In order to bring more liquidity to the real estate market, putting an end to complex, slow and stressful real estate transactions, a new form of business grows a lot in America: iBuyer (instant buyer).
The need to optimize processes and raise the efficiency of one of the largest industries in the USA, combined with the expansion of technology and the new demands of consumers in their buying journey make the transformation of the real estate market not only a possibility, but a necessity.
In the United States, in cities like Phoenix, Arizona, iBuyers transactions have been growing and represent 5% of the total. It is still a small volume, but with potential, according to experts.
First of all, iBuyers are digital companies that evaluate and compare properties that will be renewed and put back on the market. Using big data, where through technology and artificial intelligence it is possible to produce more accurate evaluations.
But, after all, how do I know there are advantages in selling my property to one of these new business models? In this article we will explore better this concept and all its characteristics.
What is iBuyer?
There are already variations of the iBuyer model operating around the world, mainly here in the United States, each with its own specificities and differences. Currently, Opendoor, Offerpad, Knock and Zillow Offers are the main references in this type of business. With a revenue forecast of up to US$ 22 billion in 5 years at Zillow alone.
In general, iBuyer is a buying and selling model in which a company uses technology, intelligence and data to make an offer to a property. That ends up maximizing the number of real estate transactions and increasing the market liquidity.
Therefore, this business model unites technology and efficiency from the very first stage of the negotiation process.
In the process of buying a property, pre-defined and non-subjective items are evaluated through a fixed algorithmic model, which gives lower flow to speculative pricing.
How does iBuyer work?
Under the iBuyer model, through technology and information, the company evaluates the properties, makes an offer to the seller and, in case of acceptance, makes its purchase, retirement and puts them up for sale again.
In this model, brokers and real estate agents will be responsible for indicating properties with good sales potential and the interested company will analyze the property based on data to make or not a proposal to the seller. The property is analyzed taking into consideration data on supply, demand, characteristics and complexity in its reform.
As a continuation of the business, the company carries out the procedures for the purchase and makes the full payment in cash to the owner.
In addition, all the headaches with cleaning and renovations stay with the company. In some cases, iBuyer even takes care of the decoration.
iBuyer brings benefits to the economy in terms of circulation of assets.
Because, by using this model of purchase and sale, the properties are sold more quickly, and can be resold in the future worth even more.
In other words, the real estate market gains value and, consequently, investments become even more profitable, activating the financial sector with strength and efficiency.
iBuyer Advantages for Real Estate Business
Among the strongest positive points for the real estate market, iBuyer brings, in the first place, greater liquidity to the sector. For, in fact, thousands of businesses are closed annually through this model.
As a considerable part of real estate financing requests are disapproved by financial institutions, with iBuyer it is also possible to say that less real estate will be of no social utility due to the disapproval of credit for its clients.
In the iBuyer model, the property is purchased in cash with the contribution of the company interested in the property.
Secondly, but not least, transparency in real estate business tends to feel the main positive consequences of this new business model.
In other words, with more accurate information about the transactions, it will be possible to be more assertive also in the pricing of real estate, helping market professionals and owners at the time of setting the right price and thus reducing the time in negotiations.
Another point where iBuyer contributes with the seller at the time of real estate transactions is the fact that the purchase is much faster and more certain.
In the case of an ordinary buyer, an individual, there is the possibility that the financing will not be approved, a problem with the granting of credit will prevent the sale or, in extreme situations, until there are certain types of blows.
Finally, iBuyer is bringing a drastic reduction in the time it takes to purchase real estate in the country, which currently averages 56 days. With the new business model, it is possible that this time will decrease by more than 10 times.
After all, what takes the most time in this sales process is the time to actually get the loan – which is around 44 days.
iBuyer’s advantages for property owners
For owners of properties purchased on the iBuyer model, there are a number of conveniences:
You will no longer have to worry about reforming the property to sell it;
Sales fees are saved;
There will be no risk in the depreciation of the property;
Due to the simplification of transactions, the time to sell the property may be more than 10 times faster;
Due to the shorter time of the property “stopped”, the owner will pay liens and other fees for less time.
Thus, by automating and standardizing valuation models, iBuyers provide more liquidity to the industry and make processes involving the real estate market less nebulous and more enjoyable for the owner who wants to sell his property.
In this context, transparency is gained in all stages of buying and selling a property.
Therefore, for the seller, there are two other main advantages in selling your property to an IBuyer. The first, as I said before, is to be able to receive the value of the sale at once, without depending on financing institutions.
Another interesting advantage is that there is no need to make reforms or improvements before the sale.
In short, the benefits for sellers are unquestionable, logically. It is possible to sell the property more quickly, without most of the risks and problems that could pass in a common negotiation with an individual.
What is the role of real estate professionals in iBuyer?
Many iBuyer companies partner with real estate agents and other realtors who will make the real estate referral to the company and, if the deal happens, they are commissioned.
For market reference terms, in 2018, the United States presented more than 25 thousand iBuyer transactions, corresponding to 0.2% of market share.
Not to mention that the iBuyer model is very much in the financial sense, mainly because of the potential gain in the property transaction.
In the United States, iBuyers can earn more than $30,000 per sale, which is much more than traditional real estate agent earnings.
In addition, with the retirement and resale, it is still possible to achieve, on average, an appreciation of more than 5% over the total value of the property
The need of the consumer to have more agility in its purchase or sale allied to the need of greater liquidity, transparency and efficiency in business makes this business model have an excellent growth potential.
iBuyer is a business model that has everything to be the biggest advance of the digital transformation in the real estate market of the United States and the world.
Uniting technology and greater dynamism in the real estate market, the IBuyers are giving more liquidity and transparency to this sector
The new technologies are more and more rooted in our daily lives and have been modeling the new way we consume, learn, spend our free time and even relate.
In the very traditional real estate market, although late, this process also starts to take shape. The new IBuyer business model has entered the sector and is making the purchase and sale of real estate more dynamic and less laborious.
In short, the advantage for real estate owners is to receive an offer in sight for the property for sale, reducing time and bureaucracy. For those who wish to buy, there is easier access to real estate options in the desired neighborhood, legal auditing and reform of the unit carried out by the intermediary.