Opendoor’s latest proptech partnership demonstrates another nail in the coffin of traditional agency. With every iBuyer offer that gets invited into a listing presentation via CloudCMA, the industry collectively sacrifices a little bit more of its soul.
If it’s been a few years since you’ve seen The Lost Boys, I suggest giving it a watch, especially this time of year. It holds up.
I think of it every time I read a story about an iBuyer making a new connection with a brokerage, such as Keller Williams and Offerpad, or when companies like Coldwell Banker and Redfin announce iBuyer programs. And now, CloudCMA is letting prospective sellers see what Opendoor might give them via their agent’s listing presentation and CMAs.
You see, the film posits that for a vampire to exact any sort of control over a host, it has to be formally invited into the home. Max, the head ghoul, is a master at getting himself invited into places.
See where I’m headed with this?
As reported last week by Patrick Kearns, Opendoor and Cloud CMA’s plan will give agents who refer clients to Opendoor two options: negotiate a traditional listing commission with the seller, who will also be paying Opendoor an average transaction fee of 7.1 percent or receive a 1 percent referral fee from Opendoor.
I don’t disagree with Tyler Hixson, director of real estate partnerships and strategy with Opendoor, that consumers want options. New cars come with option packages, like a sunroof and leather seat combo. Cellular phone plans come with an array of data limits, pre-paid choices and different streaming video capabilities.
Mr. Hixson, homes aren’t consumer goods.
It takes a great deal more experience and training to sell a house than it does to get someone to upgrade to a navigation package. And that experience is worth much more than 1 percent.
With every iBuyer offer that gets invited into a listing presentation via Cloud CMA, the industry collectively sacrifices a little bit more of its soul, and its practitioners are pushed closer to economic limbo.
Unlike MLSs’ syndication deals with Zillow, agents aren’t being blindsided by the rise of iBuyer partnerships.
In fact, iBuyers are not even hiding their spell book, they’re merely hoping agents don’t know how to read it.
Like a capitalistic succubus, iBuyers are seducing “partner” agents across the threshold to give up their value proposition with a potion concocted out of one-part technological efficiency and cup fulls of the astonishingly immortal conceit of disruption.
Don’t be fooled by the ruse that frequent seven-figure infusions or expansions into new markets equate to success. Opendoor still doesn’t know the inroads to the market that agents do. It needs to feed off of your market intelligence to win more listings and then sell them on their behalf. It can’t grow without you.
Use the numbers
Real estate agents are the heart of one of our nation’s oldest business practices — the buying and selling of properties. And you remain in control of it.
Yet, far too many seem to have forgotten that and are substituting taking a stand for submission to what still remains a very unclear future.
Opendoor’s website copy openly admonishes the very process that has proven for more than a century to earn a real estate owner the most money possible in return on their investment: open market competition.
Leaving homes off the open market does a great disservice to their sellers, and homeowners need to be reminded of this.
I find it negligent of CloudCMA to not include in its cash-offer pitch the on-average reduction in market price iBuyers earn their customers. It’s about 11 percent, according to MarketWatch. Forbes found it to be around 10 percent in a write-up last year.
Collateral Analytics “develops real estate analytic products and tools to support financial institutions, institutional and retail investors, as well as property capital market activities.”
Its Ph.D. researchers, who combined have more experience in real estate industry analysis than I have years on this planet, published a report on iBuyers that is required reading.
It surmises, “In all, the typical cost to a seller appears to be in the range of 13% to 15% depending on the iBuyer vendor. For some sellers, needing to move or requiring quick extraction of equity, this is certainly worthwhile, but what percentage of the market will want this service remains to be seen.”
CloudCMA should also make every Opendoor-pitch market-specific, citing a ZIP code’s time-on-market and average percentage of list price received in the same screen (picture above) where it presents its perceived benefits. In Maricopa County, Arizona, from whence Opendoor emerged, the latter stat was 98.5 percent for Q2 2019; in Pinal County, Arizona 98.7 percent.
Remember, the consumer wants options, right?
Draining your brand
Agents earn their commissions — and future referrals — during the transaction, by leveling-out the ups and downs, managing inspection calendars, fighting fixture debates and negotiating concessions in-lieu of repairs.
Your brand and professional character are built after agreements are signed. You don’t get paid for winning the business, you get paid for doing it.
Those opportunities are lost with every iBuyer transaction that closes. With every 1 percent referral fee you accept from Opendoor, you spend that much against your brand.
I don’t doubt that buyers and sellers want homebuying to be easier, and that for quick sales and owners who favor time over money, iBuyers have a place.
But something is now abundantly clear: That small segment of the market can’t sustain Opendoor. It needs a great deal more nourishment.
Remember that there are loads of technology products already out there to make buying and selling easier. I review them, and Inman reports on them. More than likely, you’re already all spending a lot of money on them.
All those ones and zeros powering things like SkySlope and dotloop and LoneWolf Technologies are coded to solve the problems to which iBuyers have staked their entire argument, which is that what you provide isn’t good enough.
Maybe it’s time to start putting those stakes in something else.
Any ideas where?
Craig C. Rowe started in commercial real estate at the dawn of the dot-com boom, helping an array of commercial real estate companies fortify their online presence and analyze internal software decisions. He now helps agents with technology decisions and marketing through reviewing software and tech for Inman.