The iBuyers service operates in a variety of markets, but it does not yet have a large presence in the Washington area. Primary markets for these companies are places such as Phoenix, Atlanta, Charlotte, Houston, Las Vegas, Nashville, Orlando and Tampa, where there are many relatively new homes in large planned unit developments (PUDs) and where the housing is all similar, making estimating the value of a home much simpler. The iBuyers have also been favoring housing built in the past 20 to 30 years, and those cities have all experienced a growth spurt in the past two or three decades.
Besides the uniqueness of its housing stock, the D.C. housing market has a very limited number of homes for sale. In August, the number of active listings dropped by 20 percent to 7,743 homes, according to data from Bright MLS. While much of the rest of the country saw inventory begin to increase earlier this year, in the D.C. region inventory has declined year-over-year since mid-2016. August’s 20 percent decline was the largest decline since June 2013, and August 2019 inventory is less than half of the peak level of inventory in August 2010.
Another indication of the tight inventory is that homeowners in the region received an average of 98.6 percent of their original asking price when they sold their home. In Arlington County, Va., sellers received an average of 99.9 percent of their original listing price. Arlington is the site of Amazon’s new HQ2 and, as a result, has seen its housing prices soar. (Amazon founder Jeff Bezos owns The Washington Post.)
For homeowners who want to sell their property on a specific date because of relocation or because they’re timing the sale to match the completion of a new home, an iBuyer option may seem enticing. Other sellers who don’t want to make repairs or who want to avoid the hassle of open houses and buyer visits may also be interested in this service.
Typically, sellers enter basic information about their property on an iBuyer site and receive an offer based on the site’s algorithms, which will be reconfirmed after an inspection of the property. The sellers can accept or reject the offer, which is likely to be lower than the amount they would be offered if they fully marketed the property. For some sellers, that lower offer is worth the convenience of certainty of the sale and not having to improve the appearance of their home, show the property and negotiate the terms of the sale.
After the purchase, the iBuyer will usually repair the house and sell it for a profit.
An iBuyer transaction consists of two sales: one from the homeowner to the iBuyer and the second from the iBuyer to the new homeowner. While iBuyer purchase transactions bypass the MLS system since the property doesn’t get listed on the open market before the iBuyer takes it, housing market data provided by the MLS helps buyers, sellers and even iBuyers evaluate current market values. Price and inventory trends tracked by the MLS influence how much sellers will be offered for their home from an iBuyer or a traditional buyer. When the iBuyer has completed their fix-up and is ready to sell, most are utilizing a professional agent and the MLS to sell their properties in the shortest time for the best price.
The iBuyer service will find its place in the market, but it won’t be an acceptable solution for most sellers. Avoiding the minor inconveniences of going through a traditional sales process will not be worth the lost equity for most sellers.
Jon Coile, chairman of Rockville-based multiple-listing service Bright MLS (formerly MRIS), writes occasional commentary on the Washington area housing market.