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By Melissa Dittmann Tracey<\/div><\/div>\n

The iBuyer business model wasn\u2019t made for a slowing RE market. iBuyers still in business seem to complete fewer purchases and make less enticing offers.<\/span><\/span><\/p>\n<\/div>\n

CHICAGO \u2013 Tech firms offering instant cash to home sellers touted simpler, quicker transactions. But the model is floundering in the housing downturn.<\/span><\/span><\/p>\n

When iBuyers emerged a few years ago, they made bold promises to revolutionize the homebuying and selling process with instant cash offers and a pick-your-closing-date transaction model. But many of these iBuyers are facing setbacks amid a slowing housing market. Some are pulling back and pivoting their business \u2013 or even shutting down.<\/span><\/span><\/p>\n

Redfin shuttered its iBuying arm, RedfinNow, in November, while Opendoor, the largest iBuyer, announced $1 billion in losses in the third quarter and FlyHomes reduced its workforce by nearly 40%. Zillow Offers, another giant in the iBuyer space, closed in 2021. Redfin CEO Glenn Kelman says his company\u2019s move was a \u201cstrategic decision\u201d to refocus on its core real estate business.<\/span><\/span><\/p>\n

The iBuyers that remain in the market reportedly are taking on significantly fewer purchases and making less-enticing offers to sellers.<\/span><\/span><\/p>\n

\u201cThe iBuyer model remains unproven,\u201d says Kurt Carlton, president and co-founder of New Western, a company that buys and sells properties for home flippers and investors. \u201cIt may return with some real utility, but I don\u2019t think the recent overabundance of cash in the venture capital markets was a healthy dynamic for these models. They certainly didn\u2019t seem to provide the urgency and do-or-die grit that often drives real innovation. Now the capital markets have shifted to a \u2018profits over promises\u2019 expectation, and many of the iBuyers have found themselves running out of time.\u201d<\/span><\/span><\/p>\n

\u201cThe purest iBuyers are essentially pivoting to become more like listing agents,\u201d Carlton says, \u201cshowing just how challenging it is to disrupt the current industry standard.\u201d<\/span><\/span><\/p>\n

