I refer you to this article from The Title Report entitled “iBuyers gaining market share in some markets”.
While South Carolina has been safe from the iBuyer phenomenon so far, I wanted you to see this article because it shows us how close iBuyers actually are to us. The Raleigh, North Carolina, market led the nation in iBuyer market share for the third quarter, according to Redfin.
Nearly 8 percent of homes bought in Raleigh in that period were purchased by iBuyers.
This blog has discussed iBuyers previously. Opendoor, OfferPad, Redfin and Zillow continue to increase their footprints. They buy houses for prices determined by their respective algorithms in markets where they operate. The locations close to South Carolina, so far, are Atlanta, Charlotte, Raleigh-Durham, Jacksonville, Birmingham and Nashville. How far behind can we be?
Selling a home through an iBuyer can be much simpler than the market we currently occupy. The homeowner opens the iBuyer’s website, enters their address and some basic information about the house. Within a few days, the iBuyer will make an offer.
The seller doesn’t have to clean the house, stage the house, store excess furniture, board pets, leave home for open houses or any of the other indignities suffered under our current system. It’s a much easier process.
What’s the catch? The seller may be leaving money on the table. The offer will be less than the amount the homeowner could receive if all the gamers are property played on the open market.
If the offer is acceptable to the seller, he or she will schedule a time for a representative of the iBuyer to visit and assess the home. If maintenance issues are spotted, the seller may choose to complete the repairs or to allow the iBuyer to complete them at the seller’s expense. At that point, a final offer will be made.
The seller is allowed to select a closing date, typically within 60-90 days. The closing date is typically flexible and within the seller’s control. There is no worrying about the contingency of the buyer to sell a house or to obtain financing.
While real estate agents in normal closings might charge a total of 6 or 7 percent for commission, the iBuyer might charge a transaction fee of 7.5 percent. The iBuyer makes most of its money from these transaction fees, not from flipping prices. The homes are subsequently sold on the open market, so there will be a profit. But the iBuyer is not a normal home flipper. Substantial repairs are not made, and substantial profits are not made.
So the dichotomy for the seller seems to be convenience vs. price. If the amount the seller loses in price is worth it because of the convenience, then the seller is a prime candidate to do business with an iBuyer.
How are real estate agents adapting? They are assisting sellers by obtaining multiple iBuyer offers, analyzing and explaining the offers, discussing the options of accepting one of the offers or beginning to market the home in the traditional manner, and coordinating everything with the iBuyer or traditional buyer, including repairs.
We’ll pay attention as this phenomenon grows, and we’ll definitely report when it hits South Carolina.