Since the start of the pandemic, money poured into the real estate market due to low interest rates and unlimited quantitative easing (QE). In the Atlanta area for example, the median sales price for homes increased 17% from one year prior. Another factor that contributed to the hot real estate market was “iBuying.”
iBuying occurs when a company offers an instant cash offer for a home without the use of a broker or real estate agent. iBuyers purchase homes based on comparable properties in the area, without ever seeing the home in person. To sell to an iBuyer, homeowners go to an iBuyer website, fill out online forms, and receive a cash offer to buy their home in 24 hours or less. If the seller accepts the iBuying offer, the sale usually closes within a few weeks.
iBuyers minimize costs and delays related to traditional real estate transactions. Many US companies are starting to offer iBuying services in cities across the United States. One prominent provider of iBuying services is Zillow, which announced in November 2021 that it would close its iBuying business and lay off 25% of its workforce. What went wrong with their model? In summary:
Now that Zillow is gone from the iBuying space, can another competitor succeed? Zillow’s rival Opendoor reported third-quarter results that topped estimates and issued an optimistic forecast for the rest of the year. It remains to be seen whether Opendoor can overcome the challenges faced by Zillow’s iBuying program.
For help with all aspects of commercial and family real estate transactions, contact your trusted Chugh CPAs, LLP professional.