Support

Ask Eli: Is iBuying the Next Trend in Real Estate?

This regularly-scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Enjoy!

Question: What do you think about the iBuying trend in real estate? Have you seen an impact in Arlington?

Answer: iBuying offers homeowners a way to sell their home quickly without going to market, using a price generated by an Automated Valuation Model (AVM) like Zillow’s Zestimates. The big players are Opendoor, Offerpad, and Zillow but recently some well-known brokerages have joined the party including Redfin and Keller Williams.

At this time, none of the main players are offering iBuying in Arlington or the D.C. Metro area. Currently, the largest iBuying market in the country is Phoenix with about 6% of transactions going through an iBuyer (half of those are with Opendoor).

How It Works

The process of iBuying is similar for each company and looks something like this:

  1. Homeowner submits a request for an offer and provides some basic information about their home (bedrooms, square footage, etc.)
  2. iBuyer makes an initial offer on the home based on their AVM pricing algorithm
  3. If the owner likes the price, the iBuyer conducts a property inspection to determine condition and cost of repairs
  4. iBuyer makes a final offer given the property condition
  5. Owner can accept and close usually within 10-14 days

Advantages

  • Sell quickly
  • Sell as-is
  • No showings
  • No repairs or improvements
  • No contingencies that cause contract to void
  • No cost to get an offer

Disadvantages

  • Sale price likely below market value
  • “Service fees” usually range from 7-10% of the sale price, well above most commissions when using an agent
  • Still pay your normal closing costs (taxes, title fees, etc.)
  • iBuyers not operating in most metro areas

When Does An iBuyer Make Sense?

There are all sorts of reasons a homeowner may value speed and convenience over price so iBuying exists for that market, but it should remain only a small percentage of the overall real estate transaction market. iBuying won’t always be the best option for somebody looking for speed and convenience, but with no cost and little effort to get an offer, it makes sense to at least see what an iBuyer is willing to pay.

If you’re in a market where iBuying exists (or when it eventually comes to Arlington), why wouldn’t you request an instant offer from an iBuyer and compare it to what your real estate agent thinks you can get on market? I know a broker in Texas who got more for his house from an iBuyer than he could get on the market because the AVM pricing algorithm over-valued his house.

Will iBuying Last?

I’m not sure how iBuyers will survive an economic downturn when they’re sitting on a huge amount of inventory that’s worth less than they paid for it. It’s a great business model in a hot market, but potentially devastating when the market turns.

Another flaw I see in the current model is that homeowners (like the broker in Texas I mentioned earlier) can take advantage of the process. An owner who does their homework, meeting with agents and getting iBuyer offers, will most likely only choose the iBuyer if they’re over-paying. That’s great for owners who can take advantage of it, but I’m not sure how that can be a sustainable business model.

An additional drawback is that iBuyers generally charge a fee of 7-10% of the purchase price, which is mostly attributed to the risks associated with buying based on an algorithm and a basic property inspection. If iBuyers can figure out how to reduce risk enough to cut this fee in half and sustain themselves through downturns, things will get interesting for the real estate industry.

There have always been brokers and investors who specialize in “buy now” or instant offer programs, but what makes iBuying unique is the implementation of technology to determine pricing and to make the process more convenient, as well as the scale of operations.

I think the longer-term solution is something that blends the convenience and scale of a well-funded tech company with the market knowledge of a local agent.

If you’d like a question answered in my weekly column or to set-up an in-person meeting to discuss local real estate, please send an email to [email protected]. To read any of my older posts, visit the blog section of my website at www.EliResidential.com. Call me directly at (703) 539-2529.

Eli Tucker is a licensed Realtor in Virginia, Washington D.C., and Maryland with Real Living At Home, 2420 Wilson Blvd #101 Arlington, VA 22201, (202) 518-8781.

Recent Stories

Good Thursday evening, Arlington. Today we published 6 articles that were read a total of 7916 times… so far. 📈 Top stories The following are the most-read articles for today…

Plans to redevelop a local YMCA may have too many apartment units and not enough community benefits, county planners say. The YMCA is proposing to tear down its existing facility…

A 3 BD/2.5 BA condo that sold for $2,374,500 and a 1 BD/1 BA condo that sold for $145,000 are included in Most and Least Expensive.

A woman was groped, followed and pulled to the ground by an unknown suspect in the Lyon Park area, police say. The incident happened last night (Wednesday) around 5:30 p.m….

With holiday season around the corner, it is easy to put your health on the back burner. If you are looking to get back on track during the holiday season, we are here to keep you accountable. At Aspire Higher Training, we offer 1-1 Personal Training for ALL fitness levels, Semi-Private Group Training, Sport Specific Training and Injury Prevention/Post Physical Therapy Training. Monica and her team of trainers are available across Arlington, Va.

If you don’t have access to a gym, no problem, we are located in South Arlington, but if you want to workout from your home/apartment gym, we also offer that flexibility. We make it as convenient as possible. Before getting started, we offer a free 15-30 minute consultation call to see how we can best help you towards your health and fitness goals. Let’s gets started on your health and fitness goals today by setting up a call at your earliest convenience: https://www.aspirehigherfitness.com/contact

Submit your own Announcement here.

Hello Everyone — You are invited to the final meeting of NAACP Arlington Branch NAACP for 2022
When: Dec 12, 2022, 07:00 PM Eastern Time (US and Canada)
Topic: 2022 General Membership Meeting — NAACP Arlington Branch
Register in advance for this webinar

After registering, you will receive a confirmation email containing information about joining the webinar.

7:00 pm Meeting Opens.
7:30 pm Installation
8:00 pm Presentation/Q&A; by Dave Schutz on Ranked Choice Voting
8:30 pm Final Remarks and Comments by Newly Elected Members
9:00 pm Meeting Adjourns

Installation Official Robert N. Barnette, Jr. President, Virginia State Conference NAACP The President of the Virginia State Conference NAACP will serve as the Installation Official and provide remarks for our newly elected officers at the general membership.

Read More

Submit your own Announcement here.

Light Up Arlington – Clarendon Menorah Lighting

Join us as we celebrate the holiday of Chanukah! Enjoy delicious Latkes, hot cocoa, donuts and more!

Clarendon Menorah Lighting and Community Celebration

Experience the festival of lights!!

*Lighting of a giant 9 foot Menorah

Read More

National Chamber Ensemble – Holiday Cheer!

NCE’s Holiday Concert will bring the finest classical masterpieces and holiday favorites together for the whole family. The festivities begin with Leroy Anderson’s classic “Sleigh Ride” and “Chanukkah Festival”, music from the Nutcracker and by J.S. Bach.

Outstanding Young Artist

×

Subscribe to our mailing list