Editor’s note: This is the first of a package of stories examining how the COVID-19 pandemic has affected residential real estate markets in the Triangle and Charlotte.
RALEIGH – So how are the iBuyers – the “instant buyers” utilizing the lastest technology – handling business in the Triangle – as the COVID-19 drives up employment and has made home selling a “virtual” affair with online showings?
Well, they took hits just like most other businesses. But the comeback has begun, especially in places like the Research Triangle region.
“Do you know what makes Raleigh a great market for iBuyers?” asked Linda Craft, CEO of Linda Craft & Team REALTORS in Raleigh. “An area vibrant with relocations and growth, a price range where housing stock is still in an affordable range, and the main thing, the product, or the houses that make it easy for a computer algorithm to determine market price.”
These iBuyers use proprietary algorithms to make instant, all-cash offers to home sellers and tend to feature the certainty of closing at a specific price and at a seller-chosen date as the primary benefits in selecting this method of real estate transaction. And firms such as Mark Spain Realty also offer to buy homes without going through a traditional listing.
John Makarewicz, president of Mark Spain Real Estate which specializes in markets in the Southeast, says that while iBuyers may be a great option for some sellers, “we do not see them as being a major disrupter.”
But in both Charlotte and the Triangle, iBuying is on the rise. Or, at least it was prior to the global spread of the novel coronavirus, COVID-19.
A February 2020 Redfin report found that Raleigh had the highest iBuyer market share in 2019, with tech-enabled companies purchasing 7.3 percent of all homes listed on a multiple listing service (MLS). This represented a 3.4 percent year-over-year growth in market share, found the report.
Of all 21 real estate markets studied in the report, Charlotte ranked third, with 5.2 percent of all homes sold to an active iBuyer company, and Durham was sixth with 4.8 percent. Nationally, 1 percent of all homes were sold to an iBuyer.
However, the iBuyers business hasn’t been all roses. Zillow Offers entered the real estate market in Charlotte in late 2018 and then launched the program in the Triangle in early 2019 but recently paused its efforts.
In both regions, Zillow entered a competitive real estate market, with tech-enabled companies like Opendoor, Redfin and Offerpad all operational.
Zillow now is providing a resource page for potential and actual home buyers and sellers.
“Zillow is adapting by accelerating tech innovation to make essential digital tools available to buyers, sellers, renters, landlords, property managers and real estate agents,” said Amanda Pendleton, Zillow spokesperson. “These tools are allowing people to transact safely right now without in-person contact.”
Opendoor paused their program the week before, announcing their decision in a blog post.
“Though major parts of our experience are virtual and self-service, there are still elements that require real-world interaction from our teammates, including home assessments and home repairs,” wrote CEO and co-founder Eric Wu at the time. “Thus, we made the decision last week to prioritize the safety of our customers and teammates by temporarily pausing new offers.”
In 2019, the company acquired 1,379 homes in the Triangle, representing 4.3 percent of the sales volume in the Triangle, worth about $328 million. In Charlotte, the company purchased 1,315 homes, worth about $297 million, representing 5.2 percent of the region’s home sales.
Yet the seven-year-old startup issued layoffs, announcing on April 15, with roughly 35 percent of their workforce—600 employees—impacted. According to TechCrunch, who received a statement from Wu, the co-founder said the move was “necessary to ensure that we can continue to deliver on our mission and build the experience consumers deserve.”
Opendoor announced last week that it has adapted to an entirely virtual process, which Wu calls “a safe, on-demand, and fully-digital experience to buy and sell a home.” After rolling out in Phoenix, the programs roll out in Raleigh this week and will be available in Charlotte and other markets in which Opendoor operates later in the year.
“Selling directly to Opendoor is now an entirely contact-free, fully-digital experience for our customers,” said company spokesperson Mackenna Scripps. “We’re now able to conduct virtual home assessments and have updated our home repair protocols to ensure social distancing.”
Their “home reserve” program is limited to single-family homes or townhomes with a purchase price of $100,000–750,000 that sit on lots outside of flood zones less than two acres in size, and buyers must have pre-approval from a qualified lender that is valid for 120 days, confirmed Scripps, and buyers can purchase any home, not just homes owned by Opendoor.
“We believe this is the future of how people will buy and sell a home,” wrote Wu.
Zillow now says it is coming back.
“Zillow is preparing to safely re-open the Zillow Offers program in Raleigh and Charlotte in the coming weeks,” the company says.