• Red Oxen Bloggers

What are iBuyers?

Updated: Mar 27

iBuyers are data-driven, large-scale home purchasers who seek to maximize value.


Let’s dive into each of these points to fully understand how they work.

What does iBuyer mean?


iBuyer stands for “instant buyer.” These are companies focused on going directly to consumers and offering to buy properties, usually from off-market sellers. The most prominent examples are companies like Opendoor, Offerpad, and Zillow Offers. Increasingly, iBuyers are working with large brokerages. Keller Williams is leading the way with Keller Offers, a limited partnership with Offerpad. This partnership allows clients to have a fiduciary guiding them through all possible options for selling their home.

Read the iBuyer Process

Data-driven


iBuyers are data-driven. This means they focus on complicated algorithms to help them quickly and accurately make offers on houses. There is a sweet spot to offering on houses. If the offer price is too low, sellers won’t accept them. Without accepted offers, iBuyers won’t be able to fully deploy their investment resources. If the offer is too high, iBuyers won’t be able to cover some of the risk they take on with potential repairs and holding costs. Where iBuyers focus geographically and how precisely they offer is key to their growth.

Read What Criteria do iBuyers use?

Large-scale


iBuyers are large-scale. They offer on thousands of houses, which is important for several reasons. First, the more houses they research and on which they make offers, the more precise their data becomes. Second, the larger they grow, the more they can spread out costs and increase their margin per house. Finally, as they grow larger, they are better able to spread out risk and balance out any properties that they mis-valued or that had surprise costs.


Home Purchasers


At their core, iBuyers are home purchasers. They aren’t the first or only ones on the scene to go directly to consumers. If you have seen signs by the road that say, “I buy houses,” or seen billboards for We Buy Ugly Houses franchises, you’ve already run across plenty of cash buyers. These tend to be smaller scale, local buyers, yet there are large-scale, institutional level buyers as well. Many real estate funds and similar organizations buy houses at high rates. They just don’t tend to advertise directly like iBuyers. iBuyers are unique in that they go directly to consumers en masse.

Read How do iBuyers judge the condition of a home?

Maximize Value


iBuyers seek to maximize value. This means they want to precisely offer on houses and optimize the proceeds from each house. They also provide connections to additional services, like mortgage, insurance, and title, so that sellers can have a one stop shop for their real estate needs. For Keller Offers, these services include the use of Keller Mortgage and Keller Covered. These services with Keller Williams allow KW Agents to utilize all of the tools within their ecosystem to serve their clients.


That’s a quick overview of iBuyers. They are not all created equally—they vary in the strength of their pricing models, and where they are focused geographically. To maximize your success, the best option is to connect with a certified KOCiB iBuyer agent who can walk you through all your different options. You should always have a fiduciary agent on your side.

Read What Does the Future Hold for Real Estate Agents?

Written by Brian Gubernick, December 16, 2019


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