Are Zillow And iBuyers Are Ruining Real Estate?
What’s up guys Justin Colby here. So unless you’ve been living under a rock, you’re probably pretty aware that Zillow, Redfin open door and offer pad exists, and they’re buying homes for top dollars. Well, this week Tick Tock is challenging these 800 million and billion dollar behemoth by some realtor who’s been a realtor for 11 years accusing one of these massive companies that he is not mentioning is actually gaming the system and inflating prices artificially. What if there was a company that everybody used, everybody used, everybody knew to look for houses, and everybody goes on there and searches for houses or when they’re bored and stuff. And let’s say that billion dollar company uses that information to go into that zip code and start purchasing houses. Because the people that are selling their houses, even though they sell it for a little bit less sometimes than what the home could actually be worth and they pay these high fees to this billion dollar company. It’s a convenience factor. So this company is scooping up houses less than what they actually could cost.
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Now, for those that are in real estate, we all know that these big companies such as Zillow, and Redfin and open door and offer pad in there are many more are the real deal, and they are actually buying at some of the most highest prices there are on the market. But you’ll see this agent is coming to the conclusion that the unnamed company is actually buying, let’s say 30 homes at 300,000. And then the 31st home his argument is they would buy it 340 and it sets a new comp and then they could liquidate higher and gain the system to make a whole bunch more money. Well first of all, I have no idea how this guy on tik tok gained so much traction. He’s a realtor, and in my opinion, he’s totally wrong. But let’s dive in a little bit here and talk about what the eye buyers actually do what’s happening. And as someone who has sold a lot of homes to these companies, I can vouch they are the real deal. Now again, if you have not heard of Zillow is actually buying homes now or Redfin or open door offer pad you probably living under a rock. So I’d actually start paying a little bit more attention to maybe not new news, but YouTube. In fact, subscribe to my channel. And so the YouTube Gods like me, make sure you’re smashing like button. With all that said, these guys are the real deal. And being that I have been flipping homes here in Phoenix for the last 14 years, we, for one reason or another seem to attract all the big hedge funds and I buyers to change the market drastically. So these companies came to Phoenix first, then they bought hundreds, if not 1000s of properties over the last several years. And what I can say is someone that has to compete with these individuals to buy properties from homeowners, it is tough, they definitely pay much higher than a small little investor like myself could ever pay. So for to start out. I would argue this point with this realtor out of the gate. Now the eye buyers didn’t just stick to Phoenix, and they are basically running nationally. In fact, Redfin, I know is actually going into Charlotte and Raleigh of North Carolina, in fact, to the point where I know this business so well, I’m actually going to follow them into that market of North Carolina because I know they pay top dollar. So if I can buy the home, I can actually sell it to them at a much higher price. This is advantageous to me in any real estate investors out there, you should be thinking the same way because they actually do pay the highest price. So I am following these Bohemians such as Redfin to jump into North Carolina. So how does this whole process work and let’s talk about what the I buyers do, they do pay top dollar and the way they typically make their money or what they’re more interested in is making sure that there’s commissions and fees paid within the dollar that they are offering. So a lot of homeowners actually don’t know that and you could maybe make the argument that they’re not being fully disclosure. That’s not a word. They’re not fully disclosing that. But I’m not even going to sit here and make that argument. What I do know is they make the process a lot more convenient for the homeowner, very similar to like myself, I go after homes that to try to provide value for the homeowner to make this process that can be very stressful for most much more seamless. Now they do a very similar thing because they essentially are saying hey, you don’t need to listed on the MLS, you don’t have to have people open or walk through your home in open houses. And we’re just gonna get straight to the point and fund the deal within two to three weeks. Now, I have the same point I make homeowners so a lot of times I’m competing with these buyers, such as Zillow or Redfin or any of these ibuyers open door offer pad. The difference being is they actually have commissions and fees included in your purchase price. So essentially, if you map it all out, they actually would get A lot closer to the number that I offer. And that a lot of times what I do with these homeowners is just actually compare apples to apples. The big difference here is it’s not apples to apples, these companies are hundreds of millions of dollars strong, potentially billion dollar strong.
