Today’s news: #iBuyers have gulled some sellers. Tomorrow’s headlines: Sellers pit #iBuying #iDiots against each other.

What do well-informed sellers know that blind iBuyers don’t? Yeah…

The big iBuyer news is the Collateral Analytics paper on the high cost of selling a home to a (fake) bot:

“In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor.”

That seems like a bold claim, and I think these folks are selling their AVM, whatever else they’re doing. And yet: A solid AVM – excellent predictive accuracy even at the margins – is once beyond even the evanescent Thalia at iBuyer analytics: I’m interested in an apples-to-apples comparison of the transactions, but the cherry on that sundae would be an unbiased assessment of the actual Fair Market Value of the properties.

Do iBuyers actually buy low? Can’t know without knowing FMV. Sell high? Ever? the matter can only be discerned with respect to an imputed FMV. The word ‘imputed’ matters, because if the analytical process is unfair, the results are simultaneously deceptive and useless.

All that aside, I like the way these guys think about things that matter to me, but I think they are quite a bit smarter than the iBuyers – and, you know, they’re competent at real estate – so they seem to overshoot the target:

“iBuyers are well aware of the risks inherent in selling a home. Using their data analysis, they should, hopefully, know about competing inventory, how long it takes to sell on average, and how much they will need to sell below market, if they wish to sell fast.”

Really? I see none of this in Phoenix. N. O. N. E. None. As I’ve discussed, the #iDiots in the Valley of the Ever-Fecund Sun have some buying discipline and absolutely no talent for reselling homes. OpenDoor, OfferPad and Zillow all appear to me to be basing their resale prices on a markup of rehab expenses plus the original purchase price – easily spreadsheetable. In any case, if the iBuyers had any game at either marketing or market analytics, their houses would sell quickly – reliably and predictably, in single-digit Days-On-Market. Since they don’t, we know all three are inept at both.


“Because of these risks and costs, iBuyers cannot afford to buy all homes offered at all times of the year, without a conservative offer price. The more unique the home, the worse the season for selling, or the more competing inventory is present in the local market, the more conservative will be the offer price.”

Wanna bet? Thalia will have everything the public records can provide, actual apples-to-apples comparisons of every inflow and outflow, to see how many thousands of dollars are being squandered per “investment.” I’ve shown glimpses so far, but we haven’t even gotten to the worst news yet.

But then we get to this:

“If sellers know the values of their homes better than the iBuyers, then there will be a problem of adverse selection for the buyers.”


The authors of the paper like emergency relocation as a good reason for iBuying to exist, which would seem to paint The Incumbent as a pawn broker, but what can you do? But that’s an outlier motivation, where iBuyers draw on high-C, high-D and high-novelty customers, for now. The novelty will wear off, and the Driven won’t tolerate ineptitude. The Cautious will orbit like moths, but folks who can be recruited by FUD can be recruited away by FUD, and that’s where this kind of paper pays off hugely: For now, iBuying is a poor option for most sellers.

But the seller always has the advantage in real estate, since he already knows what the buyer must discover. Sellers who know why they should not have bought a property love blind buyers of every sort, especially really dumb ones who think it’s worth risking half-a-million dollars for half-a-year to collect and resell pilfered toenail clippings to witch doctors – and who call that a business! Oh, do crafty high-C sellers love iBuyers…

But just as buyer’s agents are figuring out how to spank the iBuyers on price, sellers of all sorts are getting better and better at forcing their #iDiot courtiers to pay more and more flash-paper cash for their camouflaged white elephants:

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Thalia is more than just big promises for what is for now still vaporware. She’s also a decent source of real estate insight, as seen by a butterfly:

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The iBuyers want to talk about anything but real estate. There’s a reason for that: They suck at it. They’ll suck worse as time goes on – as sellers get better and better at torquing them (I have lots more ideas) and as buyers get better and better at spanking them (much more here).

Whatever it is they think they are doing, what the iBuyers are actually failing to do is a job that almost everyone fails at – selling real estate. The more they fail at that, the less their witch doctor margins will cover.

Accordingly, what seems like bad news in the Collateral Analytics report is actually very good news: The iBuyers’ marketing record has been catastrophic so far – and their best days are behind them.

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