IBUYERS INPHOENIX Phoenix has been home to iBuyers like Zillow Offers, Knock, Opendoor, and Offerpad since the trend started. These Wall Street tech behemoths offer consumers fast cash, as-is, and flexible closings on homes so the consumer can move on with life. They are spending millions making investor offers go mainstream. And Phoenix has been ground zero as they compete for homes against Main Street investors that often com- plain they increase prices on digital marketing and significantly compress profit margins. In 2020, the median cash-of- fers that these ibuyers are making is $250,000. With FHA limits for single-family homes at $331,760, this range is affordable and well supported by the area’s median in- come. While the ibuyers took a short breather during the early months of Covid, their quick return will ensure they continue to impact local inves- tors competing in the same price point or “buy box.” iBuyers and Main Street real estate investors are benefitting from sellers seeking all-cash transactions with little contact from potential

Source: PropertyRadar via public records.

the process of launching their branded versions of ibuy- ing. The strategy appears to be the as-is-fast-close-all- cash transaction blended with the hyperlocal knowledge of an agent. This strategy could prove to be a potent one. Then again, local agents have always had access to cash offers via local investors without the liability of taking on the transaction internally. With Phoenix being a hotbed of ibuyer activity, local investors need to decide how to play the game against competitors that don’t currently have to make a profit or are making money in other facets of the business. The most important place to start is understanding the local “Buy Box” of ibuyers. For the Phoenix area, ibuyers in 2020 have been concentrating their activity in Valley View, Sunrise Terrace, and South Phoenix. ibuyers in 2020 are purchasing on average: • 78 percent single-family homes

buyers during the pandemic. What ibuyers have that Main Street doesn’t is a fully integrated pipeline of services like closings, mortgages, marketing, and sales. iBuyers can make aggressive offers because they are making money at several points of a transaction. For those flipping in markets like Phoenix, you’re probably wondering if they are making money. Zillow is the only publically traded ibuyer that has released much information on its ibuyer program. In the most recent shareholder letter, Zillow said the average purchase price was $284,975, with $15,848 in renovation costs. The average loss per home was $6,939. Here’s a disclosure from the same letter: “Zillow Offers Could Fail to Achieve Expected Results and Cause Harm to Our Financial Results, Operations, and Reputation.” Mega Realtor brands like Keller Williams are also in


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