Offers from iBuyers are getting weaker compared to market value, at a time when iBuyers purchases are still far below last year’s levels, according to a real estate tech company zavvie’s first ever Seller Preference Report.
The total number of purchases rebounded from the second quarter, when many stay-at-home and lockdown orders were still in place in many U.S. markets, but the report found that “unlike the real estate market as a whole, the iBuyers haven’t yet bounced back.”
Purchases by iBuyers were down 82 percent overall in the third quarter of 2020, even as the nation’s largest iBuyers returned to market with new safety protocols and tools, according to the report.
“The national iBuyers relaunched in all their pre-COVID markets, though their purchase volume was significantly reduced compared with 2019,” the report reads. “This was a function of making fewer offers at lower prices with somewhat higher service fees, though that has begun to change.”
The finding of the report mirror those of Mike DelPrete, a real estate tech advisor and zavvie board member, who recently published a study that estimates the market share for iBuyers was cut in half by the pandemic.
IBuyers have increased the size of their “buy box” according to the report — which is essentially the types of homes the companies will buy at what price points — but not formally. IBuyer purchases now include condos, older and more eclectic homes and even homes priced up to seven figures.
Offers from iBuyers are getting weaker compared to full market value, according to the report. Looking at iBuyer transactions since May, the report found that, collectively, iBuyers have been purchasing homes at an average of 95.5 percent of market value across the country, compared to 98.6 percent in 2019. The change is likely a result of “perceived higher risk in the marketplace immediately following the shutdown,” the report states.
However, despite the number of purchases waning and iBuyers offering even further below market value in the months following the shutdowns, the third quarter saw a slight increase in the acceptance rate. Offer acceptance was reported at 4.7 percent in the third quarter of 2020 and 4.2 percent the year prior.
“This suggests that for some sellers, the iBuyer benefits of speed, certainty, convenience — and perhaps above all safety — are compelling enough to justify a lower offer amount and higher service fees, even in a strong seller’s market,” the report said.
The fees collectively charged by iBuyers jumped slightly to 8 percent — it was an average of 7.6 percent the year prior — which was also likely a result of the perception of higher risk, according to the report.
The report, published by real estate technology company zavvie, the first of what the company says will be a quarterly review of selling solutions available to homeowners throughout the U.S. This report specifically focuses on the relaunching of national iBuyers and the rise of bridge solutions.
“As more homeowners think about selling their homes within the next year, many won’t — because they are nervous about how to do it because of COVID, scarce inventory, and general uncertainty,” Lane Hornung, zavvie’s co-founder and CEO, said in a statement. “Our new report provides all the details.”
But like zavvie’s technology offerings — like the zavvie Pro platform — the free report isn’t intended to be direct to consumer, rather a tool to “empower” agents and help them win more listings in a competitive environment, according to Hornung.
“The modern agent does not fear what disruptors are doing,” Hornung said. “They co-op it because the modern agent is the trusted advisor who a consumer wants to help them fully understand all their choices, including the advantages and disadvantages of each.”