Seems hard to believe the global economy could be shut down overnight…Yet it happened.
There’s no wonder then why people are speculating about how the future will look when it comes to anything related to the housing market. We recently weighed in on this in our article titled— Should You Invest In Real Estate Post Coronavirus?
Today, we want to look at what the future of the ibuyer movement looks like after Covid-19, and how this will impact real estate agents and investors alike.
Let’s dive in…
The Growing iBuyer Movement
When iBuying companies like Redfin and Zillow ceased purchasing homes a few months back, we weren’t surprised. Suddenly they had excess inventory on hand and the market had fewer buyers. Home sales took a downturn. So did home listings. Consumer confidence had fallen to the lowest level since 2011, according to Fannie Mae.
Even though iBuyers represented a small portion of the real-estate market, that share has been growing steadily over the past several years.
While some real estate authorities perceive the iBuyer movement to be negative, we prefer to look at it as a tide shifter. Especially when it comes to the perceived value of below market cash offers.
With the rise of the iBuyer movement, homeowners have been becoming steadily more receptive to the value that instant cash offers provides them with over that of a traditional listing.
There are many benefits to taking a below market cash offer, including flexible moving terms, a guaranteed sale, not having to make necessary repairs, and not having to maintain a show-ready home during the selling period—or during a pandemic—to name just a few.
If these benefits ring a bell or if they sound familiar it’s because these are the same benefits that real estate investors like us have been offering sellers for years. The iBuyer movement is simply making this more recognized on a broader scale, bringing many of the traditional sellers into the fold, whereas real estate investors typically are in the business of helping sellers in need.
With that all said, the coronavirus pandemic is still hanging around, and talks of second and third waves remain in the headlines. While it’s still a bit shaky for many, people are still moving and that means the iBuyers are back in play.
iBuying Firm’s Return To The Market In Time For The Summer.
It’s the summer and the buying and selling season has already restarted despite the ever-shifting societal climate. Alongside it, the big iBuyer firms have resumed their programs. Which is a reminder that if you’re not in the game right now, you need to jump back in asap.
There’s no guarantee when it comes to the speed of economic recovery in our nation, but we do see signs that Americans are re-entering the housing market. Buyer demand is on the rise and with inventory levels down 25% year-after-year, many real estate entrepreneurs, including the big iBuyers are ready to take a risk again.
While listings are down, buyer inquiries are still going strong despite the coronavirus sticking around. In fact, buyers now have more online tools than ever to help them tour homes, making the starting point easier than ever before. And since the big firms are back in play, that’s further proof that buyer demand is likely going to continue it’s rise…
What’s Driving Housing Demand Right Now?
Owning a home has been the American dream since well before the iconic jingle, “baseball, hot dogs, and apple pie.” Many people aspire to homeownership, but not everyone can afford it. The recent pandemic and rise in unemployment may make ownership unattainable especially for those most impacted.
Experts agree there has already been an affordability issue. Markets like New York and San Francisco are expensive, making ownership virtually impossible for the working class.
As a result, we have already seen a movement out of major cities.
Besides consumer wariness about living in close quarters, the coronavirus outbreak has seen an acceptance in employees working-from-home.
Employers that previously refused this flexibility were forced into allowing it when offices were shut down. Now they are seeing productivity from employees without having to lease office space. If employers continue to allow staff to work-from-home, employees will no longer need to live in expensive cities and pay premium prices for housing.
With people moving to less expensive markets, housing demand will increase.
What about secondary markets like vacation rentals?
This market has already been significantly impacted. We talk about the impact of the coronavirus pandemic on vacation rental owners in this article here.
In short, the vacation rental market was largely built on the ability for owners to have someone else pay their mortgage(s). Websites like Airbnb and VRBO put renters in touch with owners, making ownership desirable. But when travel halted, investors without reserves to weather the storm, were immediately affected. These owners may be looking to liquidate. They could easily look to iBuying websites to help them unload properties fast.
