Real estate investment companies selling Phoenix metro homes for $100,000 less than what they paid
Realtors say investors are in trouble. Say potential buyers should take advantage.
PHOENIX (3TV/CBS 5) - The Phoenix-metro area has led the nation in home price increases for nearly 3 years in a row.
In June of 2020, Valley homes sold for an average of $368,000. In 2021, it jumped to $508,000. This past June, the average sale price totaled a whopping $591,000. However, the Phoenix real estate market is taking a drastic turn. “All of the sudden, prices went up and up and up. And then, interest rates started going up. And then, things started to slow down,” John Sposato, a real estate agent who’s been in the business for over 30 years, said.
Sposato said the slow down caught iBuyers by surprise--something that could be an advantage to you. iBuyers are popular home buying companies like Offerpad and Open Door. You’ve likely seen their TV commercials. Sposato said he believes that iBuyers like Opendoor should be concerned, saying that their business model “doesn’t work.” Sposato frequently posts on TikTok saying iBuying companies are bleeding financially. He may have a point.
In April when the real estate market started to shift downward, On Your Side learned that Open Door bought a North Phoenix home for $710,000 and immediately listed it for sale at $753,000 in an attempt to profit. In just five short months, the same company dropped the sales price 8 different times on that same home just to attract a buyer in the new real estate climate. The same home is currently listed for sale at $584,000. If it sells for that amount, Open Door will have lost $126,000. Sposato says he believes the home will probably sell for a lot less.
Open Door has more than 1,500 Valley homes for sale, and according to Sposato, that’s a lot of money left on the table. “They paid X amount of dollars for houses in February through May and now, they’re feeling it. They’re losing from 50, 60, 70, up to a $100,000 less than what they paid for it.” The company said that while they acknowledge the shift in the market, they’re not concerned. One Open Door executive said that as long as profits across the board average on the “plus side” and they’re not in the red, they’re satisfied. The company says that they look at home investments as though it’s a person’s 401-K--some quarters are up and some quarters may be down.
Other iBuyer company Offerpad also said they’re also not concerned, despite offering incentives to attract buyers. J.R. Samsung is the vice president for Offerpad Home Loans. He says, “We currently have a special incentive here in Phoenix where if you buy one of our homes that we own and that we have listed for sale, then we will actually buy down your interest rate to 3.99% for the first year. 4.99% for the second year and then 5.99% for year 3, and however long you have the mortgage. As for Zillow, the company got away from the iBuying business already in November of 2021. Sposato says, “I mean, they (iBuyers) are willing to deal. They want to free up capital.”
Sposato and other Valley real estate experts believe iBuyers are getting desperate. They believe the companies have invested too much money in too many homes and need to get out. Their dilemma spells good news for potential home buyers looking to land an ideal bargain. “I mean there are deals to be had out there. They have to get rid of these house--Open Door and Offerpad,” Sposato said. “These guys are making deals.”
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