Have you ever sold a home before?
If yes, then you know that selling a home is probably the worst process in the world.
If no, then let me tell you: it sucks.
There’s really no other way to put it. While the idea of buying and selling a home is exciting, the actual process of doing so is horrendous.
Well, for starters, it takes forever. The average time it takes from when you put your house on the market to when you actually close the sale of the home is about three months. That’s a quarter of a year – and at that timeframe, selling a home is the single longest retail process in the world today… by a mile.
But taking forever is just the start of the headaches in the home shopping process.
Even worse, it’s extraordinarily expensive!
Selling your home costs an arm and a leg. There are so many expenses in the process.
You have agent fees. Staging costs. Closing costs. Selling concession fees. Add it all up, and at the end of the day, you’re giving away more than 10% the sales price of the home… and for what?
Agents help list your home, sure. They increase exposure. Maybe they help you get a better price. But is that really worth 10%? Couldn’t data and algorithms help automate everything an agent does? Couldn’t that automation save you tons of money?
(Spoiler alert: It can. But more on that later…)
Beyond being expensive, the home shopping process is also highly complex, with an average of six counterparties per one home sale. That’s a lot of counterparties – meaning a lot of communication gets lost in the shuffle.
No wonder the home shopping process is also terribly volatile, as ~20% of potential transactions fall through due to inflexible timelines, buyers backing out, and financing delays.
I wasn’t kidding when I told you that the home shopping process sucks. Indeed, I’d venture to say that selling a home is the single most inefficient retail process in the world today.
Of course, the million-dollar question is: Why is it so inefficient?
Because the real estate market is stuck in the stone age.
If you remember, buying a computer also used to be inefficient. You had to get in your car. Drive down to Circuit City. Fight through crowds of people. Talk to a sales rep. Find the right product. Sit in a checkout line. Pay for the item. Drive back home.
That’s a terribly inefficient process – and it only became more inefficient if your local Circuit City didn’t even have the computer you were looking or hoping to buy.
Talk about inefficiency!
Then… along came Jeff Bezos and his internet startup, Amazon.com (AMZN)…
A company that centralized, streamlined, and simplified the electronics shopping process with a single e-commerce platform…
No more getting in your car. No more driving from store to store. No more fighting through crowds of shoppers. No more sales rep consultations. No more running around stores and trying to find the right product. No more sitting in long checkout lines.
Just your couch, a computer, and a credit card.
Amazon made buying an electronics item as easy as opening up an app, searching for an item, and tapping “Buy.”
Amazon leapfrogged shopping into the digital era, and in so doing, dramatically improved the shopping experience.
Wayfair (W) has done the same in the home goods sector. Remember how long and inconvenient the furniture shopping process was? Going from store to store, all across the city, looking for the perfect couch? Wayfair allows you to do all that from the comfort of your own couch.
Carvana (CVNA) has done the same in the automobile world. You can now buy (and sell) cars online as easy as you buy and sell a computer.
Chewy (CHWY) is doing the same thing in the pets’ category. Forget Petco and PetSmart. Just buy your dog’s food and toys from Chewy.com.
Across all verticals, retail shopping processes are being modernized, digitized, and optimized for consumer convenience.
That is, across all verticals except the home shopping world… where less than 0.1% of homes sold last quarter were sold online.
And so, I repeat… the real estate market is stuck in the stone age.
But it won’t be forever.
IBuying is the trendy term given to the new process of selling your home online to a technology company, dubbed an iBuyer.
In short, the iBuyer leverages data and algorithms to give you a real-time, all-cash offer on your home, performs a quick inspection to finalize that offer, and then closes the deal in as little as two weeks.
IBuying offers significant benefits over the traditional home shopping process.
It’s cheaper (most iBuyers take around 5% to 7% fees, versus 10%-plus all-in costs for the traditional home selling process). It’s faster (these transactions can close in as little two weeks). It’s less complex (it’s a one-to-one process between the iBuyer and the homeowner) and less volatile (you get to choose your own closing date, and it’s always much more reliable all-cash offers).
IBuying is the future. Eventually – and inevitably – all home shopping will move online.
So, what has held up iBuying adoption to-date?
Mostly technological and demographic headwinds. Long story short, the tech has not been there to make iBuying a great experience, as the pricing algorithms weren’t great, and the virtual touring technology was awful. At the same time, the folks buying homes – normally older in age – have traditionally not been the most tech-savvy and prefer the “old school” way of doing things.
That’s all changing right now.
The tech has made huge improvements in recent years. Advancements in machine learning algorithms have enabled iBuyers to digest the enormity of housing data more effectively in the market, and deliver true-to-market, dynamic offers to home sellers. Concurrently, advancements in VR technology have enabled home shoppers to do very in-depth and granular tours of homes on their phones or computers.
Also, all those millennials that pushed off home buying for so long, have saved up a lot of money and are now taking advantage of ultra-low interest rates to become first-time homeowners. In that group, 40% of home shoppers want to buy their home online.
Times are a-changing… and as they change, iBuyers will redefine the $1.6 TRILLION real estate market.
So, what are the top iBuying stocks to buy today?
Well, of course there’s Zillow (Z). Zillow finds its roots as an online real estate listing marketplace but has recently expanded into the iBuying space. It’s still very early for the company’s iBuying business, but Zillow has a huge demand-generation advantage over peers as it is the app all home shoppers use today to view homes.
There’s also Redfin (RDFN). Redfin is basically a smaller version of Zillow. The company provides largely the same services – online real estate listing marketplace first, and iBuyer second – and therefore, is just Zillow with less demand-gen opportunities. But Redfin also has a unique partnership with Matterport (GHVI) which highly differentiates the company’s virtual touring features and gives them the best 3D imaging technology in the iBuying space.
But, alas, I’m saving the best for last…
There is one iBuyer in the market that stands head-and-shoulders above the rest.
This company is the market’s largest iBuyer, and therefore, has huge advantages when it comes to network effects and economies of scale.
That is, this company buys about 7X the number of homes as the second largest player in the iBuying space, which gives them 7X the inventory as the next biggest competitor. With more inventory, this company will attract more potential buyers, which will attract more potential sellers, so on and so forth. It’s an enormous network effect advantage.
Meanwhile, also because the company is 7X as large as its closest competitor, this firm can charge sellers way less per home while still maintaining positive economics due to economies of scale. This company has the lowest iBuying fees in the market.
Oh, and this is a true tech company. The other iBuyers are real estate companies trying to be tech companies. This is a company that was founded by technologists, is run by technologists, and which has engineers and computer scientists from Square, Twitter, Google, Uber, etc.
Technology is in this company’s DNA, which enables them to have the market’s best pricing algorithms.
This is the future “Amazon of Real Estate.”
Yet, today, it’s a tiny company that most investors have never even heard of…
Buying this stock today could be like buying Amazon twenty years ago – before it soared 8,000%.
Trust me… this is a once-in-a-lifetime stock pick you don’t want to miss…
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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