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iBuying in Gator-Infested Waters: The Impact on Florida Real Estate
November 3, 2021

iBuying in Gator-Infested Waters: The Impact on Florida Real Estate

by The CE Shop Team

iBuying Programs Continue to Raise Concerns

Zillow and other popular iBuyer programs such as Redfin, Offerpad, and Opendoor have come under pressure recently after real estate agent Sean Gotcher’s TikTok went viral. The agent called the companies out for allegedly manipulating the real estate market, effectively squashing the American dream of homeownership.

@seangotcher

##housing

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Zillow responded in an email to Inman and said the video represented “misinformation and falsehoods” and that its iBuying operation is based on buying and selling houses at market rate.

But what’s the truth?

What Is Zillow Doing?

Zillow has been purchasing homes throughout the U.S. in what can only be described as an “arms race” against other iBuyer sites like Redfin, Opendoor, and investment firms like BlackRock. These iBuyer programs are targeting affordable homes at an average price point of $320,000. The typical value of a home in Tampa is $322,000, which is why cities like Tampa Bay are seeing high rates of iBuying home purchases. 

Zillow told shareholders that it has purchased 3,805 homes through its iBuyer program, Zillow Offers, in the second quarter of this year, a significant increase compared to previous years.

Zillow Offers started in 2019 and has since been buying and reselling thousands of homes in major real estate markets throughout the country. Many real estate agents are not thrilled, to say the least.

The current conspiracy is that Zillow is mimicking the “Amazon Model” and gobbling up homes to gain a large chunk of market share, allowing them to manipulate home prices to their advantage. 

While buying up that many homes (allegedly overpaying by thousands) and selling without large profit gains sounds counterintuitive, the strategy is similar to how Amazon operates.
Homebuyers and real estate agents alike have been voicing their concerns on social media, stating that they cannot compete against multi-billion-dollar corporations.

As of last week, Zillow announced that they will be halting their iBuying programs, citing they have too many homes and do not have enough “operational capacity” to efficiently renovate and sell the homes. For many, this move confirms their suspicions of the company’s operations and dubious intent.

This change also comes after the company was slapped with an antitrust lawsuit in early 2021 over allegations that the website violates antitrust laws by steering customers to home listings from a subset of agents that are working for the company’s brokerage.

iBuying's Impact on Florida's Real Estate Market

What Does This Mean for the U.S. Real Estate Market?

While iBuyer programs account for only 1% of residential transactions, a small percentage compared to the $36 trillion U.S. residential real estate market, the models projected to grow could be a real issue if they hold a more significant market share in the future. 

“If they reach say 20% of the national market, the kind of allegations people voice on social media could become worth considering,” Garrett Camfferman, president of the Tampa Tenants Union, said in an interview with the Tampa Bay Times.

That being said, time will ultimately tell the story of iBuying’s impact on the real estate market. As homebuying becomes increasingly harder, change will inevitably occur.

How Does Zillow Impact Florida’s Real Estate Market?

This digital arms race has been playing out in South Florida, where the real estate market has been on fire for the past two years. This booming seller’s market has allowed iBuyers to increase their resales to an average of 9.6% higher than the purchase price, according to Zillow. Beyond the sale price, iBuyers typically make their money on the fees involved in the transaction. 

Zillow is the most recognizable company in this race, but it also includes Redfin, Offerpad, and Opendoor. These companies have purchased 2,500 homes in the Tampa Bay area alone between 2019 and June 2021. As of September 2021, there are just under 5,000 homes listed in the Tampa Bay real estate market. 

Camfferman said he’s glad to see more people expressing skepticism about big corporations’ role in driving up housing costs.

“It’s something universal. In Tampa Bay, everyone is concerned about housing,” he said. “If [that TikTok] didn’t resonate with people across the U.S., it wouldn’t have gone viral.”

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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