A new report from real estate technology company zavvie shows that amid a highly competitive market in the first half of 2021, iBuyers began making more competitive offers and expanding the range of homes they were willing to purchase.
The findings, detailed in zavvie’s midyear Seller Preferences Report, specifically found that among other things, in the first half of 2021 offers from iBuyers came in at an average of 104.1 percent of market value. That average includes offers from Opendoor, Offerpad, Redfin Now and Zillow Offers. By comparison, in 2020, iBuyer offers were on average only 97.6 percent of homes’ market value, the report notes.
Credit: zavvie
The report goes on to call this change “impressive” and an improvement compared to the past, adding that “anecdotal reports from brokers across the country confirm the iBuyers are often making offers above prices expected on the open market.”
At the same time, those same iBuyers have dropped their fees, from an average of 7.2 percent in 2020 to 5.1 percent at the end of this year’s second quarter, as well as the concessions they charge for home repairs. Overall, the result is “a 35 percent reduction in the consumer’s costs of selling to an iBuyer,” the report notes.
“That dramatic decrease brings the iBuyers’ fees in line with what sellers pay on the open market,” according to the report.
The report doesn’t dive into the deeper causes of this shift, though presumably much of it has to do with the extremely limited inventory many markets saw this spring. On the one hand, that means iBuyers have to compete more aggressively for homes because homeowners can easily sell their property quickly on the open market. And on the other hand, it means iBuyers are all but guaranteed to make a profit simply by holding onto houses for a short period of time and letting appreciation run its course.
Either way though, the report also details a number of other changes iBuyers have experienced this year. For starters, their “buy boxes” — or the target homes they’re looking for in terms of age, price range, location etc. — has expanded, with the companies now paying an average of 22 percent more for houses than they did at the end of last year.
Additionally, the report notes that “iBuyer purchases in Q1 bounced back to exceed their pre-pandemic levels a year ago by 21 percent.”
“And, in Q2, iBuyer purchases rocketed to nearly double the Q1 2021 total,” the report adds. “Definitively, the iBuyers are back in the marketplace.”
The report also explores the growth of what it dubs “power buyers.” The term was coined by analyst Mike DelPrete — who is also an Inman contributor and an advisor to zavvie — and refers to companies that aim to help buyers with things like cash offers and bridge loans. The power buyers represent a kind of flip side of the coin relative to iBuyers, which generally focus on homesellers.
The report identifies the top power buyers as EasyKnock, Homeward, Knock and Ribbon. And it states that these companies have seen “explosive growth” lately.
“Ribbon reports demand for its cash offers has increased 10x in 2021,” the report notes. “EasyKnock’s Q1 business grew 70 percent from the previous quarter. And Knock expanded from three markets at the end of 2019 to 49 markets by the end of Q2 [2021].”
Zavvie offers an iBuying platform that can compare cash offers. This week’s report is the second of its kind, and it compares data on the largest players in the real estate technology space.
This week’s findings are especially interesting because zavvie’s previous report, out last December, found that at the time iBuyer offers were actually getting weaker — the exact opposite of what has been happening over the intervening months. And while it remains to be seen how exactly the real estate market might ultimately recover from the last wild year, the report ultimately notes that consumers are getting more tools to help them navigate the real estate landscape.
“Fortunately, new ways of selling and buying have risen to meet the sellers’ needs and have found high consumer acceptance,” the report concludes. “It’s not an exaggeration to state that for consumers with access to the new selling solutions, the real estate marketplace has fundamentally changed to their advantage.”
