- "ERA Express Sell" appears designed to capitalize on growing demand for iBuyers but will primarily serve as marketing tool.
For over 40 years, real estate franchisor ERA has formally promised thousands of homeowners that it would buy their homes if the brokerage’s agents failed to sell the properties on the open market.
But not once during the last 15 years or so has ERA had to bite the bullet, said ERA CEO Sue Yannaccone.
Every homeowner that signed up for the “ERA Seller Security Plan” during that period either sold their home with an ERA agent or ultimately chose not to sell to ERA, she said.
Now ERA, one of several franchise brands operated by real estate behemoth Realogy, has unveiled a new version of the program under which ERA will promise to buy a home on a much shorter timeline.
“ERA Express Sell” appears designed to capitalize on growing demand for iBuyers — a moniker for high-tech investors that make quick offers on homes and can close in days. ERA revealed the program to Inman shortly after Redfin introduced its own iBuyer, Redfin Now.
But like the ERA Seller Security Plan, ERA Express Sell will serve primarily as a marketing tool for ERA agents, not a new revenue engine for the franchisor. Early results show the program can help agents win more clients, even though few sellers choose to sign up for it.
The goal is to “help speed up the pace of the transaction for the consumer” but in a way that “protects the consumer and agent within the business,” Yannaccone said.
The Express Sell deal
Homesellers who use Express Sell receive an offer that is equal to 86.5 percent of a home valuation that’s based on two appraisals, less repair costs. They also pay a typical commission. Sellers choose the appraisal companies and home inspector used in the process from a list of vendors provided by ERA.
But sellers only receive an offer from Express Sell around two weeks after requesting one.
In the meantime, an agent with an ERA affiliated brokerage lists the home in the multiple listing service (MLS) in the hope of attracting bids that are higher than what ERA will offer.
Even after accepting an offer from ERA, sellers can back out of the deal if they receive a better offer before the transaction closes.
The goal is to let sellers take a stab at fetching top dollar lickety-split, with the option of selling at a discount as a last resort.
Since homes are selling like hotcakes, sellers stand a good shot at nabbing offers during the two weeks in which ERA prepares its own offer — as the program’s early results illustrate.
Express Sell is basically a shortened version of ERA’s legacy Seller Security Plan.
The Seller Security Plan, established in 1976, provides for a six-month marketing campaign with the option to sell at 90 percent of the home’s market value once that period elapses.
Basically, homesellers who choose the new Express Sell over the Seller Security Plan would elect to net less money — due to accepting 86.5 percent of their home’s value, rather than 90 percent — in exchange for a quicker guaranteed sale.
As with the Seller Security Plan, Express Seller users must pay a typical listing commission — often between 5 and 6 percent of the home’s value. That means Express Sell sellers might have to pay what effectively would be a commission of 20 percent or more (when including possible repair costs).
Express Sell is much slower than a typical iBuyer and — if iBuyers’ claims about their cost are accurate — also more expensive.
In addition to taking two weeks to make an offer, Express Sell can’t close any faster than 30 days after an offer is accepted. iBuyers, by contrast, can often make offers within 24 hours and close within a week.
Another key difference between Express Sell and iBuyers is that the program openly buys homes below market value. In contrast, iBuyers tend to claim to buy at market value or use vague terms, such as a “fair price” or “top offer,” to describe their bids.
Results from the early test markets
Real estate agents at ERA-affiliated brokerages in Jacksonville and Palm Beach, Florida, marketed and presented Express Sell to sellers from June to December 2016.
ERA has paused the program for the last six months to analyze early results, but the franchisor plans to gradually roll it out to markets across the country in the coming months.
While agents pitched Express Sell to many prospective homesellers during the six-month test period, only four homeowners ended up requesting an Express Sell offer.
Of those, just one received an offer through Express Sell. The three other homeowners accepted offers from other buyers while ERA was in the process of preparing its own offer, said Frank Malpica, who is overseeing Express Sell as ERA’s senior director of product management.
The one seller who did receive an Express Sell offer accepted the offer but later canceled it after receiving bids from four other buyers during the two-week marketing window.
That homeowner ultimately sold to another buyer for 15 percent above list price.
These were ideal outcomes, according to Malpica: In each case, Express Sell gave sellers confidence to work with ERA and ultimately sell their homes for full market value, he said.
The program also produced the desired effect of helping agents win over more clients, according to ERA.
Agents who marketed and presented Express Sell saw their conversion rate from listing appointments to listing agreements rise from an average of 30 percent to 57 percent, Malpica said.
Critics say guaranteed-sale programs can often be gimmicky or exploitative. Consumers rarely use the programs upon reading the fine print, or they unwittingly sell for much less than the market could bear, they say.
But unlike many programs, Express Sell provides full transparency, Malpica said.
“[W]e do things that other programs don’t,” Malpica said. “Our ability to educate the homeowner in advance of the process; the appraisal companies that they select; the home inspection companies that they select; the opt-out clause that exists in the program.”
In addition to launching Express Sell, ERA has also made the Seller Security Plan — the legacy program with a six-month timeline — available to a wider swath of homeowners.
Homeowners now only need 10 percent equity in their homes to qualify for Express Sell (down from 20 percent). And all properties worth between $75,000 and $750,000 are eligible, unless they are worth more than 90 percent of recently sold homes in their market.
Eligibility requirements for Express Sell will start off tighter but may loosen up over time.