If you are in one of the select metropolitan markets across the US or follow the industry headlines, you can’t help but here about ibuyers with new freshly funded companies entering the space and real estate incumbents expanding their product offering. The model is simple, these company’s raise a pile of cash and purchase single family homes taking on operational, finance and execution risk in order to “flip” a property after renovations and make a profit. Is it innovative, no, but at scale and using data and tech to make informed decisions, it’s providing another viable alternative for the consumer providing speed and certainty.
Traditional ibuyer platform
iBuyers do provide home-sellers with a viable alternative versus a traditional model – if a customer is willing to accept a discount to fair-market-value. Most of the current ibuyer companies have rigid requirements; price range, type, location, etc. for them to even consider making an offer. On top of their offer, a home-seller will pay anywhere from 6-12% in “service fees” to ensure a timely transaction without the friction of being in the retail market dealing with showings, negotiations, etc. The capital is coming from institutional investors, both debt and equity to fund these transactions. A small percentage of offers are excepted, at least from the publicly available data we can source from companies like Redfin and Zillow when taking a look at their respective programs.
Therefore, what does this mean for the consumer – depending on your address and other factors, you have the potential option to source an offer from one of these companies – could be knock, opendoor, offerpad, Zillow or others. Your cost for “speed and certainty,” 6-12% service fees as noted above – not very consumer friendly given the equity a seller would leave on the table – pricing is aligned with the traditional real estate brokerage model with their rich fees. These companies do have significant funding, providing immediate market liquidity if the properties they make offers meet their investment criteria.
Annual iBuyer Home Sales
iBuyer transactions currently represent a fraction of all home sales; it’s been estimated that roughly 5 percent of sales in the markets where they operate were completed through iBuyers. Opendoor, the largest of the iBuyer companies, flipped 10,130 homes in 2018, according to ATTOM Data Solutions, a real estate data provider. There were 5.3 million existing home sales in 2018 and 622,000 new home sales.
iBuyer 2.0 | dwellowner
Another ibuyer alternative is available on dwellowner, a platform that allows any home-sellers the opportunity to source potential offers from investors that’s more cost effective. For the home-seller, the total cost is zero. . . yes, zero cost for the home-seller as the investor as a buyer would agree to a 3% buyer’s premium. Same process for the home-seller, submit your home on our platform for investor consideration and entertain potential offers from multiple investors – you are not limited to one company. Through an exclusive partnership with Realeflow, a leading technology platform for real estate investors in the country. To date, over 100,000 investors have used Realeflow to close over $10 billion in real estate transactions.
Our investors may purchase to retain the asset long-term or flip, therefore are not exposed to short-term market conditions if they want to realize a yield (rental income) over a period of time while building equity through long-term price appreciation. We are not using our balance sheet to make these purchases – zero debt with our model. We’ve opened our investor network to the broader marketplace!
If a home-seller does not want to accept an offer on dwellowner (no obligation), they have an option to list their home with our full service brokerage at a 1% listing fee, saving thousands in real estate commission expense.
We do and don’t discriminate on home pricing, geographic location or other factors – it’s up to our investor to determine the merits of a potential property for investment consideration. These investors are typically local individuals that know the market cold –it’s estimated, 70 percent of all single-family rental properties in the US are owned by someone whose primary residence is within 10 miles of the rental property. Furthermore, Institutional SFR companies only own somewhere around 250,000 SFR properties, a mere fraction of the 17 million SFR properties in the United States – most are owned by individuals, our investor base.
Whether a home-seller wants to list with a traditional real estate firm, discount brokerage, or sell to an ibuyer, it’s an exciting time to be in market as a consumer with viable alternatives. The funding behind companies to streamline the process in order to making selling a home more efficient with less friction will continue to improve. We applaud everyone who is contributing to drive our industry forward and will continue invest time and resources to champion the same.