“‘iBuyers certainly don’t have enough market share to wield the type of pricing power that the video describes.’ ” - Daren Blomquist, Īnd no, they’re not aiming to increase prices too much. They focus very much on the middle of the market, where there’s more liquidity, Piskorski said. But these companies aren’t buying megamansions either. “Most of the distressed properties sold on our platform are in need of significant renovation and it would appear that the iBuyers are by and large not focused on the distressed market.”īlomquist’s analysis also found that iBuyers target newer homes than other cash buyers. “This does support one of the claims in the Tiktok - that most of the properties that iBuyers purchase are not in need of heavy renovation,” Blomquist said. For example, only 3% of properties that were in foreclosure or bank-owned on were purchased by iBuyers between January and May of this year, according to Daren Blomquist, ’s vice president of market economics. These companies aren’t interested in buying just any home. “The iBuyer will help you by essentially buying your house in five days,” as opposed to two to three months, Piskorski said. “Households are doing this because of the speed advantage,” Piskorski said.įor instance, if a homeowner in New York suddenly got a job in California, he or she would theoretically have a much easier experience selling directly to one of these real-estate companies rather than listing with an agent. There’s one key reason sellers opt to go this route, even if it means getting a lower price than they would find on the open market. “Companies like Zillow and Opendoor typically buy homes at a slight discount relative to the market value, and then sell them for a small premium. “We’re honest with sellers that they’ll likely net more by listing on the market with an agent,” the Redfin spokesperson said. The companies themselves are open about this approach. The companies also collect fees from the seller, though it’s roughly in line with the typical fees charged by real-estate agents. And they do then usually aim to sell the homes at a slight premium, of about 1.6%, he said.
Typically, iBuyers will purchase homes at a discount, which Piskorski said is usually around 3.5%. “It’s a very tight-margin business - it’s actually hard to make money on this business right now,” said Tomasz Piskorski, a real-estate professor at Columbia University who has published research on this emerging business model. The iBuyer then might do some light renovation of the home but will generally turn around and quickly put it in the market. IBuyers argue that the transaction is a no-fuss, no-muss way for sellers to offload a property without involving middlemen such as real-estate agents however, sellers do have to pay fees to the iBuyer. The basic concept is this: The companies use data to make a direct offer to a seller for their home. (Opendoor and Offerpad did not respond to requests for comment.) Among the biggest players are Zillow, Redfin, Opendoor Over the past decade, multiple companies have entered the so-called iBuyer business. Here’s what people need to know about so-called iBuyers, today’s competitive housing market and the future of real-estate technology: How the iBuying model works “If you could rig the residential housing market that easily, the Realtors would have done it long ago,” said Gilles Duranton, a real-estate professor at the University of Pennsylvania’s Wharton School.