Coronavirus has influenced every industry there is, and real estate is no difference. What no one expected, though, was that the restrictions put on business activity would influence the online market as well and that the so-called iBuyers would also have changes in their activities. In other words, even the online buyers stopped purchasing houses! Why are even the iBuyers not buying houses at the moment and how will this influence the market as a whole?
On 23rd March 2020, Zillow announced that they have paused all the services through their iBuying service, worrying how their profit will be hit during this lock-down. Other big online places that offer the services of home selling and buying, such as Redfin and Opendoor, have also stopped their home buying activities for the same reasons. Now that we have even iBuyers not buying, we can truly say that the impact of Covid19 cannot be fully predicted.
Why did this happen?
Coronavirus pandemic caused the whole world’s economy to crash, and the same happened to profit-dependent real estate market. iBuyers make money when they buy large amounts of real estate and later sell them at a slightly higher price. This is why the real estate market is rather illiquid; the profit doesn’t fluctuate every day and there aren’t many risks for it in the stable market, as they use debt that is provided by equity funds, banks and capital firms. However, in a market that isn’t as stable, such as is today, due to the recession that is happening, the real estate market is could be doomed to fail. What does this have to do with iBuyers not buying?
Usually, the higher the risk, the more profit can go to the iBuyers, as in such condition sellers are more likely to sell their houses for a lower price. iBuyers are insensitive to the unstable situations people can get themselves into, especially as they will buy your Milwaukee house without any human contact. However, when their entire company is at risk to be left without any money at all, we have iBuyers not buying any houses. As even they can’t allow themselves to risk not being able to gain any profit back.
Why is real estate market receiving damage?
First and foremost, real estate isn’t an essential business activity that is necessary for people to survive – at least when it comes to iBuyers who make profit from buying houses so they can sell them later. This means that, when crisis comes, no one is going to try to make a sale of their house unless it is urgent, and when people do have to sell their house fast or to they are in immediate need of cash, homeowners will opt to contact more reliant homebuyers, such as direct home buyers.
Another problem for iBuyers is the fear of house prices dropping during this time period. Just think about it. When you want to sell one house and the price goes down, you’ll lose several thousand of dollars. When you want to sell several dozens of houses… Well, the math is there.
What does this mean for homeowners?
With even iBuyers not buying houses, this can cause a great flood of foreclosures in the next several months. As as all the people that were hoping to sell their house fast to iBuyers, to prevent the court process, now can’t do that. Homeowners who simply want to sell their property out of desire to do so aren’t at loss, as they don’t have to make their sale quickly, but not everyone has that luxury.
Luckily for some homeowners, most of real estate investors, such as Sparks Property Investors LLC, are still willing to give you an offer to help you with selling your property. So you don’t need to worry about not being able to make a quick sale of your house.
What is the difference between iBuyers and investors?
Both iBuyers and real estate investors are a quick way for you to sell your property fast. To a lot of people iBuyers seem like a better option, as they can buy your house while you don’t have to worry about any kind of meetings. However, iBuyers are often times less reliable and there is no way for you to be certain who you are speaking to. At the same time, with big iBuyers not buying houses in these terrible times proves them to be more like machines than human, as they have proven themselves to be insensitive to people whose personal struggles have forced them into foreclosure. The decision to stop buying houses will have great impact on those who need to sell their house fast, and whose lenders are not taking the current situation with the worldwide pandemic into consideration.