Are Conveyancers Ready for the Rise of the iBuyer?
If you don’t already know what an iBuyer is, and how it affects the house-buying process, well pretty soon you’ll be hearing rather a lot about them.
The iBuyer is yet another American import hoping (with good reason) to do well on these shores.
But what do they actually do?
They are a blend of estate agent, property portal and property buyer all rolled in to one, slickly packaged online site. Think Foxtons meets Rightmove with a dash of House Buy Fast thrown in to the mix.
Sellers who visit their site have a choice – go on the market or apply for a quick cash offer there and then. The model is automated and values and offers are generated by clever use of tech – so it’s no surprise that the most recognisable brand in the US, Zillow was founded by former Microsoft and Expedia execs, Rich Barton and Lloyd Frink.
Sellers have a choice to wait and sell at market value or to take a quick offer albeit at a fee-free reduced price. For many, the convenience factor is just too tempting and below value offers are accepted.
Zillow is doing brisk business with turnover in excess of $1bn but questions are being asked about the suitability for the UK market.
Although it can be argued we share a common language, the property markets have even less in common. For starters, US agents charge around 6% versus 1.25% here so the potential to save big on commission is not so great. Automated valuations won’t be quite so simple on this side of the Atlantic either – UK housing stock is far more varied and individual than that found in the States – just think of how high their house numbers go compared to ours – many streets have hundreds of near identical houses.
That said, existing iBuyers in the UK, usually known as quick sale companies or cash buying firms have been successfully trading for many years already but usually rely on a more human element for valuations. Here they will pay 80 to 85% of full value. Some received negative press in 2013 but formation of The NAPB and adherence to a new Code of Conduct with the Property Ombudsman oversight has cleaned the sector up.
Many conveyancers are suspicious of these firms and are rightly protective of their clients when such a company is involved in a transaction. Once bought houses are usually ‘flipped’ to a standard buyer so again, alarm bells ring when the buyer’s representative spots an uplift in price and a short period of ownership.
But these buyers are already here and the sector accounts for over £1.5bn in turnover already.
If the big guns from Stateside hit the market hard, it won’t be long before there is an iBuyer in almost every chain.
You heard it here first folks!
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