I know Zillow just went out and raised another $450 million to buy homes. Guess who can’t compete with that? This guy right here. But what I can do is I can help offer more value to the homeowner paint a much clearer picture of the values that I offer versus these I buyers. And for me, that allows me to actually typically beat these companies out. Now let’s get back to this tic Tock agent who has become famous to the point where I’m doing a YouTube video about his subject matter. At the end of the day, I just completely disagree with his hypothesis, if you will, well, yes, logically, could that somewhere be relevant, I just don’t believe it because typically they are paying top dollar. And if a homeowner isn’t going with them, and they don’t go with someone like myself, they are typically listing on the MLS. And the data shows that the offer that the eye buyer gave the homeowner is just as close to the number that the property sold out on the MLS. So when you actually boil it down, these companies are in the business of data, as much as they’re in the business of anything else. And they want to do good by these homeowners. Like I’ve mentioned, these businesses, and these companies are going national, in a sense, they’re in multiple markets. And there’s more than just four of them. There are a lot of these companies now just like so many of my other videos and posts on social media, if you’re not following me, you should be the Justin Colby. I will tell you, the real estate market is crazy. And the other thing that this agent should have pointed out to you is these I buyers at a small level are increasing the value of homes across the nation. Now whether someone would argue that to be good or bad, it is a reality. I can tell you in a market like Phoenix that I’m very, very familiar with. Some of these comps that this agent is referring to are increasing drastically because the ability for these companies to buy a top dollar, they have a lot more money than the little guys like myself. And so they continue to get these comps raising in these markets. And so whether you would make the argument or he would make the argument that the Phoenix market exploded the way it has over the last two years or more. So I wouldn’t put it all on the I buyers to create the value of these homes and all this appreciation that’s been going on. But they definitely play a role because they have so much money that they can essentially spend and not have to worry about the type of returns I need to as the little guy I need to be able to put food on my plate for them. They’re a big conglomerate, like I just said they raised 450 million Zillow specifically, and I can’t compete with something like that so they can spend more money continue to have higher prices and it is affecting the real estate market. Which brings me to the point of this is actually harmful to the normal Joes that are trying to buy homes. I just posted on my social media that Miami took over Los Angeles is the most expensive, expensive real estate market relative to income. That is mind boggling. I did not do a deep dive into the research on this. But it did mention that the average income in Miami was $40,000 in the average price point was 550,000. That hurts my brain to think about that someone that is making 400 or $40,000 a year would even attempt to buy a $500,000 home because there’s just no way they can actually afford it regardless of them getting a loan or not. Things like this are making the real estate market a much more challenging place and quite honestly quite scary as someone that just literally bought a home myself in Miami close two weeks ago, I can tell you I’m paying more price per square foot then is actually reasonable bite by like 3x which is silly to think about in just one year.
The home I bought appreciated $300,000 and I’m the sucker who bought the home. So the fact that I’m actually doing an actual YouTube video about this agent and about the topic is kind of crazy to me. But it is something worth noting is his video did go viral and I buyers aren’t going anywhere. We need to live with this idea that there are companies now that have a whole lot more money and anyone that can personally do this, and they’re going to help the real estate economy stay moving. There’s a lot more benefit to the buyers being here than not even though because they’re able to buy at a higher price point they are incrementally increasing the value of homes which does make it harder for the average Joe making anywhere from 50,000 to 150,000. To be able to buy a home. I would make the argument right now that most people should not be buying a home and I know I’m going to get a lot of hate on that and feel free to write some comments in here. But Just because you can afford the loan payments doesn’t mean you should be buying the home. Now the first thing you should be doing is liking this video and making sure you subscribe to my YouTube channel because that’s what’s really important here. But all in all, the world is a very crazy place right now, real estate is still a pretty good investment, you just need to make sure you’re buying right I’ll wrap this video up by just saying this. I am a full time real estate investor and I can tell you the numbers that we are buying homes at and reselling homes are unfathomable. It is actually crazy, because the amount of free money that has been printed. So if you do want to buy a home, I encourage you to but i’d also make sure you understand this. There are taxes there is insurance, and there is maintenance on this home. And if you’re buying a home simply because you can afford the mortgage payment and you got a 2.85% loan in an interest rate. Do you you should not be buying a home. Wait, there will be a correction. I don’t know when Don’t ask me there will be a correction and that’s when you should go in and buy the home. Hopefully you guys found this well again, make sure you’re liking this make sure you’re subscribing and I will see you guys on the next YouTube