There’s been a lot of writing about iBuyers lately. Last month the Denver Post ran an article about listing activity in October. The reporter, Aldo Svaldi made the following claims about iBuyer activity.
You read this correctly, the reporter claims that ibuyers are buying 2,000 homes per month. This isn’t just wrong, it’s wrong by a lot!
iBuyers and Off-Market Transactions
The overall number of homes sold in Denver on the MLS is flat to slightly down (-1% or so). With 4500-5500 properties sold per month on MLS, it seems highly improbable that the number sold off-MLS has increased from a few hundred to a few thousand in the space of a year. All of the title companies see the off-market transactions, and none of us have seen that happen. Off market traffic hasn’t materially changed. Think about it this way, if iBuyers were buying 2,000 homes per month, we would see them selling those homes 60 to 90 days later. We would consistently see about 2,000 homes per month listed by the iBuyer brokers. We aren’t seeing anything close to that.
iBuyers using the MLS?
The other explanation is that the ibuyers are buying more deals ON the MLS. To test this idea we took some time to pull every deal off MLS for October 2019 to determine the number of properties purchased by iBuyers. In October 2019 there were 93 deals on the MLS that were purchased by iBuyers, and 5,384 were purchased by typical buyers with their traditional real estate brokers.
Maybe it's True Nationally...
It’s possible the quote “the iBuyers buy 2000 per month” is a NATIONAL stat, but it was not written that way. Based on numbers reported by Zillow, one of the bigger iBuyers, a figure of 2,000 iBuyer deals per month even nationally seems steep. The Motley Fool reports that Zillow sold only 2,411 homes nationally for the entire year as of October 31, 2019.
...and iBuyers are Losing Money
Setting aside deal volume, it appears most major iBuyers are still trying to figure out how to make money. Zillow reported a loss of nearly $5,000 per home last quarter. Similarly, Redfin reported a $3.4 Million loss for its iBuying business.
Why Home Sellers Might Choose iBuyers
It remains to be seen whether iBuyers will have any material impact on the real estate market or the ability of real estate brokers to compete. Meanwhile, it’s important to learn what iBuyers are offering, what they are charging home sellers for the cost of convenience, and why sellers sometimes choose them over traditional real estate brokers. Real estate brokers need to be ready to have these conversations with their clients.