People today are in constant search of instant gratification, mainly focusing on anything that is easy to achieve or obtain. But selling a house has never been instant or easy, and in all honesty, most people don’t like selling or buying houses. Because of this, someone came up with a solution that makes the homebuying and selling processes easier — it’s known as an iBuyer.
Startups like Offerpad and Opendoor allow people to quickly and easily sell their home. There are definite drawbacks, like not getting the full market value for the home, but the speed and simplicity of the process appeals to users nonetheless.
The startups don’t do everything, though, and they definitely aren’t for everyone. As a real estate agent, you must learn what they can and can’t do and use that knowledge to your advantage.
What you need to know about iBuyers
The companies behind these startups are incredibly well-funded by people in the real estate industry, and they’ll pull consumers because of their convenience. However, they are currently available in some major U.S. markets, like Phoenix, Orlando and Las Vegas. They will definitely expand in the future, so all real estate agents should be prepared to adapt.
The most important thing to understand about Opendoor, Offerpad and similar services, is that they thrive on quick turnarounds. Sales can take as few as three days using these services. For sellers trying to move as fast as possible, this is a great feature.
IBuyers also provide sellers with cash offers for their homes based on public knowledge of current market values, information provided by the seller on their property, and the companies’ own internal algorithmic valuation systems. This means sellers might not get as much for their home as they could on the open market, but they get the money much faster, and they’re finished with the sale much sooner.
Opendoor and Offerpad also offer homebuyers opportunities to purchase a home as quickly and easily as possible. Opendoor advertises a 30-day satisfaction guarantee.
Zillow Instant Offers is another competitor that recently entered the market. Zillow provides similar services, using Zillow Premier Agents to represent Zillow in its re-sale of the homes it buys instantly.
The bottom line is that iBuyers are a definite competitor in the world of real estate, but they are not going to make real estate agents obsolete. The programs are good for sellers who want to get out of a home as quickly and easily as possible and are not overly concerned about the price point.
The iBuyer model will not appeal to all buyers and sellers, nor does it cover every aspect of real estate. However, the following tips will help you successfully maneuver your role as an agent in this new real estate climate with iBuyers.
How to respond to iBuyers
1. Embrace iBuyer startups, and adapt your approach
The real estate agent’s role may be changing, but that’s not necessarily a bad thing. When new startups such as Offerpad and Opendoor come along, agents have the option to embrace the technology, or fight it — and fighting isn’t usually a great choice. You are going to have to adapt.
Definitely don’t ignore these startups — they are not going away. They will slowly eat into the marketplace, but they will not force great agents into extinction. If you’re different and offer amazing service, new opportunities always arise with new technology, so figure out how to use these new startups to your advantage.
Bernice Ross covered how to do this in “How to put the iBuyer model to work in your business.” She spoke to Byron Short, the designated broker for United Real Estate Success in Scottsdale, Arizona, an active Opendoor and Offerpad market (since the column was posted, Zillow has also become an active iBuyer in Arizona). Short has his own system for adapting to iBuyers in his market.
Here’s how Short takes advantage of the iBuyer model to help his business. Short has created a strategy that allows consumers to have it both ways — go for the retail price by listing with him, but if the property doesn’t sell during the listing period, sell with an iBuyer at the wholesale price.
Here’s how it works:
- You must have a signed listing before pursuing this strategy.
- Second, it’s important that the sellers have had the property inspected so they know whether the bids the iBuyers provide for repairs are accurate; iBuyers typically use their own inspection companies.
- After the seller has prepared the house for sale and just prior to posting the property on the MLS, the seller contacts Opendoor, OfferPad and We Buy Ugly Houses to obtain a bid from each company that shows what the seller will net.
- After obtaining the bids, the sellers now have a firm buyer offer that they can exercise if the house doesn’t sell with Short within the agreed upon listing period. This is a particularly attractive approach when the seller is purchasing a new home and needs a firm sale to move forward with the new build. (It’s also the reason Lennar is working with Opendoor to expedite purchases of Lennar’s new construction.)
This approach allows the seller to go after the retail price, but to have a wholesale offer ready to go if needed.
If the property doesn’t sell during Short’s listing period and the owner sells to one of the iBuyers, Short offers to do the sale for 1 percent to make sure they are represented.
His reasoning is that in almost every case, those sellers will be purchasing another home, and he’ll represent the sale on the buyer side. Either way, it’s a win for both the sellers and their agent.
Think of iBuyers as an addition to the real estate world, not a replacement for it.
2. Quality of quantity
Offerpad and Opendoor both pride themselves on their simplified process and fast turnaround times, but those attributes can also be negatives.
Both services collect public data and information from the seller to determine the initial offer. The inspection or assessment happens after the initial offer, which can impact the contract. Sellers have options on which repairs to make or costs to deduct.
There is also less personalization, in my opinion, when people don’t work with a real estate agent. Computers can’t replace the individualized knowledge of an agent who has worked in neighborhoods and knows the market.
The good news is most consumers will want to get the most for their home, and with time, they’ll realize that’s done by showing it properly and being patient. Not all consumers need to sell tomorrow.
3. Niche markets are up for grabs
The startups are designed to be as streamlined and simple as possible. While this is helpful in some respects, it also means that they have very limited inventory.
The homes for sale on Opendoor and Offerpad are those that will sell quickly and easily — in other words, iBuyers sell the most common types of homes on the market. This opens up major opportunities for real estate agents to pursue niche market opportunities.
Specialty homes, luxury properties, condos and other specific areas of real estate could become extremely valuable markets for agents as they are outside the bounds of these startups.
4. Be realistic
Many people like the speed and convenience of online homeselling, and therefore, it is probable that real estate commissions will decrease over time.
Adam Smith’s idea of the “invisible hand” will catch up with our market and ensure that commission rates balance out supply and demand.
As long as we are flexible enough to evolve with this new technology, our future in the real estate world will remain bright.