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iBuying in Atlanta and Its Impact on the Real Estate Market
November 3, 2021

iBuying in Atlanta and Its Impact on the Real Estate Market

by The CE Shop Team

Controversy Surrounds iBuying Programs

In Hot-Lanta’s booming real estate market, housing prices are skyrocketing to new highs, with the median sales price increasing 15.8% year-over-year as of September 2021. Additionally, the number of homes selling above list price has increased 120%.

Atlanta REALTOR® Sherri Fortson Bailey, who has worked in the Atlanta market for over a decade, reflected on just how substantial this change in the market has been in reference to a project she recently completed. She sold a fixer-upper for $15,000 over the asking price, which was the 19th offer on the home.
“I’ve seen times when there were multiple offers on a home, but that meant like, three or four,” Bailey said in an interview with Atlanta Magazine.

With this heat hitting the Atlanta real estate market, concerns about iBuying programs’ impact on home values have hit an all-time high.

iBuying's Impact on Atlanta's Real Estate Market

Zillow’s Effect on the U.S. Real Estate Market

Popular MLS service Zillow launched their iBuyer program, Zillow Offers, in 2018, and Atlanta was the third real estate market the program entered. Multi-billion-dollar companies like Zillow have the tech resources to purchase houses quickly via iBuying, which has gained traction in recent years.

These iBuyer programs are targeting affordable homes with the average home price being $320,000, which is why cities like Atlanta are seeing high rates of home purchases. For those that aren’t familiar with the process of iBuying, homeowners disclose information about their property to an iBuyer program, which uses an algorithm to estimate the value of the home and generate an offer in 24 hours or less.

While the convenience of iBuying appeals to many sellers, it comes at a cost.

iBuyers cost home sellers about 13% - 15% of the home’s sale price, while an agent costs 5%-7%, according to a 2019 research report from the real estate data firm Collateral Analytics. In a 2018 Forbes article, Zillow Chief Marketing Officer Jeremy Wacksman admitted that “the discount the seller may take [from selling with Zillow] could be anywhere between 10-15% or even higher. It depends on the home, market conditions, and other factors. For some people it’s worth taking less, not worrying if the sale will close and being able to move quickly."

In other words, if a home is worth $300,000 and Zillow thinks the property is worthwhile, they could potentially charge $30,000-$45,000 for their help in getting it sold.

Now, it should be said that while homebuyers and real estate agents are concerned, the iBuying market only accounts for 1% of residential sales. Compare this to the $36 trillion residential marketand iBuying’s market share seems insignificant — even though the impact is very real.

How Has iBuying Impacted Atlanta’s Real Estate Market?

On a national scale, the iBuying market doesn’t raise concerns, but when you take a closer look at key markets like Atlanta, the iBuying market accounts for 5% or more of residential transactions. In Q1 of 2021, iBuyer purchases accounted for 968 home purchases, and they accounted for 1,987 home purchases in Q2 of 2021.

Beyond iBuying’s efforts, investment firms like BlackRock have also impacted the local real estate market, purchasing 12,000 homes in Atlanta alone. In a real estate market like Atlanta’s, where affordable housing is nearly impossible to find, companies consistently snapping up properties makes it harder for homebuyers to compete.

Atlanta’s housing market is expected to see the country’s steepest rise in home prices in the future. Forecasts predict an 18% increase in home prices across the country in the next year, which could discourage homebuyers from trying to buy property.

This increase can be curbed if new development of affordable housing can be completed over the next year, but that’s a big “if.” In Atlanta, new mayor candidates continue to push and promise plans of developing more affordable housing, but so far these efforts haven’t materialized.

How has iBuying impacted your market? Are you a fan of the programs, or are you concerned about their growing market share? Let us know in the comments below!

Zillow announced on 11/2 that they're shutting down their iBuying program, Zillow Offers, citing that unpredictability in forecasting home prices exceeded what the company anticipated and scaling Zillow Offers would result in too much volatility. As for other iBuying programs, we'll have to see what happens next.

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