Does this mean that iBuying websites will be more popular post pandemic?
With fewer in-person interactions, you could reasonably assume iBuying options would become more popular than the traditional selling process. But according to some experts and some of the recent moves by big iBuying Firms, that may not be the case…
While homeowners may be more anxious to sell, especially if they were financially impacted by the pandemic, offers from iBuying firms may not be as high as in the past. This might make those lower offers less appealing to sellers under normal circumstances, unless they have a personal need to move out quickly.
In this case, iBuyer Firms could be looking at fewer sellers overall, especially if they were targeting the average homeowner.
This doesn’t mean they’re in trouble though. Like most big businesses, they have an uncanny way of adapting to new market changes…
How The Big iBuyers Are Adapting To A Post Coronavirus Market.
Companies are in business to make a profit. If the market poses a risk to investors who plan to resell quickly, these projected costs will need to be calculated into their offer.
According to Redfin CEO Glenn Kelman, homeowners could see lower offers from iBuying firms. Planning for a greater margin of error than the pre-coronavirus era is necessary, and iBuyers will be more cautious. It’s one thing to take a loss on a single home but having hundreds of properties in the same market could be financially detrimental.
But, lower offers aren’t the only expected change…
These iBuying firms may be more selective in what they opt to purchase as well.
Properties with extensive repair needs may be passed up. Structural problems, asbestos, or mold could take months to be fixed before the property could be resold. This not only adds costs for maintenance, but leaves the iBuyer firm vulnerable to the market when the property is finally ready to be listed. This is not a risk iBuying firms will likely be willing to take moving forward.
That’s not all…
There’s another significant move that some of the biggest iBuyers are making in this post pandemic marketplace…
Two Big iBuyers Launched Traditional Brokerage Listing Services…
While many iBuyers are shifting their strategies and instituting new features in this ever changing marketplace, two of the biggest iBuying firms launched traditional brokerage listing services recently. This has been a pretty lowkey move and a telling sign of what’s in store…
While it hasn’t gained a whole lot of attention, both Offerpad and Opendoor launched their own traditional brokerage listing services recently.
You might be wondering why these big firms would take the traditional route…
By taking measures to merge their digital services with a traditional service, these big iBuying firms are able to cover even more ground in the real estate marketplace. And now that they can make any of the moves that traditional real estate brokers can make, their competitive advantage is only going to keep on growing.
What does this mean to you?
More Than Ever, Real Estate Agents Need To Compete Or Be Eaten Alive By These Mega iBuyers…
We’ve seen it happen time and time again. From big box stores to online mega retailers, the road to growing and dominating a competitive marketplace can become a battlefield. But you don’t have to be a casualty of war when it comes to playing the real estate game.
How do small businesses and individual entrepreneurs maintain footing when the giants start paving over everyone in their way?
They fight back. In this case, they stay relevant and stay ahead of the curve.
That Means You Need To Adapt Your Strategy.
As iBuyers move into the traditional world, real estate agents are going to have to fight even harder for their share of the marketplace. Our Managed Service solution can help you stay ahead of the curve.
We’ve helped real estate brokers and agents build and manage their iBuying businesses without having to sacrifice their time or their traditional business model. In fact, we can even help realtors get more qualified traditional leads in the door.
Sounds too good to be true? Let us prove it.
More than ever you have to stay one step ahead and keep your eyes open to opportunities. We’ve helped powerhouse real estate agents and brokers like Erik Hatch of Hatch Realty and Jeff Cohn of kwELITE with their iBuying platforms. And we want to help you.
Learn, Take Action, Adapt, and Succeed.
If you want to learn more about the iBuyer movement and the value of adding a “done for you” iBuyer platform to your real estate business, we invite youto read this interview with Erik Hatch about offering sellers a first class selling experience, and this interview with Jeff Cohn on why real estate agents should be in the business of offering solutions.
At the end of the day…
The big iBuyer firms are in full swing AND they’re adapting.