Blomquist: A high percentage of off-market sales means the traditional gatekeepers of real estate listings in the market—local Multiple Listing Services and the brokers and agents that rely on the MLS—lose some of their credibility as gatekeepers. Sellers have an alternative to listing on the MLS that might be more favorable to them, and if these iBuyers gain critical mass of inventory they are listing, buyers may be more likely to just go directly to them in addition to— or even rather than—enlisting the help of an agent to find a property. These iBuyer purchases also will create more turnover in the market, with more sales happening, but also will likely have a bit of a drag effect on home prices since the purchases by the iBuyers are often lower than what the property would sell for if listed on the MLS.

GlobeSt.com: How else is the market affected by this practice?

Blomquist: If the iBuyers are truly creating efficiencies in the home-buying and selling process and gain sizable market share as a result, the ripple effect is that other buyers and sellers will be forced to compete with the iBuyers, which could squeeze agent commissions.

GlobeSt.com: What else should our readers take away from your firm's analysis?

Blomquist: There have been other threats to the traditional MLS model of marketing real estate, particularly during other hot sellers' markets, but none have ended up completely disrupting that MLS model and often run into trouble when there is a downturn in the market less favorable for sellers. If these iBuyers are eventually going to disrupt that MLS model completely, they'll need to gain enough market share during this up cycle in the housing market to have enough critical mass to survive when the next down cycle hits.

IRVINE, CA—A high percentage of off-market for-sale-by-owner transactions means the traditional gatekeepers of real estate listings in the market lose some of their credibility as gatekeepers, ATTOM Data Solutions SVP Daren Blomquist tells GlobeSt.com. A recent report from the firm states that only 8% of home sales in 2016 were off-market FSBOs, according to new data from the National Association of Realtors, but the picture is markedly different in some local markets such as Phoenix (25% off-market sales in 2016) and Dallas (14% off-market sales in 2016) where the so-called iBuyers and other MLS disrupters are concentrating their efforts. We spoke with Blomquist about why these disruptors are focusing on these particular markets and the impact a high percentage of off-market FSBOs has on these markets and the surrounding areas.

GlobeSt.com: Why are so-called iBuyers and other MLS disruptors concentrating their efforts in certain local markets such as Phoenix and Dallas, where off-market FSBOs were strong in 2016?

Blomquist: Markets like Phoenix and Dallas are good testing grounds for iBuyers for a few reasons. First, they are fast-appreciating markets where the iBuyer model of basically flipping a property and allowing appreciation to provide a profit works well. Second, they are still reasonably priced markets closely in line with the national median home prices, providing the iBuyers less risk on each transaction as compared to a high-priced market such as many of those in coastal California, New York or even Seattle and Denver. Third, these markets have proven to be good markets for old-school direct buyers such as HomeVestors and NetWorth Realty, both of which have a similar model to the iBuyer, with the major difference being in how they market to prospective sellers.

GlobeSt.com: What impact does a high or increasing percentage of off-market FSBOs have on a particular market and its surrounding markets?

Blomquist: A high percentage of off-market sales means the traditional gatekeepers of real estate listings in the market—local Multiple Listing Services and the brokers and agents that rely on the MLS—lose some of their credibility as gatekeepers. Sellers have an alternative to listing on the MLS that might be more favorable to them, and if these iBuyers gain critical mass of inventory they are listing, buyers may be more likely to just go directly to them in addition to— or even rather than—enlisting the help of an agent to find a property. These iBuyer purchases also will create more turnover in the market, with more sales happening, but also will likely have a bit of a drag effect on home prices since the purchases by the iBuyers are often lower than what the property would sell for if listed on the MLS.

GlobeSt.com: How else is the market affected by this practice?

Blomquist: If the iBuyers are truly creating efficiencies in the home-buying and selling process and gain sizable market share as a result, the ripple effect is that other buyers and sellers will be forced to compete with the iBuyers, which could squeeze agent commissions.

GlobeSt.com: What else should our readers take away from your firm's analysis?

Blomquist: There have been other threats to the traditional MLS model of marketing real estate, particularly during other hot sellers' markets, but none have ended up completely disrupting that MLS model and often run into trouble when there is a downturn in the market less favorable for sellers. If these iBuyers are eventually going to disrupt that MLS model completely, they'll need to gain enough market share during this up cycle in the housing market to have enough critical mass to survive when the next down cycle hits.