John Gafford, broker-owner of Las Vegas-based Simply Vegas Real Estate, is alarmed.
IBuyers, companies that use technology to quickly buy and resell homes, he alleges, are bilking homeowners left and right.
“Here’s the deal: 60 percent of the American population has no other wealth than equity in their house,” he said, speaking onstage at Inman Connect Las Vegas on Tuesday morning.
And if those homeowners sell their homes to an iBuyer, he claimed, they are basically lighting a great deal of it on fire. Homeowners could easily end up coughing up 12 percent or more of their home, compared to the 5 to 6 percent commission they would pay if they used a real estate agent, Gafford said at a panel entitled “The Anti-iBuyer: Going Against the Grain.”
On the other hand, Veronica Figueroa, who heads up an agent team for eXp Realty in Orlando, took a different view. Through a partnership with Zillow Group, she frequently presents what she said are fair market offers from Zillow to homeowners.
“Let the seller decide what’s best for them,” she said on a panel that came before Gafford’s, which was called “Are You i-Ready? Plugging Into the i-Buying Craze.”
The two agents’ remarks illustrate how real estate professionals who are familiar with iBuyers can hold sharply contrasting views about the merit and true cost of these industry disruptors. Depending on which agent you ask, iBuyers can be a great option for a range of sellers, a rip-off for all of them, or mostly just a lead-generation tool.
Two years ago, Figueroa, who sits on Zillow’s agent advisory board, decided to partner with Zillow in its effort to play in the iBuyer sandbox.
“We learned the sellers are definitely exploring these options and embracing the on-demand experience,” she said. Many different types of sellers now choose to sell to Zillow’s iBuyer, including those who want to avoid home showings, need to relocate for a new job, or are undergoing a difficult life event, such as a divorce, she said.
Figueroa explained how her partnership with Zillow Offers works. First, a homeowner requests an offer. Next, Figueroa comes up with a comparative market analysis (CMA) for the property. Zillow then factors this estimate into its own analysis and comes up with the offer.
Figueroa then presents this offer to the owner. If the seller accepts it, Figueroa facilitates the transaction. She then resells the home for Zillow. If the seller rejects the offer, Figueroa then will offer to list their home on the open market.
Zillow Offers charges a service fee that is somewhat higher than a typical real estate commission of 5 to 6 percent, she said. But it offers fair market value, she claimed.
On the other hand, Matt Patulski, who leads an agent team an Austin, Texas-based Keller Williams brokerage, says the bids he fetches from iBuyers for homeowners typically would cost them 12 or 13 percent of the value of their home.
Nonetheless, Patulski takes a neutral view of iBuyers. He uses them to generate seller leads with the aim of converting them into listings, though he’s also willing to help them sell to iBuyers.
In prospecting phone calls, his team members will tell potential sellers that they can bring them a cash offer. This can help get a team member in the door, where they will present an offer from an iBuyer alongside what they say they can sell their home for on the open market. Patulski said most homeowners choose not to accept the iBuyer offer, opening the door for his team to list their home instead.
“Start to use it on all your conversations on the phone,” he advised agents.
Robin Smith, a team leader with a Las Vegas Keller Williams brokerage, told the Connect audience that she has also integrated iBuyers into her business. IBuyers were winning away some sellers who wanted to buy new homes from homebuilders.
Now, when she connects with such customers, she presents them with a bunch of bids from cash buyers. Those might include offers from Opendoor, Offerpad and Zillow, the biggest iBuyers. But they also can include bids from other investors that she has relationships with. Sellers also, of course, see what she thinks she could net sellers by listing their home on the open market.
These presentations make sellers fully aware of how much money they might leave on the table by selling to an iBuyer. Echoing estimates from other agents who spoke on the panels (excepting Figueroa), Smith said the iBuyer’s discounted offer and service fee can easily add up to 12 percent of a seller’s home. She added that iBuyers often request repair cost credits after home inspections that are much higher than what an ordinary buyer would ask for.
It’s for these reasons, said Gafford, the broker-owner of Simply Vegas Real Estate, that agents should strongly discourage sellers from using iBuyers. Casting them as a valid selling option for homeowners is unethical, he argued.
“You,” he said to hundreds of agents watching his panel, “have an obligation… to protect them [homeowners] from what they don’t know” — that using an iBuyer purportedly means leaving lots of money on the table.
He added that Opendoor is a member of his association (the Greater Las Vegas Association of Realtors), and that he thinks that is “egregious and unbelievable.”
Gafford’s final word of advice?
If iBuyers are coming to your market, don’t be like Roy Horn, the magician from the legendary Vegas act Siegfried & Roy, who was mauled by a tiger that he’d thought he’d domesticated.
Editor’s note: This story has been updated to clarify that Opendoor is a member of the Greater Las Vegas Association of Realtors, according to Gafford. A previous version of this story reported that Gafford said an iBuyer sat on the board of his local association.