Tech companies are keen to acquire homes in North Carolina quickly as âinstant buyâ is coming to new communities.
What is iBuying? Instant buying offers sellers a new way to sell homes.
Real estate analysts say it’s safe to assume that buying an “instant” home is here to stay.
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In early September, Josh Musselwhite was ready for a new chapter in his life.
West North Carolina executive chef Musselwhite, 46, was considering moving to the Florida Keys where a friend had a restaurant for him. But first, he had to sell his ranch-style home in the unincorporated community of East Flat Rock, about 25 miles south of Asheville.
Musselwhite believed buyers would be impatient and plentiful in this market, but as a single dad with a full-time job he didn’t want to go through the typical door-to-door selling headache of finding a real estate agent, to stage his house, to have it photographed. , welcome visitors to open houses, negotiate and wait for a bank to approve a potential buyer’s mortgage.
He found an alternative.
Musselwhite received a flyer from Opendoor, a real estate technology company based in San Francisco, which stated that she wanted to buy her home through a process called iBuying, or instant buy.
After being reassured by his younger, more tech-savvy brothers, Musselwhite agreed to give it a try.
He filled out an online questionnaire and immediately received a preliminary offer for an amount that far exceeded the $ 177,000 he paid for the property in 2014. A few days later on Zoom, he offered to representatives of Opendoor a virtual tour of every room in his house. After a quick external inspection, which took place during Musselwhite’s absence, Opendoor formalized its offer.
On September 30, Musselwhite sold his house in Opendoor for $ 277,000. To date, the company advertises the property for $ 315,000.
If Musselwhite left money on the table by not selling his house the traditional way, he doesn’t mind.
âThe simplicity was great,â he said from Key West. âI barely had to do anything. “
Significant presence – and impact of iBuying
More and more North Carolinians are trying “iBuying”, and some believe the trend will dramatically change the way homes are sold.
This year alone, instant buying companies have moved to new areas of the state, including Fayetteville, Piedmont and western North Carolina.
Even after financial losses pushed online real estate giant Zillow to recently ax its instant buy services, companies like Opendoor and Offerpad continue to acquire homes by making instant buy offers.
Today, iBuying accounts for about 1% of home sales nationwide, but Charlotte and Raleigh are two of the county’s strongest local markets. According to zillow search, at least 5% of home purchases in these two cities were made through iBuying in the second quarter of this year.
Just west of Charlotte in Gaston County, Opendoor, the country’s largest iBuyer, holds 9% of active real estate listings according to data compiled by local real estate agent Chip Wilson.
âIt’s important for an owner,â Wilson said.
IBuyers aim to transform homes on a large scale, using internal algorithms to identify the best prices at which to buy and sell. Before reselling, companies will often do minor repairs to the property. But the margins for returning homes can be slim, and iBuyers also make money from transaction fees.
According to its latest annual filings with the Federal Securities and Exchange Commission, Opendoor is reselling homes to both individual buyers and institutional investors, including large rental companies.
âInventory is definitely down for the average buyer because iBuyers are in the middle,â Wilson said. Tax records show that Opendoor currently owns 92 properties in Gaston, and Wilson has started working with the company to sell their properties.
Lower inventory means home hunters face more competition and higher prices. And because instant buy forgoes loans, individual buyers may feel pressured to bid in cash to stay competitive, Wilson explained.
Still, he was quick to point out low stocks and all-cash offers would still be aspects of today’s real estate market, even without an instant purchase.
“Another great thing is taking over”
While still focused around Raleigh and Charlotte, instant shopping is starting to spread to new areas of the state.
This year, Opendoor and Offerpad traveled further to Piedmont, the Fayetteville area and the mountains of western North Carolina. In February, Opendoor began making offers to owners of Asheville, and the company also began securing properties in Henderson (like Josh Musselwhite’s) and Alamance County.
In Cumberland County, Arizona-based Offerpad owns 13 properties, all acquired this year.
âIt all happened in the last six to nine months,â said Steve Dozier, a real estate agent in Henderson County, western North Carolina. In the past few months alone, Dozier has received at least four emails from Opendoor asking if he is considering selling his house.
Instant buy’s footprint in these new markets has so far been minor, but many expect the model to flourish.
âA lot of (buying a home) happens this way,â said Clarissa Marshall, Asheville real estate agent. “I think there is a certain ease in (iBuying) that gives people peace of mind.”
“It’s hard to see how it won’t develop here,” said Sondra Dorn, an Asheville resident who sold her Weaverville home to Opendoor in October.
An artist living with multiple sclerosis, Dorn, 55, found the iBuying process “very, very easy”. Maybe, she thinks, she could have made more money selling it the traditional way, but the convenience was well worth a premium.
Despite being a satisfied customer herself, Dorn sees something dismal about iBuying: an example of more big tech companies threatening an industry traditionally in person.
âIt’s a bit like Amazon or Walmart taking over,â she said. âI have friends who are realtors. I always have (iBuying), but it’s just another big thing taking over, killing people’s jobs.
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If you can’t beat them
While a typical home sale with a loan can take anywhere from 45 to 60 days, realtor Chip Wilson saw iBuying deals close in two weeks.
This quick turnaround is enough to persuade some not to put their homes on the open market, a move that Wilson says may mean missing out on higher bids.
âIt’s just pure economics,â he explained. “More competition and demand, the price will go up.”
But Wilson is not opposed to iBuying.
Real estate agent for 11 years, he has had a reference relationship with Opendoor, Gaston’s biggest instant buyer. Although Opendoor pays realtors like himself below industry standard commissions, Wilson said he liked that more of the work was virtual and that there were plenty of properties for sale.
âThere are a lot of agents who wouldn’t touch an Opendoor deal with a 10ft post, but we still have to adapt,â he said. “I took the ‘if you can’t lick them, join them’ approach.”
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IBuying’s future plans in NC
$ 381 million. This is the amount that Zillow CEO Rich Barton told investors that the company’s iBuying department, Zillow Offers, lost in the third quarter of 2021.
Earlier this month, Barton recognized the company had overpaid for properties and that Zillow would be leaving the instant buy business after selling the properties it already owned.
The news made many wonder if the whole iBuying trend was in jeopardy.
âIf I were one of these companies, I might just step back and slow down a bit to understand why Zillow has strayed from it,â said real estate agent Steve Dozier of Henderson.
But the top remaining iBuyers in North Carolina say they’re not put off by Zillow’s announcement.
âOfferpad does not adjust our operations or our iBuyer business,â said company spokesperson David Stephan. âWe are a real estate technology company with a deep understanding of the cyclical nature of real estate. “
Offerpad entered North Carolina in 2017, first operating around Charlotte before expanding to Raleigh. She has since purchased properties in the rest of the Research Triangle and the Piedmont Triad, with Stephan saying the company intends to “continue to develop and expand our presence in new and existing markets in 2022”.
Jon Enberg, regional general manager of Opendoor in North Carolina, did not detail the company’s future plans in the state, but suggested it would continue to compete with the traditional in-person door-to-door model. . Enberg called this model “outdated”.
Brian Gordon is a statewide reporter with the USA Today Network in North Carolina. Contact him at [email protected] or on Twitter @skyoutbriout.