Is Cash Really King? ‘Keepin’ It Real’ Discusses iBuyers and Real Estate Investors

Anyone with a finger on the pulse of real estate knows homes are selling for over-asking price in record time these days. First-time homebuyers are being turned down in favor of cash offers. Investors are swooping in on fixer-upper properties. This begs the question: What does this all mean?

In a brand-new episode of “Keepin’ It Real with Nick Bailey,” expert panelists Tyler Hickson, Chief Growth and Strategy Officer with Opendoor, and Rob Hahn, Managing Partner of 7DS Associates and founder of popular blog Notorious R.O.B., joined RE/MAX President Nick Bailey. The trio discussed current market trends, iBuying (which accounts for only 1% of total real estate transactions), the integral role of real estate agents, and where it all leaves homebuyers and sellers now and in the future.

How are iBuyers currently affecting U.S. housing markets?

According to a statement from the U.S. government, one out of every six homes purchased so far in 2021 has been acquired by investors rather than immediate buyers.

An iBuyer – or an Instant Buyer – uses AI technology to purchase a home from the seller and list it down the road for potential buyers.

Hickson said that iBuyers digitize the real estate transaction and eliminate the seller’s contingency of securing a buyer in order to move. But iBuyers are not a new phenomenon, Bailey reminded the audience, as they are essentially cash buyers with a modern twist.

“The big difference is that historically, your local cash buyer [and] real estate investor was going to purchase 60 to 70 cents on the dollar and look to then invest in that home [and] maximize the sale price on each individual unit they touch. With Opendoor, our job really is to meet the seller where they are at the point [that] they’re ready to transact,” Hickman explained.

Who loses when iBuyers win transactions?

iBuyers are becoming increasingly more controversial in today’s market because, alongside institutional investors, they’re beating out first-time homebuyers as well as those with FHA or VA loans. The influx of cash offers is making the barrier to entry in the market nearly impossible for some.

“Cash buyers have such an advantage right now,” Hahn said.

When first-time homebuyers are competing against Wall Street-backed hedge funds, Hahn said, they’re bound to lose.

Are iBuyers at fault for sellers being unable to turn around and buy after they sell?

“I think it’s wrong to blame iBuyers obviously because they’re just market makers. But at the same time, [my] biggest concern right now is that the average buyer can’t compete,” Hahn said about current market conditions.

Hahn also strongly believes that inflation is playing a larger role in the home-pricing disparity than home prices simply rising amid a frenzied seller’s market.

Tyler and Bailey both agree that alongside the evolution of technology and despite iBuyer platforms, the real estate agent will remain integral.

“The agent is going to continue to be the center of the transaction for a long time. iBuying nationally, [as Bailey] said, is 1% of overall transactions. Well, even a huge percentage of that is agent-facilitated transactions with iBuyers. So, this is not some existential threat to the agent community,” he assured.

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