RALEIGH – Zillow announced last week it would wind down the company’s iBuying program, Zillow Offers, saying it was unable to accurately predict home prices in a rapidly changing housing market. But just because Zillow will no longer purchase homes using an instant-buying program doesn’t mean that the practice will end.
Far from it.
In the Triangle, Zillow will remain a home seller since it owns more than 100 properties acquired through its program, some of which have yet to be listed on the open market, a Zillow spokesperson told WRAL TechWire.
Rich Barton, co-founder and CEO of Zillow Group, noted in a statement last week that Zillow would close down the program everywhere in the United States where it was operating, because “the unpredictability in forecasting home prices far exceeds what we anticipated.”
But other companies will continue to operate in the Triangle. That includes Opendoor and Offerpad, who continue to operate in the region.
The competitors also include the newest entrant to iBuying in the Triangle – RedfinNow – which will list the first home the company acquired in the Triangle on Wednesday after preparing the home for sale.
That home, located at 1800 Pershing Road in Raleigh, was acquired by Redfin on Oct. 18 for $500,500, according to real estate records filed with Wake County’s Register of Deeds.
“Redfin is committed to offering customers a complete real estate solution and iBuying is part of that solution,” said Redfin’s CEO, Glenn Kelman. “We will keep methodically and carefully expanding our iBuying service so that we can give every homeowner a choice between a cash offer and a brokered sale,” he added.
How it works, and what comes next
RedfinNow, Opendoor and Offerpad are known as iBuyers, an abbreviation of “instant buyer,” and they use technology-enabled platforms and a robust set of data to estimate a potential price of a property owned by a possible home seller. The companies make an offer to buy the home, typically in cash, from the existing homeowner, and prepare the home for sale on the open market, oftentimes completing necessary repairs or updating the home to align with other comparable homes in the real estate market where they’re located.
“The iBuying business is what we’ve always thought it is, an attractive option for homeowners who are willing to pay more for convenience and peace of mind,” said Kelman. “It’s one piece of the puzzle, not the whole puzzle.”
A spokesperson for Redfin told WRAL TechWire this week that iBuying is not a fit for every homeowner who is seeking to sell, but that the program may fit a seller’s needs for a variety of reasons.
An analysis of market data published in September found that, for the second quarter of 2021, 5% of all home sale transactions in the Raleigh housing market were sales to iBuying companies — 5 times the national average, in markets where iBuying is occurring, which was 1% of all transactions.
Earlier this year, Raleigh, Durham, and Charlotte ranked as the top three markets where iBuying activity was occurring.
RedfinNow’s first property that it acquired in the Triangle will be available tomorrow. According to Opendoor’s website, the company has 76 active listings for sale in the Triangle region. Offerpad has a 26 listings in the Triangle region, and 274 across North Carolina, including the Charlotte MSA, which includes some properties located in South Carolina. Zillow currently lists 103 properties in the Triangle for sale, and 78 in Charlotte.
iBuying remains a difficult business, real estate technology industry analyst Mike DelPrete told WRAL TechWire.
“iBuying is still hard, it’s a very risky business,” said DelPrete. “When you’re talking about billions and billions of dollars, and buying 100, 200 houses every day, you’re going to make mistakes.”
Zillow’s mistake was, according to DelPrete, a “catastrophic pricing failure.” The company racked up about a billion dollars in losses before deciding to end the iBuying program. That could pave the way for other iBuyers to recapture market share, said DelPrete, but it could also remain a pyrrhic victory for existing companies.
Some conventional real estate firms have adapted to the entrance of iBuyers. Those options include adding services to their brokerage firms that include a certainty of sale, or an offer to purchase the property at a given price under given terms if no acceptable offer emerges from listing the home on the open market.
Other real estate agents and brokerage firms have adapted by incorporating options that a home seller may qualify for. Those include iBuying, or other programs available from technology-enabled real estate companies such as Knock or Ribbon, that provide access to capital in order for a home seller or home buyer to successfully navigate a transition between residences.