An instant reaction?<\/span><\/span><\/h3>\n
Despite promises to disrupt the industry, iBuyers accounted for a small number of transactions: 1% of sellers sold their home through an iBuyer in the past year, according to National Association of Realtors\u00ae data. However, some markets saw more activity than others, such as Phoenix, where iBuying accounted for nearly 10% of sales, according to data from Parcl Labs, a company that tracks iBuyer activity.<\/span><\/span><\/p>\n
Parcl\u2019s research finds that iBuyers in the Phoenix area currently hold about $1 billion in housing inventory, says Jason Lewris, co-founder of Parcl Labs. As the market slows, iBuyers are slashing prices by more than 2% every two weeks to unload properties quickly.<\/span><\/span><\/p>\n
\u201cAs more pressure builds for iBuyers to exit their positions, they will likely become more aggressive in their pricing,\u201d Lewris says. \u201cThis will continue a downward spiral until prices reach a point where demand enters to stabilize it.\u201d<\/span><\/span><\/p>\n
Many iBuyers also are reducing their purchases. Opendoor reportedly scaled back its homebuying activity by 45% in the third quarter compared to a year earlier and shut down its mortgage business. The company announced layoffs of 18% of its workforce this fall, and CEO and co-founder Eric Wu said this month that he plans to step down.<\/span><\/span><\/p>\n
Offerpad, another iBuyer, said it slowed the pace of its purchases by 33% in the third quarter compared to a year prior. Nevertheless, \u201cdespite the current market volatility, I firmly believe technology-enabled solutions that simplify the homeownership experience will define the future of real estate,\u201d Offerpad CEO and chairman Brian Bair said in a statement.<\/span><\/span><\/p>\n
Refocus, restrategize<\/span><\/span><\/h3>\n
Still, some iBuyers are expanding into other areas while slowing or halting home purchases. Offerpad is beta testing its \u201cMy Way\u201d program, which enables homebuyers to renovate prior to moving in and roll the costs into their mortgage.<\/span><\/span><\/p>\n
Opendoor is investing in a new program, Opendoor Exclusives, a marketplace for buyers to view off-market homes on a first-come, first-served basis. (Opendoor skirts MLS rules for off-market listings because the company owns its listings.) Homeowners who sell with Opendoor can either request an instant offer or list on Opendoor Exclusives for 14 days to generate buyer interest. Opendoor aims for 30% of its total business to come through the Exclusives marketplace by the end of 2023.<\/span><\/span><\/p>\n
\u201cThis is a big shift in their model,\u201d says Mike DelPrete, a real estate technology strategist who authored The 2022 iBuyer Report<\/a>. \u201cThe proposition of iBuying has always been about speed, certainty and simplicity.\u201d But speed is at risk with Opendoor Exclusives, DelPrete notes, because it doesn\u2019t use the instant offer model. \u201cAnd it\u2019s less simple. It\u2019s more complex to explain and understand than just pressing a \u2018sell\u2019 button.\u201d<\/span><\/span><\/p>\n
Will other iBuyers choose to innovate or retreat from the market? Tech startups like New Western are focusing on niche markets, like managing fix-and-flip properties.<\/span><\/span><\/p>\n
\u201cWhen others are retreating, we\u2019re advancing,\u201d Carlton says, adding that there are 15 million vacant homes in the U.S. that could be rehabbed and returned to the marketplace to help address inventory shortages.<\/span><\/span><\/p>\n
\u201cI\u2019m hoping this more challenging funding environment will drive real innovation to improve the homebuying and selling experience,\u201d Carlton says. \u201cThe current market is challenging, and I think the old saying holds true that \u2018necessity is the mother of invention.\u2019 It\u2019s hard to tell if iBuying will fade into a niche alternative or evolve into a different approach that proves viable.\u201d<\/span><\/span><\/p>\n
\u00a9 2022 National Association of Realtors\u00ae (NAR)<\/span><\/span><\/p>\n<\/div><\/div>\n
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\nAuthor: kerrys<\/p>\n","protected":false},"excerpt":{"rendered":"
By Melissa Dittmann Tracey The iBuyer business model wasn\u2019t made for a slowing RE market. iBuyers still in business seem to complete fewer purchases and make less enticing offers. CHICAGO \u2013 Tech firms offering instant cash to home sellers touted simpler, quicker transactions. But the model is floundering in the housing downturn. When iBuyers emerged a few years ago, they made bold promises to revolutionize the homebuying and selling process with instant cash offers and a pick-your-closing-date transaction model. But many of these iBuyers are facing setbacks amid a slowing housing market. Some are pulling back and pivoting their business \u2013 or even shutting down. Redfin shuttered its iBuying arm, RedfinNow, in November, while Opendoor, the largest iBuyer, announced $1 billion in losses in the third quarter and FlyHomes reduced its workforce by nearly 40%. Zillow Offers, another giant in the iBuyer space, closed in 2021. Redfin CEO Glenn Kelman says his company\u2019s move was a \u201cstrategic decision\u201d to refocus on its core real estate business. The iBuyers that remain in the market reportedly are taking on significantly fewer purchases and making less-enticing offers to sellers. \u201cThe iBuyer model remains unproven,\u201d says Kurt Carlton, president and co-founder of New Western, a company that buys and sells properties for home flippers and investors. \u201cIt may return with some real utility, but I don\u2019t think the recent overabundance of cash in the venture capital markets was a healthy dynamic for these models. They certainly didn\u2019t seem to provide the urgency and do-or-die grit that often drives real innovation. Now the capital markets have shifted to a \u2018profits over promises\u2019 expectation, and many of the iBuyers have found themselves running out of time.