iBuying activity is stronger than ever, dashing all hopes Realtors had of iBuyers going away. The beginning days of the pandemic were bad for iBuyers, but that lasted about a minute -- post-pandemic, iBuyers are back with a vengeance.
iBuyers even have their favorite buying locations, and you can be sure that a city favored by an iBuyer would probably be a good city for all types of residential real estate investors.
Cities seeing the most iBuying activity
Atlanta wins the prize for the city with the most iBuying activity, with Phoenix and Dallas-Fort Worth close behind. A total of 15,028 homes were bought by an iBuyer in the second quarter of 2021, according to Zillow. Of the top three cities where an iBuyer bought the home, 1,987 transactions were in Atlanta, 1,744 in Phoenix, and 1,321 in Dallas-Fort Worth.
Market share is another metric to consider. While iBuyer activity accounted for a 1% market share nationally -- the largest ever recorded -- some cities experienced an iBuyer market share of over 5%. Phoenix takes the lead there, with a 5.7% iBuyer market share, followed by Atlanta and Charlotte, North Carolina, which tied at 5.3%. Raleigh, North Carolina, saw a 5% market share, with 434 homes sold to an iBuyer.
iBuyers are a fairly new type of real estate player. iBuyer stands for instant buyer, meaning these companies buy off-market homes, often fixer-uppers, for cash right on the spot. iBuyers make some improvements to the homes and relist them. For the first time, in the second quarter of 2021, iBuyers have reached a milestone: a 1% market share for all homes purchased in the United States.
The top four iBuyers are Opendoor, Zillow Offers, Offerpad, and RedfinNow. And there are many others. These iBuyers serve as a wakeup call to traditional real estate agents. While it isn't game over, the writing's on the wall.
The future of buying and selling homes?
Even during the extreme seller's market we've been experiencing since COVID-19, where sellers don't usually need to do anything to sell homes quickly, people are still selecting iBuyers.
The reason is iBuyers have been making bids to buy homes, not at rock-bottom prices, as what many think, but by averaging 104.1% of market value this year. They present an instant cash offer and allow the seller to pick the closing date. iBuyers have also reportedly lowered their fees to more closely align with a Realtor's commission. In the past, the fees were more and the offers less. iBuyers have wised up.
At 1% of the market share, iBuyers aren't a threat to the current way residential real estate is bought and sold, but at 5%, they're starting to be. Atlanta Realtors, for one, are certainly feeling the pressure, as iBuyers are already taking some customers away. And this is just the beginning.
Even the NAR is ceding to iBuyers
In the latest newsletter I received from the National Association of Realtors (NAR), the lead story presented information obtained from Opendoor (an iBuyer). When that happens, you know, as Bob Dylan once wrote, "The times they are a-changin'." NAR, by quoting Opendoor, is practically admitting it's ceding to its competition, and that sends a message to the public that the new way might be better.
The Millionacres bottom line
Although iBuying is focused mainly on cheaper homes in poor condition, iBuyers are starting to buy more expensive, nicer homes as well. Investors, take note: The current sweet spot for iBuyers are newer, suburban homes.