PHOENIX (3 On Your Side) - The share of homes purchased by instant home buyers plummeted in 2020, according to recent analysis of home sales.
The concept of iBuying is simple. There's no listing and there are no showings. Sellers agree to a price. A company cuts a check, and after the seller moves out, the iBuyer puts the home on the market.
There are several companies using this model, which gained traction in 2019. But a recent Redfin report shows a drop in interest from sellers in 2020. According to the report, in the Phoenix area, 5.3% of home sales were going to iBuyers in the third quarter of 2019. At the same time in 2020, that number fell to just 1.5% of home sales.
Jeff Ostrowski, a senior mortgage reporter for Bankrate says the sharp drop may be caused by a strong sellers' market. "Buyers are lining up and making full-price offers or above list offers," Ostrowski said. "The question for a seller becomes, 'Well, do I want to pay the extra money to sell to an iBuyer or do I want to pay a little less in fees and sell my house almost as quickly in the traditional way?'"
"It kind of just depends on how much you want to deal with the sale process and open houses and decluttering and cleaning," he added. "The iBuyers say, 'Hey, you don’t have to worry about cleaning and decluttering. We’re going to buy your house as is.'"
Average realtor fees are about 5%, while iBuyers charge anywhere from 6 to 12%, according to Ostrowski.
Offerpad is one of the big players in the iBuyer market. At the beginning of the pandemic, the Arizona-based company put a pause on cash offers, according to Cortney Read, the chief of staff and communications at Offerpad. "We were watching the market shift," Read told 3 On Your Side. "People were needing different types of homes. People were losing their jobs and we needed to pause, recalibrate what the real estate market was doing so we could provide competitive cash offers to people."
Read says despite the dip, numbers remained strong in 2020. She says Offerpad is expecting growth in 2021. "If anything, we're seeing a lot of people come to Offerpad that may not have considered us before. People don't want strangers in their home. They want a for sure sale. They want to make sure the buyer doesn't back out," Read said. "Offerpad is in a great spot right now and looking forward to 2021."
Opendoor, another major iBuyer, has operated in the Phoenix area for more than six years. Michelle Meyers, the general manager of Opendoor Phoenix also expects to see growth. "Competition is strong in the market right now," Meyers said. "And the reason Opendoor resonates with so many sellers is that we provide certainty and speed with competitive all-cash offers."
"We're able to offer Phoenix residents truly safe and contactless selling, a feature that we expect to remain important through 2021 and beyond," she added. "And I don’t foresee the Phoenix market slowing down anytime soon. I anticipate we’ll continue to see people, both in-state and out-of-state, move here for more space, affordable options and a nice place to raise a family."