Opinions on "iBuying"

[Mark V.]

Anyone ever hear of "iBuying"?  I saw a news clip about it on TV and looked it up.  Apparently, companies like Zillow and Redfin (among others) are buying distressed properties.  It doesn't look like they've expanded their markets to Houston yet but that's bound to change.  

Here is an article I found on it.

https://www.disruptordaily.com/6-ibuying-startups-...

Any thoughts?

[Account Closed]

Originally posted by @Mark V.:

Anyone ever hear of "iBuying"?  I saw a news clip about it on TV and looked it up.  Apparently, companies like Zillow and Redfin (among others) are buying distressed properties.  It doesn't look like they've expanded their markets to Houston yet but that's bound to change.  

Here is an article I found on it.

https://www.disruptordaily.com/6-ibuying-startups-...

Any thoughts?

 I submitted one of my properties to a company similar to that called Opendoor dot com. The house is valued at $295,000 and they offered $229,000 some $65,000 below value and wanted to charge 6% on top of that for their "fees". I don't think it is a winning strategy.

[Ray Johnson]

@Mark V. This is nothing new regarding concept, What I think will change is if they were to become mainstream it is the current Wholesale community will suffer a little because these guys are cherry picking the better properties and leaving the riskier properties for everyone else. After the last crash, Private Equity companies were doing this with a flawed model so they saw great losses, these companies are trying to use a more refined model however I still see gaps, the big upside is if you gave people the option of using a well known brand like Redfin or using the stranger who direct mailed or cold called you, Redfin will win most of the time over for those who are on the fence or uncomfortable with the situation.

[James Wise]

Originally posted by @Mark V.:

Anyone ever hear of "iBuying"?  I saw a news clip about it on TV and looked it up.  Apparently, companies like Zillow and Redfin (among others) are buying distressed properties.  It doesn't look like they've expanded their markets to Houston yet but that's bound to change.  

Here is an article I found on it.

https://www.disruptordaily.com/6-ibuying-startups-...

Any thoughts?

 They've been saying that Zillow is going to change the way Real Estate is done & all Realtors will be obsolete for years. Haven't seen a major impact yet & Zillow has been around for over 10 years. IMO Zillow's bread & butter is making money on advertising. Hard to scale a home buying business nationwide without local knowledge & infrastructure on the ground.

[Sharon Tzib]

Zillow is testing "Instant Offers" in the Orlando and Vegas markets, and it is pretty much the same as what Open Door has been doing in Dallas/Phoenix/Vegas/Atlanta/Orlando/Raleigh-Durham for a while now. They come speak to we agents at conventions and claim they aren't trying to cut us out, because the way it works is the seller (who can sell without showings, staging, etc.) is given an "instant offer" by them, but also a professional valuation from an agent, so in their mind, they are including us.

The offers are very low, from what I've heard, and the fees equal, or in some cases, more. Probably the only sellers that would sell this way would be those who have very distressed homes, so I look at these services as more of a wholesaler with marketing on steroids because of their wide reach. 

I've also read on forums that the customer service is super limited with this method, by email only, so no personal touch at all, which obviously, is the cornerstone of a real estate agent's value, along with their knowledge and expertise of their local market.

The day we can take emotions out of selling or buying real estate is the day realtors will cease to exist. Our fees may get challenged, but our profession isn't going anywhere, imho.

[Mark V.]

From what I read in the article, Zillow has a group of investors who make the offers.  Zillow just gets some sort of fee for bringing them leads.  Like @Ray Johnson said, wholesalers may take a little hit from this.  However, I seriously doubt that Zillow will be researching and contacting these distressed sellers to get their business.  They do have name recognition though.. Much like Homevestors.  

I'm not a wholesaler but I'm curious to see how this plays out.

[Andrew Johnson]

Mark V. From a super high-level it looks like it’s going to appeal to the same sellers that would call bandit signs. But it also looks like they close in days so there’s no funky “out clauses” like you’d see with a wholesaler, they’ll definitely be able to close at their offer, etc. It just looks like their have better confidence in their value algorithm (than, say, we do in Trulia) and instead of offering 70% ARV on a $295K home ($206K) they offer $230K and tack on some fees. So you get to the same “distressed wholesaler price” but you have 100% certainty of closing and it’s 7 days instead of 30 days.

If there’s any challenge for them it’s will be branding to those distressed homeowners. How to distinguish themselves from the number on a bandit sign. From an outsiders perspective it looks like “webuyuglyhouses” has done that but I cringe at what they spend just on TV advertising. And I think they’re a franchise business model anyway.

[Jimmy Dudley]

It will work, but not today and not tomorrow. The algorithms are constantly improving but they are still no match for a person with some experience, yet. 

[Bill B.]

The algorithms have to work, or they’ll be over paying. I tried it a year ago with vegas property that was turning over after Long term rental by same tenant. It was worth about $225k.  They took out 6% commission, 3% closing costs and the killer 11% for “market conditions”. One of the fastest appreciating markets has a minus 11% adjustment? No thanks. 

They’ll probably pick up some of the probate and inherited houses. They said they would close in 3-90 days you choose. So convenient for people moving or building/buying something else.  

[Mark V.]

I just watched the story on the local news about this type of business.  One of the companies they focused on was called OfferPad.  I read some of their complaints on their Facebook page and the Better Business Bureau website and some of them were pretty bad.  They claimed on the news story that they weren't flippers but that's obviously not true.  It seems that they buy houses, do shoddy repairs, and then try to sell them.  One of my favorite complaints was how they replaced a light fixture with a smoke detector which would only work when the light switch was turned on.  Someone else complained that the company attempted to sell a flip that had mold which was discovered by the home inspector... And even painted over parts of it to try to conceal it!

You just can't make this kind of stuff up.

[Justin Stamper]

....but don’t they know that iBuy houses all the time and want to make them a better offer! Haha!