iBuying, or the practice of a company directly purchasing homes from sellers and then selling them to buyers themselves, is widely thought of as a massive market opportunity. But which real estate company will be the biggest winner? Will it be an established player like Redfin (NASDAQ:RDFN) or Zillow Group (NASDAQ:Z)(NASDAQ:ZG)? Will it be a company laser-focused on iBuying like Opendoor Technologies (NASDAQ:OPEN) or Offerpad?
In this Fool Live video clip, recorded on June 29, Millionacres real estate analyst Matt Frankel, CFP, and Millionacres editor Deidre Woollard discuss which iBuying player is the most promising.
Matt Frankel: Who do you think has the big advantages? Opendoor is the biggest. I'm going to give you just a couple of numbers. Of the three big ones that I know of, Opendoor, Zillow, and Redfin. Opendoor sold 2,500 homes in the last quarter. That's a pretty good size number. Zillow was 1,422, Redfin was 171. Big difference, big gap between number two and number three.
Deidre Woollard: Yeah.
Frankel: Do you think any of those are getting closer to the secret sauce there yet?
Woollard: I hate to say this, but I still feel like Zillow is going to be the closest partly because of what real estate agents hate the most: the Zestimate. I mean, when you think about it, they've been spending years preparing for this, not on purpose I don't think, because the Zestimate came out so long ago, but they've had to figure this out for a long time ahead of everybody else.
Frankel: For a while, the Zestimate was pretty inaccurate.
Frankel: That's also putting it kindly. For example, my house's Zestimate varied by $50,000 in the course of one week at one point.
Woollard: Oh, my God.
Frankel: I think it's also a newer technology.
Frankel: But they have so much data that they're able to use to perfect this. Zillow has 225 million unique monthly visitors. Their site was visited 2.5 billion times, they have over 150 million homes in their database, that's a lot of pricing data that they're getting. So I think Zillow's competitive advantage is that they're starting in certain markets to test using the Zestimate as their offer to really automate the process. You go to Zillow's site, look up the value of your home, boom, there's your estimate, there's your offer, that's where you can get all cash right now. That could put traditional home sales out of business if they perfect that. If it becomes that easy to sell your house, because right now, my Zestimate is pretty good. I mean, it's gone up about 25% in the past year. If I could sell my house for that with one-click, if I wanted to sell my house, that's a pretty tempting offer. People are going to Zillow's site anyway, which is where I see them really getting the competitive edge as they grow. No one goes to Opendoor's site, unless they are looking to sell their house.
Frankel: I mean, no one goes to Redfin Now right now, unless they're looking to sell their house or if they were referred by a Redfin agent. Zillow just has that traffic coming to its site anyway. I mean there's room for more than one winner in the space. Let's be very clear on that. This is a huge market opportunity. But I could see Zillow running away from everybody else if they get it right.