[VIP] Don’t Tell Yourself Pretty Lies About iBuyers, Part 1: Economics of iBuyer

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Recently, there was an excellent post about iBuyers from Homebloq, a company that appears to sell some sort of a mobile app "connecting Chicago brokers and buyers" according to the website. The blog is not signed, but I think it's written by Austin James, the co-founder of Homebloq, and is titled, "How iBuyers Die."

I've seen a lot of these kinds of posts and sentiments since Opendoor pioneered the space in 2014, but this one caught my eye and kept my interest because the author spent a good amount of time and effort, did his/her homework, and put together an interesting bear case against iBuyers.

The author ultimately concludes that "It's not looking great for iBuyer economics" but doesn't take a strong stance. He leaves a bunch of outs with a lot of questions, writing:

Let’s tally this up. It’s not looking great for iBuyer economics. Again, there is so much here to discuss that we’ve not yet covered. What if agents choose to eliminate dissemination of listings to iBuyer sites? What if Amazon acquires OpenDoor? What if a recession hits and wipes out the cash accounts and strangles profit margins for long enough to bleed out the iBuyers? What if I’m flat our wrong?

Since it appears that Austin is a fan of Notorious, and I'm becoming a fan of his, I wanted to take some time to address a number of the issues he raises. Ultimately, it isn't that I disagree with Austin or think that his bear case is wrong, but that I want to caution him and the rest of the industry against wishful thinking.

It's one thing to look at the challenge of iBuyers (and the related challenge of the institutionalization of real estate) with clear eyes, acknowledging uncomfortable realities, and then trying to formulate a response. It's a whole other thing to look at the challenge, pick and choose what you want to see, in order to tell yourself pretty lies about how ultimately, you're going to be just fine.

So let's get into it.
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