iBuying companies are experiencing a slump in sales during a time when many thought the opposite might happen, as they provide a contactless way to sell a home.
Opendoor, the biggest iBuying company, has seen its revenue fall by almost half in the past year, and said it doesn’t expect its business to recover properly until mid-2022, according to the Wall Street Journal.
When the COVID-19 pandemic emerged last spring, most iBuyers, which buy and resell homes electronically, halted their businesses. By summer, they had come back online and resumed making instant cash offers to people who wanted to bypass the traditional homeselling process.
But it seems the high demand for homes from a flood of buyers enticed by the pandemic into making a move has worked against iBuyers. Selling on the open market is more appealing as the high demand means most can fetch good prices for their homes, and they don’t have to wait long to do so. Most iBuyers offer prices that are below market value with the promise of a fast sale, but that is no longer such an enticing prospect.
Opendoor, which launched its business in 2014, is still the leader in the iBuying space, but it is facing challenges from numerous competitors, such as RedfinNow and Zillow Offers. While the company's revenue surged 158% to $4.7 billion in 2019, Opendoor cut more than a third of its workforce in April 2020 due to economic hardship during the pandemic.
Opendoor has responded by expanding its business model to include escrow, title and other services.
iBuyers have managed to sell a large number of their home portfolios during the pandemic. Opendoor said it sold 80% of its housing stock in the first six months of last year. But that has meant rivals have been able to gain a bigger market share.
Still, Opendoor insists that other iBuyers aren’t its primary competitors, seeing traditional brokerages as its main rivals instead.