Change in life and in business is a constant. The only way you can survive is to understand how the industry is changing and navigate based on your insights. Here are five fundamentals to keep in mind as our industry evolves.
Agents in my company are constantly in my office or calling me these days. They’re anxious to discuss the increased presence of iBuyers in our market here in Nashville and Middle Tennessee.
Many of them are still somewhat confused or uninformed about the iBuyer business model. After I explain how these companies operate, they start worrying even more about their books of business. I encourage them to take deep breaths and to remain calm: I reassure them that the iBuyer route is not for every homeseller.
I tell my agents these companies are connecting a relatively small group of large qualified investors to prospective homesellers for a “service” fee that is usually higher than what a traditional broker would charge a homeseller. And, the price an iBuyer will offer a seller for their property is generally less than market price.
The iBuyer hook is a simplified and expedited offer and “contract to close” transaction process, unlike the standard 30- to 40-day escrow period. An iBuyer transaction allows a seller to quickly move on to their next home or the next chapter in their life. Again, it is a good fit for some — but not all — sellers.
In other words, a seller must decide whether speed and convenience trump potential increased net returns on the sale of the home. In our current good economic times, I feel most homeowners want to realize as much money as possible at the closing table and are ready to wait for a qualified buyer. Most homeowners are “upsizing” and need as much equity as possible to transfer to their next home purchase.
I have five very important points for an agent to keep in mind if — and inevitably when — they face going up against an iBuyer company:
1. Educate yourself thoroughly on the iBuyer model
It will be very challenging to defend your value proposition if you do not know how iBuyers operate. Their marketing is exceptionally good because they convey a very simple message to their prospective clients. I guess you could equate how they market to “Madison Avenue meets Main Street.”
2. Understand that the offer from an iBuyer will most likely not be similar to an offer from a traditional buyer
Though the “quick close” benefit can be attractive to some sellers, most sellers will not like the higher listing fees and lower proceeds at closing. (Note: More times than not, they are lower no matter what the iBuyers say.)
Stress the importance of how you, as a real estate professional, can sell a seller’s home in a timely manner at the highest price — resulting in higher proceeds at the closing table. It might take you a little longer to sell the house, but in the end, the result will be a positive one for your client.
3. Remember that the iBuyer process is less personal
One of the most significant advantages of relying on an agent to market a home is that the seller will always know who they are working with and will have access to a real person for counsel and advice.
As professionals, the personal attention we give our clients has been a foundation of who we are and how we have operated for over a century. Most clients want the personal touch, and iBuyers cannot offer this to them.
4. Truly allow your sellers to consider the iBuyer option
As much as you don’t want a seller to use an iBuyer, you must remember that today’s consumer wants options. This holds true for homesellers as well. A quick sale might be something your client needs so he or she can relocate to another city to begin a new job.
Or, your clients might be beneficiaries of an estate with a home, and they want to sell the property quickly. In either case, an iBuyer might be a solution.
As a licensed real estate professional, most iBuyer companies will offer you some compensation if you refer a client or prospect to them. It may not be what you are used to making on a home sale, but something is better than nothing.
5. Don’t let iBuyers distract you from growing your business
If Opendoor, Zillow Offers, Knock or other iBuyer companies are showing up in your market, do not let them distract you from your prospecting efforts and the goals you have set for your real estate business.
You will survive any disruption if you stay focused each day, work your business plan, prospect consistently, maintain personal contact with clients and continue a level of customer service that goes beyond your client’s expectations.
If you have been successful in the past, you will continue to be successful in the future — with or without iBuyers competing for your listings. You may lose a few opportunities to these companies, but you will gain more if you build on your past accomplishments.
There is no question our profession will continue to evolve. The iBuyer concept is indicative of one of many trends in our industry. I don’t believe they are going anywhere anytime soon.
However, remember, as the industry evolution takes place, embrace the change coming your way. I guarantee you your role as a real estate professional will be different in the years ahead, but I am confident you will still have an important one to play.
Most sellers and buyers will continue to always need someone they can turn to who can shepherd them through the complexity of a real estate transaction.
Always remember the fundamentals of the profession, and hone your selling and relationship skills like you never have before! These basics principles of what we do will still be around even when our industry morphs into something different than what we see today.
Now, get out there, and sell something! And don’t let those iBuyers frighten you. There’s enough business for everyone.
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John Giffen is Director of Broker Operations for Benchmark Realty, LLC in Tennessee. He is the author of “Do You Have a Minute? An Award-Winning Real Estate Managing Broker Reveals Keys for Industry Success.”