Which Real Estate Stocks Will Win the iBuying War?

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IA purchase, or the practice of a company buying homes directly from sellers and then selling them to the buyers themselves, is widely viewed as a huge market opportunity. But which real estate company will be the biggest winner? Will it be a recognized player like Redfin (NASDAQ: RDFN) or Zillow Group (NASDAQ: Z)(NASDAQ: ZG)? Will it be an iBuying focused company like Opendoor Technologies (NASDAQ: OPEN) or Offerpad?

In that Fool Live video clip, written on June 29, Millionacres Real Estate Analyst Matt Frankel, CFP, and Millionacres Editor Deirdre Woollard discuss which iBuying player is the most promising.

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Matt Frankel: Who do you think has the greatest advantages? Opendur is the largest. I’ll give you just a couple of numbers. Of the three big ones I know, Opendoor, Zillow and Redfin. Opendour sold 2,500 homes in the last quarter. It’s a pretty good size. Zillow was 1422, Redfin was 171. Big difference, big gap between second and third.

Deirdre Wullard: Yeah.

Frankel: Do you think any of them are already getting close to the secret sauce?

Woollard: I hate to say it, but I still feel that Zillow will be the closest in part because of what real estate agents hate the most: Zestimate. I mean, when you think about it, they spent years preparing for it, not on purpose, I don’t think because Zestimate came out so long ago, but they needed to figure it out for a long time ahead of everyone else.

Frankel: For a while, Zestimate was inaccurate.

Woollard: Yeah.

Frankel: This is also putting it mildly. For example, my home’s Zestimate changed $ 50,000 in one week at some point.

Woollard: Oh my God.

Frankel: I think this is also a newer technology.

Woollard: Yeah.

Frankel: But they have so much data they can use to refine it. Zillow has 225 million unique monthly visitors. Their site has been visited 2.5 billion times, they have over 150 million homes in their database, and that’s a lot of the price data they get. So I think Zillow’s competitive advantage is that they start testing in certain markets using Zestimate as their offering to really automate the process. You go to the Zillow website, see the value of your home, boom, here’s your estimate, here’s your offer, that’s where you can get all the money right now. If they improved it, it could supplant traditional home sales. If it gets so easy to sell my house, because my Zestimate is pretty good right now. I mean, it has grown by about 25% over the past year. If I could sell my house for it with one click, if I wanted to sell my house, that would be a very tempting proposition. People go to Zillow anyway, and I see that this is where they really get a competitive edge as they grow. No one visits the Opendur website unless they want to sell their home.

Woollard: Truth.

Frankel: I mean, no one goes to Redfin Now right now, unless they want to sell their house or a Redfin agent recommended them. Zillow gets this traffic to its site anyway. I mean, there is room in this space for more than one winner. Let’s clarify this. This is a huge market opportunity. But I could see Zillow running away from everyone if they get it right.

Deirdre Wullard owns shares in Redfin and Zillow Group (A shares). Matthew Frankel, CFP does not hold positions on any of the mentioned shares. Motley Fool owns and recommends Opendoor Technologies Inc., Redfin, Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool recommends the following options: The short August 2021 $ 65 bet on Redfin. The motley fool has disclosure policy

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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