“There’s been this narrative of how this is a chase to see who can buy the most homes the fastest,” he said of Zillow’s jack-rabbit growth strategy in a MarketWatch interview on Thursday. “That’s just not sustainable.”
Bair said Zillow Offers’ failure has cast doubt on the iBuying model as a whole; however, the success of Offerpad and its remaining competitors proves that when done right, iBuying can weather market shifts and provide value to consumers who can’t or don’t want to navigate the open market.
“When you actually execute, this is a really, really strong model all the way, across the board,” he said while addressing the industry and the public’s questions about the longevity of iBuying. “And if you don’t execute, it’s like any business — it just doesn’t work.”
Bair said Offerpad’s success is based on a 100-day timeline that utilizes an in-house team of experts, including experienced real estate agents and contractors, to streamline the process and minimize the impact of supply chain and market disruptions.
“My background has been heavily in real estate and real-estate operations,” he explained. “So we took the approach of we wanted to get some of the best real-estate minds and then team that up with some of the most powerful technology in real estate. The reason we did that is, this is a very logistically heavy model.”
Furthermore, the CEO said Offerpad’s balanced approach to evaluating homes has enabled them to make smart offers that not only benefit them but sellers as well. Instead of totally trusting automated valuation models (AVMs) to do the heavy-lifting, Bair said the platform uses AVMs to start the evaluation process and relies on experienced real estate professionals to do the rest.
“Where we’ve always been different is, we’ll have our algorithms or AVMs get us about 90 percent there, but that other 10 percent we’re going to combine that with our people power in our markets,” he explained. “These are people that have bought hundreds or thousands of homes in those markets. They have local expertise in those markets.”
“So we’ll combine that technology with our people, and we feel like that’s one of the things that is definitely different,” he added.
In addition to refining the pricing process, Bair said having a salaried in-house renovation team has allowed the company to skillfully navigate supply and labor chain backups — which Zillow said was one of the nails in the coffin of Zillow Offers.
“When you have more control of the renovations, then you can control costs, you can control quality and you can control timing. Those are all really key things,” he explained. “When you’re hiring a third-party contractor, you hire them and don’t really control a lot of the process. If you get tripped up there, it’s just as important as getting tripped up on the pricing side of it.”
“Our model played favorably into the pandemic,” he added while noting the company has experienced little turnover with contractors. “Having internalized renovation has played to our favor here with the labor shortages and some of the things that are going on.”
Now Zillow is out of the way, Bair said Offerpad and its competitors have a golden opportunity to seize the attention of the public and growing interest in alternative transaction models, such as iBuying. “I think there’s actually more opportunity for us now. There were three companies buying at that volume, and now there’s two,” he said. “The overall take is the opportunity is just massive.”
“I’m not expecting a major player to come in,” he said addressing the chance another company will try to fill Zillow’s power vacuum. “You’re going to see some regional ones like we’ve seen over the last little bit. But there is a lot of opportunity for us right now, and in others in the space.”
The CEO said this week’s controversy highlights the need for proptech companies to properly prepare for market shifts and create business models that account for market booms, such as the one that started at the beginning of the pandemic, and market cooldowns, such as the one some say we’re heading into now.
“The market is always going to do something,” Bair said. “You’re going to have six months or a year of home price appreciation, and then you’re going to have [a situation] where the sky is falling, interest rates are going up and people think the market’s going to decline. Each market is different; each cycle is different.”
“[However], what I’ve been seeing is a tipping point for iBuying,” he added. “Even though there was more certainty for a consumer who was selling the traditional way than there ever had been over the last six months or eight months — they still were coming to us.”
Bair said he’s “bullish” about Offerpad’s future, as they work to sustainably scale and diversify the range of solutions for homesellers and homebuyers — something he said is the key to longevity for any iBuyer brand.
“I’ve always been really bullish on our channel and where we’re going to take it. It’s doable,” he said. “We’re going to continue to grow responsibly and continue to get market share.”
“It’s a shock that they got out of this as quickly as they did, but I also think there’s more opportunity, and you’re going to see this growing in the future,” he added.