Heavily-funded, tech-driven investors that make quick offers on homes and close in days are among the latest startups raising eyebrows in the real estate industry. And they’re betting that the promise of fast and easy transactions will help them overtake traditional real estate brands — soon.

NEW YORK — Heads up Re/Max, Century 21 and Coldwell Banker, the iBuyers are coming for you.

Heavily-funded, tech-driven investors that make quick offers on homes and close in days are among the latest startups raising eyebrows in the real estate industry.

And they’re betting that the promise of fast and easy transactions will help them overtake traditional real estate brands — soon.

“I believe that in five years the five brands that most consumers know, the Re/Maxes and Century 21s and Coldwell Bankers, … they’ll be marginalized and they’ll be replaced by five new brands who can predict exactly when your house is going to sell and specialize all the parts of the transaction,” Sean Black, co-founder and CEO of Knock, told attendees today at Inman Connect New York.

Dan Mayes, senior vice president of product management and analytics at Knock rival OfferPad, agreed and added, “It’s all about scale, the ability to transact.”

Both startups offer transaction processes they say are more convenient, more predictable and less painful for sellers than the sometimes long drawn-out process of selling a home on the open market.

“It’s all about ease. The culture is moving [toward on-demand]. People like an easy transaction. They like it smooth. They like to have a situation planned for them. Models like ours are a perfect fit for that,” Mayes said.

Yesterday, Knock announced its new trade-in home model in which the startup helps potential sellers find their next home, buys that home for all-cash, conducts repairs to the home, moves the seller in, lists the seller’s old house, fixes up the old house, and once it sells, transfers the new house to the sellers.

“We’re literally reinventing the way people buy and sell homes. And we’re doing it by … facilitating a seamless swap of your home,” Black said.

“We’re trying to make homes liquid. People hate the 120-day listing process. They hate the repairs, shelling out of pocket for repairs. They hate inconvenient showings every time someone wants to come through their house, and the uncertainty that it’s going to actually happen.

“We alleviate all that and make it pretty much instantaneous.”

Knock, which is a licensed brokerage in 10 states, employs its own real estate agents, which it calls “local licensed experts.” These agents are not independent contractors, but rather salaried employees with benefits and stock options. They also earn commissions for any homes they sell or buy on behalf of Knock’s customers.

“So they also get certainty in the transaction,” Black said.

At OfferPad, sellers go to the startup’s website and fill out a form to request an offer on their current home. OfferPad provides a valuation and an offer within 24 hours.

Sellers choose whether or not to accept the offer and if they do, the deal closes in an average of 20 days, though the record so far has been five days, according to Mayes. After OfferPad buys the home, the company rehabs it and puts it on the market.

In March, OfferPad will introduce a financing program similar to Knock’s to allow sellers to move into their new homes ahead of selling their old homes, according to Mayes.

OfferPad currently operates in the markets of Los Angeles; Phoenix; Atlanta; Tampa, Florida; Orlando, Florida, and Charlotte and will soon expand to Tucson, Arizona; and Nashville, he said.

Knock is currently only in Atlanta, but plans to expand to 10 more markets by the end of 2019, starting with Charlotte next week and Raleigh in a couple of months.

‘Trulia for sellers’

Black hates the term “iBuyer.” It distracts from what companies like his are really doing, which is bringing about the “institutionalization of the transaction,” he said.

“Most agents do everything from lead generation to sales to contract management to closing, and they can’t necessarily get great at any of them. They’re spread very thin,” Black said.

“We have a highly specialized transaction. Our typical agent, our local licensed expert, does eight to 10 deals a month because behind them they have a home valuation specialist, a customer success specialist. They do … the people part of the transaction, the neighborhood part, the knowing the local school district.

“And as soon as they sign a contract it goes to our transaction coordination team specialized in getting to closing or getting that house on the market as quickly as possible.

“What you’re seeing in the market is that this transaction is becoming highly specialized, highly tech-enabled, and it’s going to be a lot more predictable in five years.”

While Mayes noted that OfferPad uses third-party tools in its transaction process (including a customer relationship management system from Salesforce), Black said Knock’s tech would be “baked from the ground up by us from end to end” because “it’s the only way you can have a seamless transaction.”

Black, a co-founder of popular listing site Trulia, said Knock thinks of what it’s doing as “building Trulia for sellers.”

While Trulia and Zillow empowered buyers, they didn’t do much for sellers, according to Black.

“[They] gave the buyer a massive amount of transparency into the data they needed to make the biggest financial decision of their lives, but the sell-side is exactly the way it was in 2005 and 1995,” he said.

“It’s totally opaque, there’s almost no automation, there’s a lot of paper. And we see on the back-end what we’re doing is an end-to-end platform that enables the seller to get total control and transparency into the process.”

Are sellers paying more for convenience?

At OfferPad, sellers pay a service fee ranging from 6 to 13 percent of a home’s purchase price. The fee is based partly on a “risk metric score” calculated according to factors including ZIP code, location and market trends.

At Knock, sellers pay 6 percent, the standard fee paid to agents in many markets. The cost of repairs is factored in at closing.

Considering that sometimes sellers end up paying more in fees to iBuyers than they would traditional brokerages and some in the industry question whether iBuyers really pay market value for homes, are sellers valuing time and ease over money?

Because of the holding expenses of staying in a home longer, which could include mortgage, utility, and homeowners association costs, “it’s really a wash,” Mayes said, especially if the seller doesn’t have to do repairs.

“I don’t think it’s a financial decision really from the consumer’s perspective. I really don’t think they look at it that way. They look at it, once they understand the model and the convenience, it fits for them,” he said.

Black disagreed. Knock’s typical sellers are usually young families with children looking to trade up or retirees trading down, and each kind of seller needs “every penny” they can get out of their current home, he said.

“We charge the same 3 percent as a traditional broker to sell your house and the seller of the house that we buy on your behalf pays us 3 percent,” he said.

“We don’t make any more money than that.” And because Knock is an all-cash buyer, “we often get a pretty significant discount off the list price of the home we’re buying on your behalf and we beat out any other competitive offers.”

Mayes backtracked a bit and said that he meant to indicate that sellers didn’t consider a transaction with OfferPad to be more expensive.

“They look at it as a equal or in some cases even a lesser one,” he said.

OfferPad’s sellers tend to be repeat sellers rather than first-timers, according to Black.

“They’ve gone through the process before. They’ve chosen to go through this process,” he said.

Email Andrea V. Brambila.

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