The way Americans buy and sell real estate is changing forever as new, innovative solutions are now available nationwide.
iBuyers provide sellers with instant offers. Power Buyers employ “cash offers” and “buy before you sell” bridge solutions for home buyers. Rent-to-own programs create new buyers and expand the marketplace. Presale renovation services help sellers maximize their profits. All these new problem-solvers are finding growing consumer demand and high acceptance.
In a new report, zavvie explores the new, “Modern Marketplace” for real estate, fully detailing the explosive growth of these businesses. The zavvie Modern Marketplace Report examines the changes in the real estate landscape throughout the U.S. during the first quarter of 2022.
A software technology company that provides real estate brokerages with a marketplace for buying and selling solutions via white-labeled platforms, zavvie is replacing its Seller Preferences Report with this new study, expanding the company’s insight into these innovative services.
“Not too long ago, options for home sellers and buyers were scarce,” noted Stefan Peterson, zavvie chief data officer and co-founder. “Sellers had one option: list on the open market. Buyers had two: pay cash or get a traditional mortgage loan. Today, the landscape has been modernized and is radically different,” he added.
Among the new study’s findings in Q1 2022:
- Power Buyers, now operating nationwide, are fundamentally changing how real estate works as they dramatically increase the consumer’s power as a homebuyer and are poised to make the “cash offer” and “buy before you sell” modern bridge the norm in real estate.
- From Q1 to Q3 2021, Power Buyer transactions grew 3X, then stabilized in the seasonally slower Q4 2021 and Q1 2022.
- The average sales price for Power Buyer purchases jumped between Q4 2021 and Q1 2022, as more high-priced “buy before you sell” transactions took place.
- Power Buyer offer acceptances remained in the 35% to 40% range, with fees ranging between 0%-3%.
- iBuyers managed to thrive despite headwinds of the strongest seller’s market on record. In Q1, iBuyer purchases were nearly 2x what they were in Q1 last year.
- iBuyers Opendoor and Offerpad accounted for 120,000 transactions last year, approximately 1.3% of the U.S. market.
- Institutional buyers such as Amherst, Invitation Homes, Tricon and First Key collectively purchased about 1 in 20 homes in the U.S. last year — 4X as many as iBuyers.
- The average iBuyer purchase price tapered during Q1, partly attributed to Zillow Offers winding down. Average offer amounts also dropped during Q1.
- Offer strength for iBuyers peaked at 104.1% of market value in Q2 2021 and was at 98.7% in Q1 2022.
- iBuyer service fees at Offerpad and Opendoor are 5% for Q1, comparable to real estate commissions, typically 5% to 6%.
- Seller concessions — the amount iBuyers charge sellers for “prep and repairs” — dropped to 2.9% in Q1 from 3.5% in Q4 2021.
- iBuyer offer acceptance rates continue to decline, down to 3.2% for Q1 from 5.7% in the first half of 2021.
- Listing Concierge – presale renovation services – activity skyrocketed. Enabling home sellers to pay for repairs at closing, their approach maximizes proceeds. The average renovation project is $42,000, as many cap projects; some Listing Concierge firms are completing renovations of $200,000 or more.
- Rent-to-Own or Homeowner Accelerator firms, which help consumers choose a house they want to live in, then rent it with an option to buy in the future, are setting new records for sales — and capital investment.
- Homeowner Accelerator Divvy Homes, for example, reported closing more homes last year than in the first four years since its founding in 2017.
- Homeowner Accelerator firms Divvy, HALO, and Landis have raised over $1.8 billion.
- Home Partners of America, the well-established category leader among Homeowners Accelerator firms with its “lease with the right to purchase” program, was acquired by Blackstone Group in June 2021 for $6 billion, placing it among the largest residential real estate firms of any type.
One of the most significant trends emerging from the zavvie report is the continued expansion of the Modern Marketplace, particularly among Power Buyers. Knock reported its transaction volume was up 307%. UpEquity saw year-over-year revenue growth surge to 500%. EasyKnock increased its customer base by 200% last year, and Homeward reported 375% growth in homes under contract.
Peterson notes that the common thread among all the Modern Marketplace choices is high customer satisfaction.
“Ultimately, the consumer will determine if a business is delivering good value,” he said. “The vast majority of consumers who have used one of the Modern Marketplace solutions are glad they did and would do it again.”
To view the complete zavvie Modern Marketplace Report visit zavvie.com/modern-marketplace-report.