The real estate industry was already undergoing historic disruptions thanks to an array of new technological applications for the basic practice of buying and selling property. Everything from blockchain and AI to the showing of homes via virtual reality platforms makes this sector a Brave New World indeed.
But just when you thought there was enough tech changing the game, a new phenomenon of the Digital Age is turning real estate on its head once again. It’s called iBuying, and it may be the hottest trend in real estate.
What is iBuying? This is when an individual or company buys and sells real estate assets strictly through connected digital platforms.
This new way to trade is being done by entrepreneurial, independent and self-employed speculators — but iBuying has also been embraced in a big way by both emerging and established companies, such as Zillow, OpenDoor, Knock, Offerpad and RedfinNow.
iBuying is actually much like house flipping, except the strategy is different. Operators don’t seek run-down fixer-uppers to remodel and sell at a sweet mark-up. Rather, they search out homes in good to excellent condition. They buy at a fair market value and then attempt to resell for a profit. That obviously means much lower margins than traditional house flipping. Thus, iBuying is high-volume trading at low margins.
The iBuying concept has not penetrated all areas of the U.S. as of yet. Most of the activity is seen in locations where average properties run in the $250,000 range.
Homeowners can get involved in iBuying. They start by going online to seek offers for their home. The first step is filling out basic information, such as the appraised value of the home, features, information about location, any recent remodeling that’s been done and so on. The homeowner hopes a company like OpenDoor or Knock will like what they see and make an offer.
The professional iBuyer has incredible tools at his or her disposal. For example, they deploy an Automated Valuation Model (AVM) which will provide an estimate of the home’s value. They also use AI applications to pour through hundreds of prospects and ferret out the promising deals while rejecting the marginal ones.
An iBuyer can sit back in his chair in a home office and ply the nation for real estate opportunities while never having to pound the streets, go out and show a home, talk to clients, tack up advertising signs or perform any other of the trappings of traditional real estate activity.