Sellers Cool on Instant Offers as iBuyers Pull Back

December 3, 2020

As iBuyers resume operations, they're finding less sales activity coming their way as the housing market sees booming sales from consumers.

Many iBuyers paused home purchases in mid-March as the COVID-19 outbreak began in the U.S. While most reopened over the summer, their sales levels are lower than before the pandemic. iBuyers make instant cash offers to sellers who wish to bypass the traditional MLS marketing route, often for assurance and a quicker sale. However, homeowners tend to pay higher fees for the convenience.

iBuyers have been collectively purchasing homes at an average of 95.5% of market value across all markets, a drop from the 2019 average of 98.6%, according to the Seller Preferences Report recently released from Zavvie, a technology firm that connects agents with iBuyer, bridge, and open market programs that they can offer to their clients. The report factors in iBuying firms like Opendoor, Zillow, OfferPad, Redfin, EasyKnock, Knock, Homeward, and Ribbon. The decrease is “probably reflecting perceived higher risk in the marketplace immediately following the shutdown,” the report says.

iBuyer purchasing volumes have been significantly lower in recent months than before COVID-19, the report notes. iBuyer purchases are 82% lower in the third quarter of this year compared to last year. “Unlike the real estate market as a whole, the iBuyers haven’t yet bounced back,” the report notes.

While there are fewer offers, the rate at which those offers have been accepted in the third quarter has been slightly higher than it was in 2019—4.7% compared to 4.2% last year, the report says. “This suggests that for some sellers, the iBuyer benefits of speed, certainty, convenience—and perhaps above all safety—are compelling enough to justify a lower offer amount and higher service fees—even in a strong seller’s market,” the report notes.

iBuyers have been expanding the parameters of what type of homes they’ll buy beyond median-priced single-family homes. They are now making offers on condos, higher-priced homes (sometimes up to even seven figures), and older homes, the report notes.

More iBuying companies also are reporting a growth in demand for “buy before you sell” bridge solutions. Companies like EasyKnock, Homeward, Knock, or Ribbon offer such programs, while Opendoor also has launched a “Home Reserve” program and Zillow Offers has begun a bridge partnership with a new-home builder. These “bridge” programs offer homeowners an opportunity to buy a home before they list. Zavvie’s report shows that consumer acceptance of bridge offers is about four times that of instant offers.

Source: 
Seller Preferences Report,” Zavvie (2020)