Instant buyer

Instant buyer (or iBuyer) is a real estate transaction model wherein companies purchase residential properties directly from private sellers, to eventually re-sell them.[1][2]

Background

The term ‘instant’ refers to the fact that this type of business aims to provide a faster cash offer on a property than traditional real estate brokers. Valuation of the property takes place online and is an instantaneous or near-instantaneous process which makes use of machine learning and AI technologies.[2][3][4] Examples of companies using the iBuyer model include Opendoor, Zillow Offers, ibuyhomes.com and RedfinNow.[1][5][6][7] The term iBuyer was coined by Stephen Kim, an equity research analyst at Evercore ISI on May 29, 2017 in a report to clients titled "The Rise of the iBuyer".[8]

The iBuyer process

iBuyer companies use computer-generated analysis of market data, information supplied by sellers, and in some cases input from local real estate agents, to make instant cash offers on residential properties.[9][10] Individuals wishing to sell their house are asked to enter basic information about the property on a company’s website. In a process largely driven by machine learning and automated data analysis, the property’s approximate value is determined and an initial offer is made.[1][3][4] If the offer is accepted by the seller, the company arranges an inspection of the property to ensure that the data supplied is concomitant with the actual condition of the building. From a seller’s perspective, the process of selling his or her property can take under two weeks.[2][6]

Once an iBuyer company has purchased a property, it arranges for any necessary repairs or modifications to be carried out in the building. The property is then re-sold.[4][10]

Businesses operating under the iBuyer transaction model make their profit on the fees incurred on the seller, which are typically marginally higher (1-4%) than those charged by traditional real estate companies.[1][11] From an Instant buyer company’s perspective, the higher fees cover the investment risk involved in holding the property for a potentially long period of time.[12] For a seller, the fees are paid in exchange for a much faster property-selling process than with a traditional real estate model and for avoiding the need to make repairs and improvements to the property prior to selling.[1][11]

References

1. Gores, Paul (October 25, 2019). "iBuyers use technology to take the time and hassle out of home selling. And they could be in Milwaukee soon". Milwaukee Journal Sentinel. Retrieved 2019-11-07.
2. Njus, Elliot (2019-06-14). "A slew of big real estate companies might soon be fighting to buy your house". Oregon Live. Retrieved 2019-11-07.
3. Lerner, Michele (February 12, 2019). "Two new online services are like Priceline.com for home sellers". Washington Post. Retrieved 2019-11-07.
4. Coile, Jon (October 7, 2019). "Perspective | For sellers in a hurry, iBuyers online service offers a new option". Washington Post. Retrieved 2019-11-07.
5. "Real estate fintech platform Immo Investment Technologies raises €11M Series A". TechCrunch. Retrieved 2019-11-07.
6. Andrews, Jeff (April 12, 2019). "These startups make selling your house as easy as possible". Curbed. Retrieved 2019-11-07.
7. "Dependable Homebuyers". Thursday, 20 May 2021
8. Wiggin, Teke (June 5, 2017). "Instant offer firms may boost home sales, reduce commissions". Inman. Retrieved 2021-10-30.
9. Schuetz, R. A. (2019-10-02). "Home iBuyers making it good to be a seller". Houston Chronicle. Retrieved 2019-11-07.
10. Wake, John (September 1, 2019). "The Surprising Way Real Estate Agents Are Adapting To "iBuyers" Buying Houses Directly From Sellers". Forbes. Retrieved 2019-11-07.
11. Clothier, Kent. "Real Estate Is Experiencing A Tech Renaissance, But Is It At The Expense Of The Homeowner?". Forbes. Retrieved 2019-11-07.
12. Blakey, Katy (26 October 2019). "New Option for Homeowners Looking to Sell". NBC 5 Dallas-Fort Worth. Retrieved 2019-11-07.