Institutional investors made up about 17% of all home sales in the North Texas area in 2021. That massive number, while indicating the desirability of DFW as an investable area, also shows that many individual investors simply couldn’t compete for deals against corporate-backed buyers operating on higher volume and lower margins. As the market shifts, these assets may come back into play and create a ripe opportunity for the every day investor.
The basic premise is simple, the iBuyer strategy involves purchasing homes in a forward moving market, charging a set of convenience fees to the seller, doing basic cosmetic repairs, and putting the home on the market at a higher price. The strategy works well so long as prices continue to increase with solid momentum and the investment firm is able to turn properties quickly. Where it stops working is in times of market shift, when inventory that may have been bought at too high a price begins to sit. This is what we’re currently seeing in the North Texas market. Homes listed by companies affiliated with iBuyer programs are sitting longer than traditional resales and closing at lower prices. It appears a liquidation is taking place and it could present the perfect opportunity for individual investors.
Institutional buyers with imperfect underwriting systems are finding they may have overpaid for a substantial number of assets early on in 2022 and are now attempting to get those homes off their balance sheets and deploy capital elsewhere. If missed out on deals earlier in the year, it may be time to circle back and make an offer to the company directly. You’re likely to have a much stronger negotiating position now than when you tried to purchase from the previous owner.
Take a close look at the homes listed by iBuyer backed companies and you may find your next smoking deal. And when you’re ready to have that property managed by the best team in town, give us a call at 469-649-7666!
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