BOULDER, Colo., Nov. 30, 2021 /PRNewswire/ — Homebuyers and sellers contended with historical challenges in markets across the U.S. this July through September — and turned toward innovative solutions as a result. When available homes for purchase were scarce, average home prices hit record highs, and multiple offers with escalating bids became the norm, "Power Buyer" companies became more commonplace than ever. With upward of 70% of sellers also needing to buy a home, it was a particularly difficult time.
Power Buyers are companies offering services that give consumers more options and financial "power" to buy a home through a cash offer, a buy-before-you-sell bridge solution, or the sale-leaseback; a new zavvie Seller Preferences Report details the explosive growth of Power Buyers and changes in the iBuyer landscape throughout the U.S. between July and September.
Just released by zavvie, a brokerage-branded marketplace that connects broker-agents and their clients with new ways to buy and sell homes while keeping agents at the center of the transaction, the report also offers deep insight into the iBuyer market.
In the third quarter of this year, iBuyers doubled their acquisitions from any prior quarter and now command a 1.8% national market share. Most notable, the report indicates a trend that iBuyers are making less aggressive offers. For example, iBuyers paid about market rate — 100.6% of market value — in September compared to their July offer strength, which peaked at nearly 105% of market value.
But perhaps the most significant trend emerging from the zavvie report is the continued expansion of the leading iBuyer and Power Buyers firms, including Opendoor, Redfin Now, Offerpad, Knock and Ribbon. During Q3 alone, these firms launched their services in more than 30 major metro areas and states.
The new zavvie report also acknowledges that in November, Zillow announced it would discontinue its iBuying operations. However, the report concludes that "it’s clear that Zillow’s decision was completely attributable to internal factors specific to Zillow rather than to any lack of consumer demand" among iBuyers.
Stefan Peterson, zavvie Chief Data Officer and co-founder, said, "Paraphrasing Mark Twain, the reports of the death of iBuying by some has been greatly exaggerated. The fact is: iBuyer purchases increased by 46% from Q2 to Q3, a breakthrough quarter for iBuyer purchase volume."
Peterson notes that with the withdrawal of a major iBuyer firm, total volume may be impacted — and compounded by seasonal factors — but he believes other iBuying firms could increase their activity, as recent news reports indicate.
Other highlights from the Q3 zavvie Seller Preferences Report include:
- Power Buyers grow exponentially: Ribbon reported demand for its cash offers had increased 10x in 2021. EasyKnock’s Q3 business doubled from Q1. And Knock expanded from 3 markets at the end of 2019 to 69 markets in 14 states across the country.
- iBuyer median purchase price jumps: The median purchase price for iBuyers increased from $280K in Q4 2020 to $413K in Q3 2021, a remarkable 47% gain.
- Power Buyers top iBuyers with higher price points: The median transaction price for Power Buyers was $480K in Q3, significantly higher than iBuyers.
- iBuyer "Buy boxes" widen: zavvie notes that iBuyer "buy boxes" (the targeted purchase price range, age, and other conditions) continued to widen in 2021. The percentage of houses eligible for offers increased 38% in Q3, with eligible inventory in the markets that iBuyers service growing from 32% to 47% in the last quarter.
- Cash offers drive Power Buyers growth: Various Power Buyers reported 2x to 10x growth for cash offers in Q3 compared to Q4 2020.
- iBuyer fees compare favorably to average commissions: iBuyer service fees remained consistent at 5%, compared with a 5%-6% real estate sales commission typical for an open-market home sale.
- iBuyers want more for "prep and repairs": The average seller concession increased from the first half of 2021 from 1.9% to 3.1% of the purchase price in Q3 — still lower than the 2020 average of 3.6%.
- Power Buyers earn the highest consumer satisfaction scores: On a 10-point scale, satisfaction among customers of Power Buyers increased from 9.3 in Q2 to 9.5 in Q3. However, for iBuyer clients, satisfaction dipped from 8.7 to 8.0, indicating service levels may have dropped some due to the skyrocketing number of properties they purchased in Q3.
The zavvie Seller Preferences Report is the first review of its kind, covering every selling solution, including iBuyer and Power Buyers, available to homeowners and buyers throughout the U.S. It examines offer strength, offer acceptance rates, service fees, market availability, buy boxes, average concessions and time to close for selling solution providers. The complete zavvie Seller Preferences Report is available for free at zavvie.com/seller-preferences.
Kevin Hawkins | zavvie