RALEIGH – Recent disciplinary action against instant home buyer Opendoor has put a spotlight on the so-called “iBuyer” market which has grown increasingly popular in the Triangle and across the state.
Instant buyers, or iBuyers, are technology-enabled companies that will make an instant, online, offer to buy property legally owned by a potential home seller. Multiple iBuyers are active in North Carolina including Opendoor, RedfinNow, and Offerpad. Zillow, which had been active in the state, announced last year that it would shut down the Zillow Offers program in the state.
And there is growing concern from North Carolina’s residents as the residential real estate market continues to rapid price appreciation that their interests are not being protected.
Charlie Moody, assistant director of the Regulatory Affairs Division at the North Carolina Real Estate Commission, told WRAL TechWire that complaints to the North Carolina Real Estate Commission have increased as the region is in a strong seller’s market where homes are selling quickly.
“As the market heats up, the more complaints we see,” said Moody, who added that as there is more business conducted, there are often more complaints that are filed by members of the general public to the North Carolina Real Estate Commission.
Homes are being purchased sight unseen, real estate agents have told WRAL TechWire. And, agents say that homes are also being purchased with due diligence amounts in the tens of thousands of dollars. And, according to Moody, those and other factors that affect the real estate market may be resulting in more complaints filed with the North Carolina Real Estate Commission.
“It’s volume, but also speed,” said Moody. “When people are making offers sight unseen, that sort of thing, that contributes to it as well.”
NC Real Estate Commission disciplines iBuyer Opendoor after complaints
Transparency vs. convenience
“These iBuyers are coming, offering something different, and for home sellers, it can be quite convenient,” said Barry Pulver, a North Carolina licensed real estate agent with eXp. “Transparency is really the key factor here.”
What an iBuyer, like Opendoor, and other institutional investors that have come into the market across the nation, including in the Triangle, provides to a potential home seller is a different approach than what most people have experienced in the past, said Linda Craft, the broker-in-charge and owner of Linda Craft & Team, REALTORS.
“They definitely offer a solution for some people that need it,” said Craft. “The marketing is really good.”
“Opendoor is creating a modern real estate experience that empowers consumers to buy, sell and move at the tap of a button,” an Opendoor spokesperson told WRAL TechWire in response to an inquiry about the disciplinary action taken by the North Carolina Real Estate Commission. “Our intent is to provide transparency to buyers and their brokers in order to facilitate an informed decision.”
The disciplinary action taken by the commission “has shown the spotlight on what the iBuyer does, what they say they do, and the actions behind it,” Pulver added.
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According to data from the Triangle Multiple Listing Service that was obtained by WRAL TechWire, Opendoor Brokerage LLC was the listing office for 243 Triangle-area listings during the first quarter of 2022, and 731 listings throughout 2021.
The company is also active in the Charlotte metropolitan area, where it was the listing agent for 1,211 residential properties in 2021 and 483 properties in the first quarter of 2022, according to data from Canopy Multiple Listing Service obtained by WRAL TechWire.
One analyst predicts even more activity from iBuyers, including Opendoor.
“Home price appreciation is through the roof again, and Opendoor’s buy-to-list premium (the difference between the purchase price and current listing price of a home) is at record highs,” writes Mike DelPrete, a real estate technology analyst, in a blog post published in March.
According to DelPrete’s research, Opendoor has listed its homes, on average, for $60,000 more than they paid for them, a markup of 17 percent, after just 72 days on average.
“I think the disciplinary actions taken, now, is so-to-speak a slap on the wrist,” said Pulver. “But what it’s done is really opened up the door for agents, and homebuyers, and sellers who will question the value of what is being offered.”
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iBuyers and institutional investors in the marketplace
“Most of the time, a REALTOR meets with a potential seller,” said Craft, noting that the licensed real estate agent would use that conversation to gather information about the property and discuss the required real estate disclosure documents with the seller.
That’s because there is potential liability in selling real estate, said Craft. There’s liability for the owner of the property and also for the agent representing a home seller under a written agency agreement.
“An institutional buyer is literally trying to purchase properties all over the nation,” said Craft. “Well, real estate is local.”
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Local markets have local multiple listing services and local real estate associations. There are state and local laws that may govern how real estate is bought and sold in a state or municipality.
Yet, said Craft, “Here they are, institutional buyers, trying to purchase all different types of properties in all different types of markets with their own local rules and regulations.”
And for many institutional investors, the pace and speed of the real estate market, coupled with uncertainty in other investing categories, such as in equities bought and sold in the stock market, is drawing interest.
“I work with some institutional iBuyers now,” said Pulver. “They’re still in go mode.”
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North Carolina follows the doctrine of caveat emptor, meaning the seller has no affirmative obligation to disclose information about the property being sold to the buyer, placing the burden on the buyer to investigate the property before forming a legally enforceable contract to buy the property.
Caveat emptor means “let the buyer beware.”
And that’s still very much the case for the Triangle’s real estate market, Craft told WRAL TechWire.
“As a buyer, it is still buyer beware,” said Craft.
While sellers do not have an obligation to disclose, and can mark “no representation” on the required disclosure form for transferring residential property, licensed real estate firms and agents are responsible for the disclosure of material facts, anything that could positively or negatively impact the value or perceived value of the property.
“When they [institutional investors and iBuyers] first came into the market, they would actually answer the disclosure questions,” said Craft. “Now, a lot of them are moving away from that and answering ‘no representation’ in the disclosure.”
A source who holds an active real estate license and requested anonymity told WRAL TechWire last month that they represented a buyer who paid to complete a property inspection prior to making an offer on a property owned by, and listed by, an iBuyer in the Triangle.
When the agent offered to share the inspection report with the company, the company’s agent declined to review it.
“I encourage folks to work with a really good licensed agent,” said Craft. “And make sure you have a very good licensed home inspector.”
That’s true regardless of who represents the seller, said Craft.
There are benefits to considering property offered for sale by iBuyers or institutional investors, Craft told WRAL TechWire.
“One advantage for a buyer buying one of these homes right now,” said Craft, “is that they often don’t have to pay a high due diligence fee.”
So a buyer who can only put up $5,000 for a due diligence fee may lose offer after offer after offer on homes not owned by an iBuyer, whereas they may be able to win a contract for one that is owned by an iBuyer, said Craft.
Another agent, speaking anonymously, told WRAL TechWire that the Opendoor had been willing to negotiate during the due diligence period, ultimately agreeing to lower the purchase price of the property after an appraisal from the buyer’s lender came back below the contract price.
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Complaints are up – more than iBuyers, investors
Moody told WRAL TechWire that complaints to the North Carolina Real Estate Commission tend to increase when the market heats up and becomes a strong seller’s market.
Sometimes, disputes between parties can be resolved prior to filing a complaint with the Real Estate Commission.
Craft told WRAL TechWire that her firm has been able to get due diligence fee payments refunded by institutional investors due to something that was not disclosed by the company.
“It took negotiation, but we have been able to get them back,” said Craft.
Craft noted that one home listed and advertised on the local multiple listing service stated it had water and sewer provided by the local municipality, but in reality, it did not. Other homes have had discrepancies in measured square footage, or incorrect figures of heated living area.
“That’s where our industry is really waking up, to an extent, by some of those working for these companies,” said Pulver. “Whether they’re giving all the black and white details in a very gray area.”
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