The iBuyer Model: A New Way to Sell Your Home
April 24, 2019
iPods, iPhones, iMacs, iPads, and now… iBuyers. While this latest iteration of iThing has nothing to with Apple, and alas, will come with no flashy Tim Cook press conference to help me explain it to you, it does represent another disruptive force shaking up its industry. So what exactly is an iBuyer, and why should you care?
iBuyers are companies that will make a cash offer on your home based on a proprietary valuation model. If the offer is accepted, they can close in as little as a few days. Once they buy a home, they generally do some minor repairs and maintenance before quickly re-listing it to sell for a profit. The homes sometimes appear back on the market within a matter of weeks.
The key to the iBuyer business model is to sell a lot of homes, and do it quickly. Unlike most real estate investors, they aren’t looking for homes in disrepair that require extensive remodeling. They want to buy homes that are generally well maintained which they can turn around and sell quickly. Their profit margins aren’t huge, but their Wall Street and Sand Hill Road backed bankrolls are, allowing them to do enough volume to be viable businesses.
Their 9-figure funding has also made it possible for iBuyers to build technology platforms that streamline the selling process. For example, companies like OpenDoor and OfferPad, two of the more prominent iBuyers, have websites where you simply enter your home address, answer a few questions, and within 24 hours receive an offer. It’s this simplicity and convenience that make working with an iBuyer appealing to sellers. They remove the headaches and stress typically involved with listing your home for sale, (repairs, inspections, open houses, etc.) and provide quick and easy liquidity for homeowners who are ready to move on. The demand for this type of simplicity in real estate transactions has grown so much that Zillow and Redfin have both launched their own iBuyer platforms.
So why should you care? As of right now, the major iBuyers don’t service the Bay Area. The high price points and limited inventory here challenge the sustainability of their business model. However, like Zillow and Redfin, local real estate investors (ourselves included) have recognized the demand for a streamlined and hassle-free home selling process, and have begun to package their services similarly. If your home meets certain criteria, you can get an all-cash offer, with no repairs, inspections, or open houses necessary, plus a move out date of your choosing.
If this interests you, we have recently launched our own iBuyer inspired, “RealSmart Home Offer Program”, connecting sellers directly to our investors for simple, hassle-free, all-cash sales. For more information on the program, feel free to give us a call! (650)363-2808