You’re about to read another story about instant homebuying, or iBuying. That’s even though iBuying sales made up less than 0.5% of the total U.S. residential real estate market in the second quarter of 2021, according to a report from Redfin.
If iBuying ran for public office, it would need to more than double its market share to garner 2020 Libertarian Party presidential candidate Jo Jorgenson’s percentage of the popular vote.
So, why should you care?
Because three companies – Zillow, Opendoor, and Offerpad – have, after a major setback at the start of the pandemic, generated enough capital to buy and sell thousands of homes a year. And one of these companies – Offerpad – found a way to make money, grist for Wall Street analysts such as Ygal Arounian of Wedbush Securities that expect iBuying to dramatically scale up in the coming years.
Offerpad is a six-year-old company founded in 2015 by Brian Bair after a career in real estate investing. The company promises to make a cash offer on your home within 24 hours of you expressing interest in selling.
If the offer is accepted, Offerpad goes to work on renovating the home and trying to resell it for significantly more than they bought it for.
The company is based in Chandler, Arizona and until recently only operated its business in the South – markets like Orlando and Birmingham, Alabama – before expanding into Indianapolis and Columbus, Ohio.
Offerpad earned $9.2 million in income in the second quarter of 2021, generating $279 million in revenue through the sale of 1,279 homes. These homes were sold at a difference of $31,500 from what the company purchased the homes for.
IBuying observers like Mike DelPrete single out Offerpad as perhaps creating a more sustainable business model for ibuying. The company went public this month following the completion of a merger with a special purpose acquisition company co-chaired by former Zillow CEO Spencer Rascoff.