\u201d \u201cThe purest iBuyers are essentially pivoting to become more like listing agents,\u201d Carlton says, \u201cshowing just how challenging it is to disrupt the current industry standard.\u201d An instant reaction? Despite promises to disrupt the industry, iBuyers accounted for a small number of transactions: 1% of sellers sold their home through an iBuyer in the past year, according to National Association of Realtors\u00ae data. However, some markets saw more activity than others, such as Phoenix, where iBuying accounted for nearly 10% of sales, according to data from Parcl Labs, a company that tracks iBuyer activity. Parcl\u2019s research finds that iBuyers in the Phoenix area currently hold about $1 billion in housing inventory, says Jason Lewris, co-founder of Parcl Labs. As the market slows, iBuyers are slashing prices by more than 2% every two weeks to unload properties quickly. \u201cAs more pressure builds for iBuyers to exit their positions, they will likely become more aggressive in their pricing,\u201d Lewris says. \u201cThis will continue a downward spiral until prices reach a point where demand enters to stabilize it.\u201d Many iBuyers also are reducing their purchases. Opendoor reportedly scaled back its homebuying activity by 45% in the third quarter compared to a year earlier and shut down its mortgage business. The company announced layoffs of 18% of its workforce this fall, and CEO and co-founder Eric Wu said this month that he plans to step down. Offerpad, another iBuyer, said it slowed the pace of its purchases by 33% in the third quarter compared to a year prior. Nevertheless, \u201cdespite the current market volatility, I firmly believe technology-enabled solutions that simplify the homeownership experience will define the future of real estate,\u201d Offerpad CEO and chairman Brian Bair said in a statement. Refocus, restrategize Still, some iBuyers are expanding into other areas while slowing or halting home purchases. Offerpad is beta testing its \u201cMy Way\u201d program, which enables homebuyers to renovate prior to moving in and roll the costs into their mortgage. Opendoor is investing in a new program, Opendoor Exclusives, a marketplace for buyers to view off-market homes on a first-come, first-served basis. (Opendoor skirts MLS rules for off-market listings because the company owns its listings.) Homeowners who sell with Opendoor can either request an instant offer or list on Opendoor Exclusives for 14 days to generate buyer interest. Opendoor aims for 30% of its total business to come through the Exclusives marketplace by the end of 2023. \u201cThis is a big shift in their model,\u201d says Mike DelPrete, a real estate technology strategist who authored The 2022 iBuyer Report. \u201cThe proposition of iBuying has always been about speed, certainty and simplicity.\u201d But speed is at risk with Opendoor Exclusives, DelPrete notes, because it doesn\u2019t use the instant offer model. \u201cAnd it\u2019s less simple. It\u2019s more complex to explain and understand than just pressing a \u2018sell\u2019 button.\u201d Will other iBuyers choose to innovate or retreat from the market? Tech startups like New Western are focusing on niche markets, like managing fix-and-flip properties. \u201cWhen others are retreating, we\u2019re advancing,\u201d Carlton says, adding that there are 15 million vacant homes in the U.S. that could be rehabbed and returned to the marketplace to help address inventory shortages. \u201cI\u2019m hoping this more challenging funding environment will drive real innovation to improve the homebuying and selling experience,\u201d Carlton says. \u201cThe current market is challenging, and I think the old saying holds true that \u2018necessity is the mother of invention.\u2019 It\u2019s hard to tell if iBuying will fade into a niche alternative or evolve into a different approach that proves viable.\u201d \u00a9 2022 National Association of Realtors\u00ae (NAR) X ADVERTISEMENT Go to Source Author: kerrys<\/p>\n","protected":false},"author":4,"featured_media":7394,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/7393"}],"collection":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/comments?post=7393"}],"version-history":[{"count":0,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/posts\/7393\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media\/7394"}],"wp:attachment":[{"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/media?parent=7393"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/categories?post=7393"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nwfl4sale.com\/wp-json\/wp\/v2\/tags?post=7393"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}