IBuyers like Opendoor, Offerpad and Zillow Offers could be hugely successful and yet, nonetheless, amount to a negligible market presence, NRT CEO Ryan Gorman said during a lively Broker Connect session Tuesday at Inman Connect Las Vegas.
In an entertaining morning session inside the Aria Resort on the Las Vegas Strip entitled “Don’t Believe the Hype: Why iBuyers Might Not be Public Enemy #1 After All,” the fast-talking Gorman broke down exactly why he believes iBuyers aren’t an existential threat to the livelihoods of real estate agents.
“When you look at most of the predictions by people who can do math, it comes to around 3 to 5 percent of the U.S. market may qualify for this model [in 3-5 years] at some level of maturity,” Gorman said. “Lots of people predicted far more than that, some of them can do math, some of them cannot.”
In Phoenix, which is flush with iBuyers, Gorman said it’s not different than a market where new home builders are dominating.
“What happens when new home construction is flying off the shelves? Everyone loses our number,” Gorman said. “Then when it gets a little crowded and the new development is finally at scale across the highway and there’s a little bit of competition? Suddenly our phone is ringing off the hook.”
There are limits right now to what types of homes iBuyers are purchasing, Gorman said.
“IBuyers are still today buying, for the most part, post-1960 houses, single-family, detached, simple homes in a mostly homogenous market where the population is growing and the average sales price is growing,” Gorman said.
Gorman said every week he speaks to people who are raising money with a new model, with many saying, “we’re going to buy $3 million houses. We’re going to penetrate the condo market.”
“They’re mostly not buying anything,” Gorman added. “They’re doing a lot of talking and they’re not raising a lot of money.”
Overall, this opportunity doesn’t look like a huge threat, Gorman said.
“IBuyers can be completely successful in their model and be huge but still be small,” Gorman said. “We work in such an enormous industry, these things can all be true at the same time.”
Gorman’s company NRT, like others, has jumped into the iBuyer business in the past year through a partnership with Home Partners of America.
NRT is a subsidiary of Realogy, whose stock price has been hammered in the past couple of years by the changes buffeting the residential real estate industry. Realogy has also filed a widely-watched lawsuit against venture-backed Compass in the Supreme Court of New York, charging that it engages in “unfair business practices and illegal schemes to gain market share at all costs.”