Category: iBuyers (page 1 of 2)

For a year-and-a-day, I was an iBuyer pricing algorithm.

When Zillow announced they were going into the cash-incineration iBuying business, I looked for opportunities to find out more. Amazingly, I lucked into a job doing CMAs for Zillow’s pioneer broker on the ground. What’s amazing? Until then, I had never done a CMA in my two-decade career as a Realtor.

I could and can price to the dollar, but I never did anything beyond reading the comps like tea leaves. Zillow was a huge gift to me that way. I got to work with appraisers, and I learned why their comp selections always look so alien to me. I did my best to teach them my way of comping, but I only made a real dent in two of them.

Their tricks were great, and I had fun playing with them. I had never in my life adjusted for anything, for one thing, but I had never ever crossed an arterial street to get a comp before, either: It was – and still is – a great big deal to get me to leave the subject property’s subdivision.

My biggest influence on them was time. Until March of this year, the price trajectory in the Valley of the Ever-Fecund Sun had been steady as a clock since 2014 or so. They were going back three months for comps, adjusting for time. I rocked them to a year, and I did not hesitate to go back longer than that. Better to have closer comps, adjusted, than a false confidence in more-recent but less-comparable sales.

Zillow was a hoot. The appraisers would do things I think are crazy – like comping one- to two-story homes – but Zillow’s minions would not understand why wildly divergent product lines – Ikea kitchens versus Sub-Zero kitchens, for example – cannot be compared for pricing purposes. If you’re looking for defects in any AVM, it’s there, the inability to reconcile proximate Read more

This has been a slow-rolling epiphany on the part of the iBuyers. I’ve snarked about it here and there, but that’s all, so far. I wrote a ton about iBuying last Summer, but by now it all seems quite a bit less urgent. There are a lot more of them now, for one thing, and they sell like a niche offering – Ug-buys-ugly-houses with swankier web sites. Much worse, dumbasses who already could not evaluate properties are all at sea trying to price into dizzyingly volatile, madly divergent markets. And I thought they were screwed before 2020 came along…

So what’s their solution?

Socialize the risks to the sellers, of course.

After only eight years of pissing away investor funds brokering real estate without a business model, OpenDoor has discovered real estate brokerage: I sell it but you own it, and all I get is a sales commission – and even then only if I get the property sold and the transaction closed. Sucks to be the broker? It can – if the broker sucks. But the upside is that the broker pays only his marketing costs, with the seller bearing all of the ongoing carrying costs.

I sell fast with almost no costs on my end, so this matters less to me that it might to, say, iBuyers, who have demonstrated repeatedly that they can cling to inventory long after buyer feeding frenzies have devoured everything else. Offloading months and months of carrying costs onto the seller might actually point OpenDoor to a path to profitability – someday.

In passing: OfferPad is already cross-selling traditional listings, and, of course, this has been Redfin’s iBuying pitch all along.

And that pitch is what?

“You can either sacrifice your equity for quick cash, or you can risk your time, money and equity on the MLS.”

They won’t say it that way, but that is the actual alternative being Read more