Real Estate hasn’t been left out of the technology revolution. iBuyer companies are staking a claim in communities across the United States. These companies offer homeowners cash for their houses, and in turn, sell them.
iBuyers are definitely a niche product right now, but these companies have seen significant growth recently. From January through October of 2018, the four largest iBuyer companies bought 11,000 homes across the U.S., while still not operating in many major cities. So if you haven’t heard of any iBuyer’s around Charlotte yet, you likely will in the near future. Since these companies are taking up more and more of the market share of homebuyers each year, it’s best to be prepared.
So how is an iBuyer company different from someone advertising that they by and sell homes with a sign on a lamppost? Financial backing. With investment from large venture capital firms, these companies are able to manage enough volume to be viable businesses.
The second big thing that sets iBuyer companies apart is the tech — using apps and websites to quickly evaluate, list, and sell homes. The thing is most of the evaluation is done by algorithms and technology, not humans. This concept works better in more suburban areas because houses are more similar. In Charlotte, however, there’s a mix of old, new, flipped, and remodeled homes on the same street.
Don’t mistake these companies for house flippers, though. While they do make improvements to a home prior to selling, it’s largely cosmetic — taking on things like deferred maintenance like new paint, landscaping, and carpet. Be wary when buying online and be sure that any detailed renovations are more than just mere aesthetics. iBuyers do, however, tend to offer close to market value of a house as opposed to flippers. Instead of buying low and flipping, these companies can afford to offer market price and then re-sell because of the volume of houses they can get through.
Who are these iBuyer companies? There are a combination of startups and established company dipping their toes in the industry. The young companies include Opendoor, Offerpad, and Knock. Established brands like Redin, Zillow, and Keller Williams are all expanding to the fast-cash offer market with their own offshoots including Redfin Now, Zillow Offers, and Offerdepot. Of note: most of these companies started in Phoenix, where the preponderance of cookie-cutter homes makes it easy to accurately assess market value.
As far as buying homes, iBuyer companies tend to target a certain price range for homes, between $100,000 and $500,000. Some have admitted to sticking to a narrower window — $200,000 to $250,000. The typical user of an iBuyer company is going to be largely middle class and motivated to sell. This does tend to vary from city to city, and not all iBuyer companies are available in the same cities. Charlotte is home to three companies: Opendoor, Offerpad, and Knock. Charlotte is a prime market for expansion for these companies, though, so I wouldn’t be surprised if more moved in.
Seller beware: Charlotte is a harder market for iBuyer companies. Because the neighborhoods closer to center city contain a mix of old, new, and remodeled homes, it’s harder for these companies’ algorithms to accurately asses market value for a home. As a result, a seller trades a higher price for their home for convenience.
