In late March, Zillow announced it was pausing their iBuying service known as Zillow Offers in an announcement from Chief Executive Rich Barton. “Given the concerns for public safety and rapid developments by governments that restrict local real estate activities, we determined it was prudent to pause our home buying to preserve our capital.”
Redfin and Opendoor had already paused their iBuying services before the Zillow announcement due to similar concerns. iBuying requires a tremendous amount of capital to maintain, something the home buying companies can’t float during COVID-19. “iBuying is capital intensive which is not ideal in a time when everyone is looking for liquidity,” says Danielle Hale, chief economist at Realtor.com.
Instant offers don’t make sense for companies like Zillow during COVID-19. iBuying sites use data and a strong feel for market patterns to make fair offers but because the pandemic has destroyed normal pricing patterns – instant offers don’t work. “With whole cities shutting down nearly all commerce, no one can say what a fair price is right now, so we’re not making any instant offers,” says Redfin CEO Glenn Kelman.
The COVID19 pandemic has not only brought the iBuying market to a halt, it could spell doom for iBuying platforms during the COVID19 economic recovery. Unlike a typical recession that touches different markets at different rates, the pandemic has caused crashes across all real estate markets at one time. Even investments as diverse and safe as nationwide properties are suffering and are not expected to recover quickly.
The iBuying platforms that survive the economic recovery will be poised for an audience that’s more used to digital services than ever before. “From the seller’s perspective, it’s probably a great time to have an iBuyer since you can sell without opening your home up for any open houses,” Hale said.