What Does iBuyer Economics REALLY Look Like?
Key Highlights
- In first half of 2020, Opendoor lost over $118M on iBuyer homes it sold, approximately -$20,000 per iBuyer home bought and sold
- In first half of 2020, Zillow lost over $178M on its sold iBuyer homes, approximately -$32,000 per iBuyer home bought and sold
iBuyers make financial presentations to their investors by highlighting their Gross Profit Statements or positive unit economics. Gross profits are driven by service fees, purchase and sale prices, ancillary services such as title and mortgage and necessary repairs.
In the first half of 2020, both Opendoor and Zillow generated approximately $17,000/each iBuyer home bought and sold in gross profit. And in the first half of 2020, Zillow finally came close to generating the same gross profit per house bought and sold as Opendoor.
Great for both of them, right? BUT, how much does it cost these two top iBuyers to generate these gross profits?
Most of those expenses/costs include…
- Employee salaries or agents’ commissions
- Customer acquisition
- Technology development
- Marketing
- Office rent
- Interest expenses
- Holding costs
- ETC.
…and all of these above-listed costs add up…PLUS they reduce the gross profits of each iBuyer house bought and sold.
During the first half of 2020, when adding up the gross profits and subtracting the expenses, these two iBuyers lost tens of thousands of dollars for every iBuyer home they bought and sold. Opendoor lost over -$118M in the first half of 2020 and Zillow lost over -$178M.
Do such losses matter? Apparently not. To quote the guru strategic advisor and global expert on iBuying, Mike DelPrete, “Disruption in real estate is being led by companies – and shareholders – willing to bet and loss billions of dollars.”
Thanks to Mike DelPrete and InmanNews.
Also read: Podcast: The Zillow Threat Is Real, Are You Paying Attention? | Tim and Julie Harris, Jen Teske: Why Brokers Aren’t Helping Us Compete Against Instant Offers!, Higher Profits on Fewer Flips
