iBuyer Property Analysis Update

In this week's article, we are revisiting our iBuyer story published last June. The property sold in July and there are some interesting insights about iBuyer financial outcomes.

Let's start with the area market conditions for this property. During this period, the market was very favorable to sellers.

The property sold in 38 days and sold properties almost equal the number of active listings. Supply of homes for sale is less than three months during the period of when this property closed. Medium average days on market for sold properties during the month was 29 days.

If the home is price right, homeowners in this market do not need to fear a long selling process.

Now let's supply some detail to the deals. According to the MLS, the property listed for $364k and sold for $361k. Tax records say the original owner bought the property for $272k and the iBuyer service bought it from them for $335k. Now we have numbers to perform some math for the analysis. You can review my calculations in this iBuyer Property Analysis PDF.

iBuyer Math Insights

The original owner of the property gave away an estimated $19.8k or approximately 33 percent of their home's equity to use an iBuyer service.

iBuyer service estimated gross income on the property was $30k. If the iBuyer had found the buyer themselves, add another estimated $10k to their revenue.

An independent brokerage did bring the buyer to this deal. Sell side GCI was $10.8k. Giving a well-seasoned agent its commission on a 75/25 split, the brokerage estimated gross company dollar on the deal is approximately $2.7k.

Interesting fact was the iBuyer service bought the home within $2.5k of the estimated net seller proceeds if the original owner went down the pathway of using a real estate brokerage service.

iBuyer Market Presence

During the two-month period the iBuyer service listed and sold this property, they had 11 sell sides and 48 list sides within the boundary of the local association. This ranks the iBuyer service 59th for total units or 0.4 percent market share. Since the sale of the property, the iBuyer service has more than doubled their total units to 98 sides or 0.89 percent market share.

Note: The largest market share in this association is only a little over 5 percent.

Thoughts

Further data and research to confirm the above findings do scale with actual results from different markets.

Consumers are using iBuyer services to sell their homes and its market is growing.

A brokerage's revenue on one side of a deal is over 90 percent less than the iBuyer's revenue. Who is making money on real estate?

iBuyer services have deep insights into market conditions in making their offer to buy homes. One sale doesn't confirm this, but providing the homeowner with an offer that is less than 0.8 percent of the estimate sellers net proceeds by using a brokerage is amazing.

Opportunities for Brokerages

The first opportunity is to educate the public on the 'real' cost for the simplicity in selling a home. iBuyer approach is a choice, but should consumers forgo a substantial part of their home's equity? Why would sellers use an iBuyer service when market conditions are in their favor?

Perhaps an opportunity is for brokerages to offer iBuyer services. Why not? Real estate brokerages and agents are in the business to aid people in selling and buying their most valuable asset, their home. The relationship between Realtor® and customer are evident even in the National Association of Realtors® Code of Ethics:

When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client. This obligation to the client is primary, but it does not relieve REALTORS® of their obligation to treat all parties honestly. When serving a buyer, seller, landlord, tenant or other party in a non-agency capacity, REALTORS® remain obligated to treat all parties honestly.

Helping people is a common theme I hear from brokers and agents. They are very empathetic people who build life-long relationships that are both personal and professional. Why not use this passion and supply an iBuyer service that is not looking for 10x return on investment?

Another opportunity is a dive into the selling process. Find ways to create value by having a real estate professional on the side of the customer. Let's discover ways to streamline the steps it takes to sell a home. As an example, there are new startups who are finding ways to soften the appraisal and mortgage process. It's a start and there are more opportunities.

Side note:

AVM accuracy is always fun to watch. In this analysis, the AVM's average home values were 5 percent to 7.5 percent lower than the sold price.

WAV Group's passion is helping brokerages find strategies that adds value for their company. If you would like to see how iBuyer services are doing in your market area, contact Victor Lund, Marilyn Wilson, or David Gumpper. We can perform market analysis with your MLS data and schedule time to discuss strategies of creating value innovation. Let's find new markets to connect your passion in helping homeowners and buyers.

To view the original article, visit the WAV Group blog.