Alternative buying and selling programs continue to grow
While iBuyers struggled, Power Buyers and presale renovation companies made big strides in 2022 as consumers looked for options in a challenging market.
- The Modern Marketplace report from zavvie finds that non-traditional buying and selling services appeal to consumers and are gaining market share.
- Clear messaging and savvy marketing will be essential for companies that want to expand their presence in the space.
- The future of iBuying is unclear, but one industry expert believes there is still a demand for it, even when the market is challenging.
It's been a tough year for iBuyers and many other tech-enabled real estate services. But despite those challenges, new companies are continuing to crop up as more consumers seek alternative ways to buy and sell homes.
That could be a significant economic driver going forward.
That's one conclusion drawn from a new report from proptech software company zavvie. The Modern Marketplace Report looks at industry-wide trends including iBuying, Power Buyers, listing concierges and homeownership accelerators.
Among the companies supporting those areas, dubbed the Modern Marketplace, are Divvy, Opendoor, Offerpad, Knock and Curbio, as well as traditional brokerages offering select services, such as Compass Concierge or RealVitalize, owned by Anywhere.
Power Buyers give ordinary homebuyers a competitive advantage by providing cash upfront, enabling buyers to present an all-cash offer. They may also offer a "Buy Before You Sell" option. Power Buyer companies grew 33% in 2022 despite the down market, according to the report.
On the selling side, the number of listing concierge presale renovation companies or services, which manage minor home improvements to improve resale value with no upfront cost to sellers, jumped 490%.
iBuying makes small gain in market share despite big losses
While iBuyers struggled mightily in the second half of 2022, the report found that the sector was still able to eke out a slight gain in market share, rising from 2.59% in 2022 to 2.67% at the beginning of 2023. With Redfin, Zillow and Anywhere exiting the iBuying market over the past year — and layoffs and losses at Offerpad and Opendoor — there are fewer big players in the market, and those that remain have faced challenges.
Despite the setbacks in iBuying, the spectrum of alternative programs for buyers and sellers are particularly important in 2023 as consumers deal with the shifting market. These types of programs can offer agents a way to help customers get unstuck, said Stefan Peterson, zavvie's chief data officer and co-founder.
Alternative programs 'vital tools' in agent toolkits
"It's clear that the popularity of these new solutions for home sellers and buyers continues to grow," Peterson said. "Real estate brokers and agents know that in today's market, to win over the customer, they must have these vital tools in their kit — or they will lose out to a competitor who does."
The iBuying component is the most difficult one to predict, Peterson said, because of macro factors like interest rates and consumer sentiment. It will also depend on what strategies the iBuyers try to pursue.
"Having said that, I think iBuying activity is most likely to track with the overall real estate market transaction volume," Peterson said in an email. "There are a couple points in favor of the iBuyers being able to thrive in a real estate market where homes aren't selling quickly. First, the iBuyer value prop for sellers actually becomes stronger when it's harder to sell a home, and second, there is no doubt that consumers love the idea of selling to a company rather than on the open market — the convenience and certainty are hugely appealing. That's not going to change."
'Modern Marketplace' solutions can help agents unlock deals
Peterson said that while many of these alternatives are catching on with consumers, companies will have to work on their messaging and marketing to continue growing.
"Instant cash offers are easy for consumers and agents to understand, and the iBuyers already spent many millions creating consumer acceptance of this selling solution," Peterson said. "But Power Buying, Listings Concierge and Homeownership Accelerators are definitely not well understood by most real estate practitioners, and have low consumer awareness," he said.
"That's why agents who have the ability to connect their clients with these Modern Marketplace solutions have a big advantage, since these solutions can unlock deals that otherwise would not happen."
Peterson notes that the common thread among all the Modern Marketplace choices is high customer satisfaction.
"Ultimately, the consumer will determine if a business is delivering good value," he said. "The vast majority of consumers who have used one of the Modern Marketplace solutions are glad they did and would do it again."