A new analysis of home-closing data compiled by Zillow found that ibuyers are poised to sell a record number of homes in Q3 after setting an all-time high in Q2.
This analysis by the Seattle-based real estate and financial services company found that the market share for ibuyers reached 1% of all U.S. home purchases last quarter for the first time as homeowners increasingly used these services to sell more than 15,000 homes nationwide.
Instant buying, or ibuying, happens when real estate companies use algorithms to evaluate a property’s worth based on comparable market data and purchase houses, directly from the seller, in quick cash transactions. Those companies then quickly list them for sale on the open market after making light repairs and updates. Benefits to the seller include cash offers, flexible move dates, and the convenience of preparing and showing the home. For those same reasons, ibuyers tend to charge sellers a higher fee than traditional agents.
The analysis examined how many homes were bought and sold in 33 different markets by the top four major instant buyers: Zillow, Offerpad, Opendoor and RedfinNow.
In Q2, about 15,000 homes, valued at $5.3 billion, were sold through an ibuyer, up from 7,000 homes worth $2.1 billion in Q1. The report found that the trend of using an ibuyer to purchase a home is expected to continue for the foreseeable future.
“The growing number of homeowners using an ibuyer service clearly demonstrates that sellers desire an easier way to sell their homes, with more certainty and less stress, even in a hot sellers market," said Zillow COO Jeremy Wacksman. "ibuyers remove some of the traditional home selling pain points, unsticking homeowners previously put off by the hassles of selling a home or worried about timing their next purchase. This brings net-new inventory to the market, mainly at an affordable price point near the middle of the market, adding liquidity to the market that has traditionally been difficult for consumers to navigate."
The news of a record-breaking quarter comes during one of the best sellers' markets in recent memory which benefited ibuyers as well—most homes listed by instant buyers sold within a week of being put on the market, a third sold above their list price.
Home sellers in three metro areas were found to be the most liberal users of instant buyers, selling 1,987 homes in the Atlanta metropolitan area in Q2, 1,744 homes in the Phoenix area, and 1,321 homes in the Dallas-Ft. Worth area.
“iBuyers tend to buy and sell homes near the median sale price in a given metro area, adding liquidity for relatively affordable homes that are often in high demand,” the report said. “In 23 of the 33 largest iBuyer markets, the median price for homes iBuyers purchased was within 10% of the market's overall median sale price. The national median price of a home sold to an iBuyer was 3.6% higher than the overall U.S. median sale price, likely because iBuyers tend to operate in larger, more expensive markets.”
Zillow's report includes data from the other largest iBuyers: Opendoor, Offerpad, and RedfinNow. iBuyer transactions were identified using a combination of public records, internal Zillow data, and other proprietary data.