iBuyers Claim to See All, Know All
But do they? In 2021 Zillow made big news in the real estate iBuyer world. The popular search site ended all of it’s iBuying purchases. It placed an indefinite hold on the activity of acquiring new property. This news eclipsed their entry into the home buying space. While other companies continue to make the real estate iBuyer proposition work, Zillow failed miserably at it.
A glance at their position told a simple story. They had acquired a lot of houses they were not selling. I heard all sorts of reasons for this. One plausible sounding excuse was that they couldn’t secure trades people to make timely improvements so they can flip the houses.
I say it sounds plausible, because it is a challenge in this topsy-turvy Covid-19 landscape to get things accomplished. But I’m not sold on this concept. I sort of believe these real estate iBuyer firms placed too much blind faith in numeric equations without really looking at what they were investing in.
That is, they, the real estate iBuyer platforms simply overpaid for so-so houses.
iBuyer Fail Example
Here’s a good example. Real property. Real numbers. I just received an email notification from OpenDoor, an iBuyer in the Boulder real estate world. They were notifying me that a house I had shown at 10141 Wolff has just sold.
First off, I’m curious why they sent this notice to me. After all, I’m a Realtor. I show a lot of houses to a lot of clients and generally have no interest in any given house my clients are not pursuing. But, as I received notice of 10141 Wolff selling, I thought I would check it out.
iBuyer Deal: Sold For Less Than List Price
This particular place sold for $693,000. That was quite a bit less than the $711,000 list price. It was also less than the iBuyer originally paid for the house five months earlier.
Colorado Sellers Market Is Not A Secret
It’s no secret, Colorado is in the throes of a hot sellers market. Most homes are selling for better than full price with multiple offers. Or even full price. Or if less than full, usually just a little less. Yet the place on Wolff that Open Door was so proud to send me had sold for $18,000 less than the $711,000 list price. Worse still, this was about 5% less than the original list price of $725,000.
So home buyers beware. That fixed up nice looking house being resold by an iBuyer might be a bad deal. Overpriced.
What About the Original iBuyer deal? Good or Bad?
The house at 10141 had originally sold to the iBuyer for $697,800 back in August 2021. Sure the seller made more than the iBuyer did. So you could say it was a good deal for the owner. But, I wonder that the owner couldn’t have made some small improvements – carpet, staging – and with timing of their side (late Summer of a hot market) pocketed more money.
It’s really difficult to say if that was a good deal or bad. I think for some sellers, with houses in lesser condition, working with a real estate iBuyer using a purely mathematical based formula when making offers, this can be a good way for sellers to consider. If your house has flaws, if the iBuyer does not require you to enumerate the issues.
Be Cautious With Real Estate iBuyer
I would be cautious. Boulder home buyers might be buying someone else’s issues. Be sure to do a thorough inspection of the house if you are on the buying side. Sellers, keep in mind that a few updates and staging usually gets other Boulder home sellers top dollar with multiple offers. And until a few years ago, with the onset of the iBuying model, it was common and easy to sell for top dollar with a Realtor.
That’s my 2 cents. What’s your opinion?