Corporate buyers, known as iBuyers, such as Opendoor and Zillow, have engaged in purchasing homes at discounted prices, making minor to moderate renovations, and reselling them. However, this model has often led to significant financial losses, with many properties selling for less than their purchase price.
Financial Performance of iBuyers:
- Zillow: In 2021, Zillow’s home-flipping division, Zillow Offers, incurred losses exceeding $880 million, contributing to the company’s overall net loss of nearly $530 million. On average, Zillow lost about $25,000 on each home sold before accounting for interest expenses.
- Opendoor: In 2022, Opendoor reported a net loss of $1.4 billion, a substantial increase from its $662 million loss in 2021. In the fourth quarter of 2022, Opendoor sold approximately 7,500 homes at an average loss of $28,000 per property, a stark contrast to the average gain of $16,000 per sale in the same quarter of the previous year.
Impact on Market Data:
The activities of iBuyers can distort real estate market data. Their rapid buying and selling practices, often at a loss, can influence local market statistics, potentially leading to misinterpretations of property values and market health. This distortion underscores the importance for individual sellers and buyers to consult local real estate professionals who can provide accurate, up-to-date market analyses tailored to specific neighborhoods.
Conclusion:
While iBuyers offer convenience through quick transactions, their business models have frequently resulted in selling homes for less than the purchase price, leading to significant financial losses. These practices can skew market data, affecting perceptions of property values. Therefore, engaging with local real estate experts is crucial to navigate the complexities of the housing market effectively.
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Article Sources:
Barron’s / Investopedia