Instant buyers, or iBuyers, are picking up steam, especially in the South. In a year, real estate companies that leverage technology to facilitate cash transactions almost doubled their share of homes sold to 3.1 percent in the third quarter of 2019. And in places such as Raleigh and Phoenix, iBuyer activity is booming with an over five-percent market share. But this quick fix comes with drawbacks for those drawn to the convenience of selling online—namely high service fees and low selling prices.
iBuyers purchased 3.1% of the homes sold during the third quarter of 2019 across 18 markets, up from 1.6% a year earlier. The markets where iBuyers had the largest market share, accounting for more than 4% of sales, were Raleigh (6.8%), Phoenix (5.1%), Atlanta (4.4%) and Charlotte (4.3%). That’s based on home sales in the third quarter across the 18 markets iBuyers were most active in, according to a Redfin analysis of the latest public data on home purchases and sales made by the iBuyers Opendoor, Zillow, Offerpad, and RedfinNow.
The term “iBuyer” (short for instant buyer) is used to describe real estate companies, such as Opendoor and RedfinNow, that use technology to make rapid offers to home sellers and then purchase homes in quick, cash transactions. iBuyers charge sellers a higher fee than a typical seller’s agent would for the convenience of helping offload the seller’s property quickly. They then make any necessary improvements and resell these homes swiftly to homebuyers.
“iBuyers are concentrating their efforts in southern markets where both home sales and prices are poised for strong growth,” said Redfin chief economist Daryl Fairweather. “We think that iBuyers are likely to accelerate home sales in these markets. Homeowners who may have been reluctant to sell because they didn’t want to deal with the hassle may be persuaded by the convenience of an iBuyer sale.”