New Trends in Real Estate: iBuyer Brokerages

09 May 2019

New trends in almost every industry start in the U.S. For real estate, the hottest trend now is iBuyer brokerages. The iBuyer model allows owners to sell their own property immediately. They will get an all cash offer and they don't need an agent, or to even fix up the property. These companies use artificial intelligence (A.I.) to appraise the property and to arrive at an offer price. Using computers to put a spin on the old "Guarantee Sales' plan has allowed these companies to raise millions of dollars.

So what's the catch?

These companies have costs to buy properties, fix them up, hold them, and resell them. Currently, they discount the A.I. estimated appraisal by 9% on average. While it may come to Canada, it is unlikely to succeed.

First, the average property takes three to nine months to sell in the U.S., too long for many. In Canada, most properties sell in 30-60 days. Secondly, land transfer taxes alone are 2-4%. They're almost non-existent in the U.S. My guess would be that the discount factor in Canada would be 13%. Too expensive for most sellers. iBuyer, an interesting twist, but not likely to be main stream in Canada.

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