The real estate industry is constantly evolving as new products and practices are introduced to the marketplace. And right now, the rise of the iBuyer is taking the industry by relative storm.
iBuyers are real estate investors who want to reduce transactional property costs by utilizing digital tools. And while iBuyers may be effective in limiting some cost concerns, industry participants argue their presence in the industry is alarmiing.
At HousingWire’s engage.marketing conference held last week in Charlotte, prominent Realtor Leigh Brown, who recently ran for Congress, said the real estate industry is locked in steep competition with these type of investors.
This is because iBuyers, who tend to favor their own digital listing services, are minimizing the role of agents and “stealing equity” from homeowners, according to Brown.
“Every time Opendoor snakes a house from a seller and a Realtor, that’s also a buyer that didn’t happen because they (Opendoor) bought it,” Brown told the crowd in Charlotte. “They are stealing equity out of people’s pocket every single day and they are not doing it with a cherry!”
Opendoor is just one of the many emerging iBuyer platforms that stands to pose a threat to both homeowners and real estate agents.
Redfin’s ibuying platform, Redfin Now, saves home-sellers time, but also reduces the amount of money homeowners earn from a purchase, according to the company’s initial public offering filing with the Securities and Exchange Commission.
“Customers who sell through RedfinNow will typically get less money for their home than they would listing their home with a real estate agent but get that money faster with less risk and fuss,” Redfin’s filing stated.
This is typical with most iBuyers. In many cases, the seller ends up with less money in their pocket after selling to an iBuyer instead of on the open market, but in exchange, they don't have to worry about many of the typical parts of the home sales process like open houses, staging, showings, and the like. Also there is a convenience factor, because sellers can choose when they want to sell and move out, as opposed to being at the whim of the real estate market in their area.
Thus far, iBuyers have a small, but growing, market share, and that's cause for the real estate industry to be frightened, according to Brown.
“They’re scared to death of iBuyers and they don’t know how to compete with hedge funds,” Brown said of some real estate agents. “Hedge funds are eating their lunch.”