One of the more inconvenient aspects of buying a new home—and offloading the old one—is lining up the move-in and move-out dates. It’s almost always necessary for people to sell their old home in order to buy a new one so that they can create the cash flow that is needed for the new purchase. This lack of flexibility can result in a gap between moving dates, which then requires the need for a temporary housing solution.
In the last several years, multiple venture capital funded tech startups (Opendoor, Offerpad, Zillow Offers, etc) have launched with the goal of solving this pain point in the homebuying process.
How are iBuyers changing the real estate market?
These companies, dubbed “iBuyers,” make you a cash offer for your current home at a “fair market price” determined by their special algorithm. This allows you to take that money, buy your next home, and move out on the date that is convenient for you. The transaction then closes in a matter of days.
The iBuyer then fixes up your old house to sell on the open market, acting as the listing broker and paying a commission to the buyer’s agent. Because the price of initial purchase is typically not the maximum the house would sell in a traditional transaction, the iBuyer is likely to make a small gain on the sale price.
iBuying platforms are working to differentiate themselves from each other. For example, the Atlanta-based company Knock calls its service a trade-in program. They buy you a new house and then list your old house on the open market. This allows the seller to conduct the same homebuyer bidding war as you may have with a traditional sale. That allows Knock to collect the full value on the existing house.
Charlotte-based startup Ribbon also buys you a new home and allows you to move in right away under the stipulation that you pay them rent until your old house sells.
What Tru Realty has, iBuyers can’t replicate.
Still, iBuyer transactions only represent a tiny fraction of all home sales. Curbed sources estimated that roughly 6% of sales in the markets where they operate were completed through iBuyers. Opendoor, the largest of the iBuyer companies, flipped 10,130 homes in 2018 according to real estate data provider ATTOM Data Solutions. There were 5.3 million existing home sales in 2018 and 622,000 were new home sales.
Of course, real estate agents have started fielding questions from home sellers wanting to know more about Opendoor and Offerpad. Agents will argue that going through iBuyers risks leaving a significant amount of money on the table in comparison to letting potential buyers bid up the price through a traditional sale process.
Moreover, the iBuyer business model is still in its infancy. These companies have not yet had a chance to prove if they can survive a shift in the housing market, much less a downturn, as home prices and sales have steadily risen since the 2008 financial crisis.
Since our inception, Tru Realty has had a strong presence competing in the iBuying space. While we are not driven by millions of dollars in VC capital, we do have a direct to the consumer team that will offer any of our sellers an instant cash offer. Best of all, you’ll actually get to talk with a human about the sale of your property (what a concept!) instead of working through a digital platform that feels cold and automated.
Offering services that match the iBuyers goals but doing it better is what gives Tru Realty a huge advantage in the local real estate market. We work hard to keep our agents educated on the forthcoming changes including the new Proptech Companies popping up in our backyard. We also help to serve our investor base with properties that they can purchase for their own portfolios. If you’re looking for a different kind of brokerage that can TRU-ly do it all, fill out the contact form below or give us a call to get started.
Sarah C. Richardson is one of the preeminent leaders of residential real estate in Arizona. As the CEO and founder of Tru Realty, she is responsible for both the daily operations and oversight of the multiple growth strategies that the brokerage carries out. Sarah launched Tru Realty in 2010 as a way to serve a marketplace that was seeing a shift from auction centric fix/flips to an MLS flow. She is now rethinking the way her brokerage uses technology to better serve clients and agents alike.