Troy Palmquist is an indie broker in California with more than a decade of experience. His regular column, which covers a range of helpful tips for agents and op-eds on industry happenings, publishes Thursdays on Inman.
IBuyer. It’s the real estate buzzword of the century. And for good reason.
According to Inman’s Essential Guide To iBuyers, “iBuyers are companies that offer homeowners cash for their houses. The companies typically do minor repairs and maintenance, then try to quickly relist the home and sell it for a profit. Homes can reappear on the market within a matter of weeks or months, but the key is to buy and sell a lot of houses and do it quickly.”
The major players in the iBuying game include Opendoor, Offerpad, Redfin, Zillow Offers and more. And they are becoming big business in select markets across the country, including Phoenix, Atlanta, Tampa, Dallas — and probably a market near you.
Today, I’m offering a few ways agents can familiarize themselves with the iBuyer model and discuss it with their clients. Why? Because so many agents are struggling to articulate their value proposition in a shifting industry.
1. Discuss iBuyer fees vs. agent commission, then tout your negotiation skills for good measure
Losing a client to an iBuyer can be a crushing blow to an agent who is grinding daily to maintain and generate leads. To counter the pull of iBuyers, help clients understand that selling their home to an iBuyer could cost them more than they bargained for.
While the iBuyer approach seems like a modern solution, that convenience inevitably comes at a cost, and I’m not talking a few measly bucks — but thousands.
A recently published MarketWatch investigation of multiple transactions involving iBuyers shows that their offers would net their customers, on average, 11 percent less than owners who choose to sell on the open market.
This is considering all the iBuyer fees and additional costs that come into play, which can equate to tens of thousands of dollars lost. The investigation also found that there was more uncertainty associated with the transactions than advertised.
IBuyer offers can be lower than the negotiated offers that clients get with the help of traditional agents, and the fees associated with iBuyers are higher too.
IBuyers are known for charging at minimum a 6 percent in fees, nearly equivalent to commission. Every percentage counts when it comes to a transaction as significant as a home sale.
Your skills could be much more valuable and lucrative for the client when it comes to launching a home to market for the right price and negotiating for the best offer.
Bottom line, iBuyers are not in it for you. They’re in it for volume. Most agents are in it to get the home sold for the highest price in the least amount of time.
2. Highlight your superior personalized service and hands-on approach
The iBuyer transaction will involve less one-on-one service. It’s a cornerstone of their business model and is great for some. But it’s not for everyone.
This often comes at a shock to iBuyer clients who are voicing similar complaints in forums across the country. They can’t reach their iBuyer representative. There is a lack of consistency. There is little to no service. Everything is automated.
Reiterate these points to your clients. If they are the type of seller who likes to be involved, informed and engaged, they’ll be better off sticking with a traditional real estate agent who can offer personalized, hands-on service from list to close.
3. Let sellers know they will likely get a lower sales price
Your clients and sphere of influence are more than likely misinformed about what an iBuyer is. Aside from explaining the what it is and how you can compete, it’s also your chance to state the facts.
Case in point, low ball offers are a thing, and it’s not a good look.
In Denver, a recent iBuyer transaction made headlines over a low-balled offer that seemingly changed overnight — and it’s causing an uproar. So much so, that local agents are warning their clients to exercise caution or forgo the iBuyer model altogether.
In the post, Denver metro Realtor Jody Bennigdorf tells Denver7 360, “they’re bad for buyers, bad for sellers, and bad for the Denver market.”
He goes on to say: “They’re not there to look at your bottom line or do what’s right for you.”
He even went as far to tell the reporter his brother recently got an iBuyer offer on his Westminster home — a suburb just northwest of Denver — that was $65,000 less than what it just sold for.
“We’re talking about tens of thousands,” the agent said. “They are low-balling people when they make them offers on their homes.”
Explain to clients that by working with a dedicated agent who is armed with a quality CMA, you can get them more money for their home with minimum bother. It’s all about timing. Are they ready to jump in and take a risk or wait for a reward?
I could keep going but these are just a few points that agents should discuss with their clients, colleagues and friends. It’s an important discussion to have, and I encourage comments from advocates on both sides.
Even better, I would love to hear your thoughts in person at the upcoming Inman Connect event in Las Vegas.
How do you stay ahead in a changing market? Inman Connect Las Vegas — Featuring 250+ experts from across the industry sharing insight and tactics to navigate threat and seize opportunity in tomorrow’s real estate. Join over 4,000 top producers, brokers and industry leaders to network and discover what’s next, July 23-26 at the Aria Resort. Hurry! Tickets are going fast, register today!
Thinking of bringing your team? There are special onsite perks and discounts when you buy tickets together. Contact us to find out more.