Until the COVID-19 outbreak, iBuyers were becoming a large threat to real estate agents and traditional brokerages. Now, with nationwide self-quarantining and social distancing, this new market is taking a downward plunge into the unknown, making consumers rethink their decisions to cut brokers out of the equation.
iBuyer, short for instant buyer, is used to describe real estate companies that use technology and artificial intelligence to make instant offers to home sellers and then purchase homes in quick cash transactions. Brands like Zillow Offers, Redfin, Offerpad, and Opendoor use advanced algorithms to determine the value and are able to buy homes directly from the homeowner, enticing them with the idea of instant cash in days. The iBuying process takes the Realtor® out of the equation, along with staging, marketing, and showings.
Zillow Group announced that it will be temporarily pausing home buying through its Zillow Offers business in response to the stay at home orders set in place. Redfin also announced on March 18, that they too would be temporarily suspending their iBuying program during these unprecedented times. On its website, Offerpad cited local municipality rules as its reason for suspending offers to sellers. “Due to health concerns for customers and employees, and to ensure we are complying with proper local municipalities, protocols and CDC requirements related to COVID-19, we are not currently sending offers to new sellers directly,” read the statement. “Interested sellers can still request an offer, which will be delivered when we resume our core business of instant offers.”
Forbes shared a story about a Charlotte native who signed a contract on his two-story townhome on January 13, accepting the highest offer after receiving bids from Zillow, Offerpad, and Opendoor. Jeramiah Dooley was given 90 days to close, which lined up perfectly with his plan to move out just before closing, until he received an email “blaming the latest public health orders issued for a wholesale cancellation of every house that Zillow had under contract to buy”. Dooley was then given 48 hours to choose two options from Zillow: “I could take a check for $5,000. That’s $1,000 in earnest money that they were contractually obligated to pay me for breaking the contract and $4,000 extra for the trouble. Or they would pay for a Realtor® to relist the house. They were just going to cancel the contract and walk away.”
Dooley, a father of two, chose the money, saying that he felt like he had no choice, although the payment did not come close to the cost of what he put into the house getting ready to sell as well as what it will cost him now with an additional mortgage payment that he will have to pay until he can find a new buyer for the townhome. He added to Forbes that “We absolutely could have closed on this house without ever having to break any sort of guidelines around social distancing. For Zillow to blame what’s going on from a health-care standpoint for their financial decision to break this contract and put that burden back on their customers and me is really insulting.”
Although the convenience of iBuying and the promises of instant cash in your pockets sound promising, consumers are now seeing that just when they needed the certainty of an iBuyer, they were left empty-handed instead. Having a Realtor® on your side when it comes to selling is now more important than ever. They can provide you with a personal touch that an iBuyer will never be able to duplicate while forming a customer-client relationship built on trust.
UPDATE May 6, 2020: After the company paused acquisitions in late March and laid off nearly a third of its staff, Opendoor will now gradually resume its instant cash offers to home buyers in select markets. Starting in Phoenix, Opendoor has restarted their operations and has plans to start buying homes again in the Raleigh-Durham, N.C. area starting next week, and reopen in more than 20 additional markets in the coming months.
Are you thinking of selling your home or have questions about real estate? Reach out to our Director of Relocation, Catharine Pappas at (704) 661-2402, or your preferred Dickens Mitchener agent today.
Words by: Emily Irish
