More and more real estate transactions involve the participation of so-called iBuyers. But who are they, what do they do and are they a threat to real estate agents?
Here's what we know so far.
An "iBuyer" is the catchall term for online real estate investors who seek to reduce transactional property costs via digital tools. In the past, before tech advances made this possible, this type of transaction was the realm of real estate agents, who could personally buy and resell properties, sometimes with the backing of investors, without searching for a buyer — similar to a pocket listing, where the real estate is never advertised publicly as For Sale.
This kind of investor, for example, may use automated valuation models, instead of a bona fide appraiser, to make instant offers on homes to clients. They will also seek to minimize the involvement of real estate agents, often in favor of their own online listing services.
The “i” in iBuyer, therefore, stands for “instant," although many mistake it to mean “internet.”
According to this agent vs. iBuyer definition on metrobrokers:
"If the seller accepts the offer, they will then receive a visit from an inspector provided by the iBuyer to evaluate the condition of the property. Any problems found that need repair will be itemized and presented to the seller for review. At this point, the client has the option to repair the items from the list or deduct the cost for the repairs from the offer made from the iBuyer. Once the final repairs are complete or price is adjusted, the home is sold [and] the iBuyer and the seller walks away within just a few days from the start of the process."
At any rate, the iBuyer model is changing rapidly and isn’t limited any longer to the traditional flip-and-fix model for real estate sales.
Indeed, some real estate agencies are adopting the model themselves. According to this article, the iBuyer path is being laid out by the likes of real estate search engines Zillow and Redfin, along with iBuyer platforms Opendoor and Offerpad. Even real estate agency Keller Williams is now jumping into the iBuyer space.
"With glossy marketing, aggressive PR campaigns, and billions in VC cash to burn, iBuyers have been expanding steadily. Since launching in 2014, Opendoor has spread to 20 major real estate markets in the United States," said Jeff Andrews in this article in Curbed.
The are plenty of videos of analysts and real estate agents explaining and, sometimes, attacking the iBuyer business model. The most balanced and informative of these is from Keller Williams associate Taylor Osieczanek, who does a good job of walking the viewer through the pros and cons.