What does iBuyer stand for?
(Instant BUYER) A real estate company that buys homes from sellers who sign up online. After receiving a description of the property, the iBuyer makes an offer to the seller within a couple of days…
Metropolitan Indianapolis got hit with iBuyers this year.
Their business plan demands that market prices will rise. They will buy your house close to market value, then turn around and sell it at above-market values. This works in the current seller’s market because prices are rising so fast that when they sell it, their above-market price will be normal market value by then.
The advantage? It works in some cases. If the owner got transferred and needed to sell their house quickly or if their company paid for the costs of the sale. Maybe it is an estate and the beneficiaries were more concerned about getting rid of it quickly and not so much about the money.
The disadvantages? Money! You will be charged 2 to 3 times what a traditional real estate sale would cost. You won’t pay commission fees BUT you may pay experience fees, repair fees, a 5% service fee, and market risk or holding fee. In total, these fees can add up to between 10 to 15 percent of the selling price for the seller.
This works in the current market. What happens when the market flattens out or drops? It won’t work. The iBuyer can’t make money when the market is flat or dropping. Their whole business plan is based on prices rising.
It will be interesting to see what happens in the coming year.
Typically price reductions are made when the house for sale is not sold in a market-average amount of time. Twenty years ago the average amount of time on the market was close to 90 days. Today the average is around 10 days. During this “seller’s market” there has been no need to reduce prices since the demand is much greater than the supply and because prices are rising. You can see this in the chart;
This year I think we have hit bottom with price reductions. With mortgage rates around 6 percent, buyers are dropping out of the market because now they can not afford to get a loan for the average-priced house. That usually means that sellers might lower the price of their house in order to sell.
It is interesting to see what has happened this year;
Price reductions are just one of many indicators that Realtors look for to forecast a changing market.
Please note – Information is taken from MIBOR’s (Metropolitan Indianapolis Board of Realtors) BLC (Broker Listing Cooperative). Information Deemed Reliable, but Not Guaranteed