According to a new report by zavvie, a real estate software company, Americans are looking for new ways of buying and selling houses. The company offers a white-label platform that allows sellers to compare offers from iBuyers. The report, “Modern Marketplace Report: 2022 year in Review”, tracks the growth of these business strategies as well as their impact on real-estate last year.
According to the report, modern marketplace solutions include open market buying with traditional mortgage and “cash offer” (power buy) homeownership accelerators for those who are unable to qualify for traditional mortgages. Open market listings, power buyer (buy before you sell), and instant sale for iBuyers or investors are all options for buying.
According to zavvie the power buyer model, whereby you buy houses and then sell them, increased by 33% last yr compared to the total U.S. transactions which fell by 38%. In Q1 2022, power buyer purchases reached $683,000. This was nearly twice the national average home value of $348,000. However, this number dropped to $500,000 later in 2018.
The demand for concierge presale renovation companies has also increased. These companies saw an average growth of 4920% in 2022. According to the report, the average project investment of these firms was $47,000 with a return on investment (ROI), of 100%.
iBuyers purchased 53% more homes than the same quarter 2021 in Q1 2022. According to data, however, the increase in sales slowed down in Q4 2022.
Despite this, zavvie’s Modern Marketplace Index shows a steady increase over the past two years in new ways of homebuying and selling. It rose from 2.59% last January to 2.67% by January 2023.
Nearly 40% of all requests processed by Zavvie were for instant cash deals.
Stefan Peterson, zavvie’s co-founder, and chief data officer, stated that these solutions may help agents create new inventory.
Peterson stated that agents and real estate brokers know that to win customers in today’s market they must have these essential tools in their toolbox — or they will lose to a competitor who has them.”
Nearly half (49.8%), of the properties that received modern market offers were completed. However, only 2.7% of all real property transactions used modern marketplace solutions.
Despite this data, many businesses operating in the iBuying sector are experiencing financial difficulties. Redfin shut down its iBuyer operations last November 2022. Offerpad and Opendoor also suffered financial losses last fiscal year. Opendoor, whose CEO Eric Wu resigned last month and has been focusing on offloading inventory since then.
The report also shows that iBuyers experienced a drop in share prices of about 90% last year while institutional buyers, including single-family residence investors Amherst and Invitation Homes, Mynd, and Bridgetower paused or reduced acquisitions.
According to the report, Amherst and Invitation Homes, Tricon, Tricon, and First Key purchased three times as many homes than iBuyers. They also limited their purchases in the second half 2022.
Flyhomes and Homeward, Orchard’s power buyers, had to conduct layoffs. Ribbon, a power buying firm, suspended all operations until spring 2023 after it laid off 170 employees or 85% of its staff.
Rent-to-own or homeownership accelerator solutions grew in 2022. They are now available in 36 US states. In 2022, homeownership accelerator firms increased their transactions by 15%, while nationwide real estate transactions fell by 38%.
Companies that thrive
According to the report EasyKnock, which allows homeowners access to their equity in their homes, increased its revenue by 89% last fiscal year compared with 2021. It was present in all 50 states by 2022 and completed transactions in 47 of them.
UpEquity also launched in 10 states and increased its power buying business four times.
Curbio, a listing concierge service, raised $90M in total funding. Curbio launched in 11 additional markets.
Peterson stated that “Ultimately, it is the consumer who will decide if a company is delivering good value.” “The vast majority (over 90%) of consumers who have used Modern Marketplace solutions are happy they did so and would do it again.”
zavvie currently operates in 47 states and has more than 65,000 agents. It estimates that modern market solutions can now be found in nearly every state.