iBuyers: good or bad?
So, a couple of months ago I realized that I’ve really changed my view on iBuyers.
What is an iBuyer?
Well, an iBuyer, or “instant buyer,” is a real estate company that uses algorithms and technology to buy and resell homes quickly.
They typically make cash offers in as little as 24 hours, without the seller having to deal with staging and showing the home.
People can also buy a home from an iBuyer.
The companies’ websites or apps let homebuyers see available properties, schedule tours and request info to get started.
Closing can happen faster than with a traditional sale, because buyers don’t have to accommodate a traditional seller’s timeline.
OK, iBuyer 101 is over…
But, here’s why I changed my view about these companies…
So, I was in Tampa for a 3-day day meeting that I go to twice a year, and there were a couple of hedge fund managers there — iBuyer-type leaders in that industry. There was a panel discussion, and there was a fellow on the panel who runs a very large multistate construction company.
And there were a couple of things that came to light during that panel that I thought were really interesting…
I think it’s clear that iBuyers are out there, and they’re not just in the major metros — they’re pushing their way into some of the tertiary markets, like Cleveland or Rochester, New York.
They’re pushing their way into some of those markets and they’re buying and holding. In most cases, some are buying and rehabbing.
Well, I talk to people who are small investors, like we are, and they’ll present themselves as very bothered by this iBuyer phenomenon. But a couple of things that I’ve always said and thought were deeply confirmed, giving me even deeper conviction at this meeting with those iBuyers.
Advantages of iBuyers in 2025
#1. They’re buying on extremely thin margins.
So, the minute the market becomes uncertain, it’s going to get dicey. At best, they’re effectively buying on a futures market.
So in some cases, they’re paying what they believe is the future value, which is driving prices up through a sort of “Wall Street mindset” coming to residential real estate, where they’re effectively buying calls.
What that’s doing is it’s driving prices up, which is good if we’re buying and holding or if we have properties we hold. And it’s also good if we’re buying and reselling because it gives us more margin. Frankly, that margin widening every day, but it also gives us an incredibly hungry buyer to sell to.
So, I stopped looking at iBuyers as competitors a long time ago and started looking at them as really great buyers.
And that shift in my mindset has been very productive.
We’re seeing a lot of deals through our funding deals that I’m doing where we’re literally selling to these iBuyers at top dollar. Some of them are doing repairs, and then some of them are buying houses that are rent-ready and paying top dollar.
So, regardless of your exit strategy, whether you’re wholesaling or you’re looking for a rehab or to buy it or you’ve got a house that’s in rent-ready bank-financeable condition, you’ve got a buyer who will pay a premium for it.
Now, if you’re a bit of a conspiracy theorist, which I think many of us are some of the time, there’s this thing going around that the great reset is being perpetuated by these hedge funds that are buying houses, like BlackRock. But that’s a rabbit hole for another time.
So, iBuyers being great buyers is one thing that came out of that panel.
Here was the other…
#2 On a rehab, the contractor is in control.
So this came from the guy who owns that huge construction company in multiple states — and they’re doing projects from small remodels up to new builds and everything in between.
He was a super-arrogant kind of guy, but he made a ton of sense. (I actually ended up meeting him during a break and he was very humble.)
But what he said was, if you own a property and you’re doing a construction project effectively… you haven’t relinquished the title, but you’ve relinquished ownership of the property to the contractor.
The contractor has control.
They decide how much you make or how much you pay, whether it’s an investment property or you’re doing a renovation on your personal residence. And it’s easy to draw the conclusion that they effectively own the property.
The Bottom Line: Advantages of iBuyers
So, my takeaway was that, at least for now, this is not a great time to be a rehabber. Not at all. And it reaffirmed my belief that wholesaling is the strategy of choice right now, because we’re not rehabbing, and we can cherry-pick the houses that we decide to hold as a rental or ones we decide to rehab — if you don’t mind the idea of being controlled by a contractor.
I felt this sense of reaffirmation that we’re on the right path here for now.
But, here’s the thing…
As the saying goes, ‘If you don’t like the weather, wait 5 minutes.’ In other words, all things change. The more you think they stay the same, the sooner change is coming.
And no one really knows what that change is going to look like, right?
So, I have a new view about iBuyers — who knows what else could come up that might change my thinking or business.
Keep your eyes and ears open, folks.