two-part series on iBuying looks at the specifics of this market sector and where this revolutionary concept in real estate goes from here in terms of evolution and profitability.
What is iBuying?
iBuying is the latest iteration of we-buy-houses-for-cash-fast concept. How does iBuying implement this concept? By using technology to determine the property’s valuation, buying the property, making minor repairs/fixing maintenance problems and then relisting the property and selling it…fast.
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What sets iBuying apart? Funding…lots and lots of money and technology…apps and algorithms and engineering teams.
According to Peter Flint, entrepreneur and former CEO of Trulia, “The premise around these iBuyers is to use capital and use technology to reduce friction.”
Who Are iBuyers?
Right now, the biggest players in iBuying include Opendoor, Offerpad andRedfin. Mike delPrete, real estate analyst and iBuying expert, indicated that Opendoor controlled 50% of the iBuying market in 2021; Offerpad controlled 23%; and Redfin had 1% of the market.
Smaller players include Realogy, Keller Williams, Rocket Homes and others. Startups such as Orchard, Bungalo, Roofstock, Properly and others offer variations on the iBuying theme.
Zillow bowed out of iBuying in the fall of 2021. At that time, Zillow’s share of the sector was 26% and it was the second largest iBuyer in the country. Zillow cited failed earnings within this sector in November 2021 and began selling off its remaining inventory of some 9,000 homes. By early December, the company had unloaded, primarily to Wall Street, about half of that inventory.
The iBuying expert delPrete said that the failure of ZillowOffers spoke to “…the consequences of scaling too fast (buying too many homes) and/or getting the fundamentals wrong (paying too much for the houses due to faulty algorithms.)”
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Naturally, because Zillow is such a giant in the overall real estate industry, gossip spread like wildfire that either the end of Zillowˆ and/or the end of iBuying were eminent. Neither has happened.
Thanks to Inman.