Jay Thompson is a former brokerage owner who spent over six years working for Zillow Group. He’s also the co-founder of AgentLoop. He “selectively retired” in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column is published every Wednesday.
Back on Nov. 2, 2021, Zillow announced plans to shut down its iBuying operations. In some circles, you could hear the Champagne corks popping as agents practically danced in the streets, celebrating both the demise of iBuyers and Zillow itself.
Of course, neither iBuyers nor Zillow is down for the count. To the dismay of many, both are still around. Notwithstanding the Zillow Offers debacle, iBuying in fact has grown. In early January, Offerpad secured more than $600 million in credit to expand its operations. According to Mike DelPrete (who is, hands down, the leading authority on iBuyers — with the data to back it up), the iBuyer market share soared in 2021. Sure, Zillow Offers was a part of that 2021 growth, but if you think OpenDoor, OfferPad, RedfinNow and all the big name franchises who have iBuyer divisions aren’t going to pick up what Zillow left behind, you don’t understand the demand or potential of iBuying. Every agent and broker should be well-versed in iBuying data and trends.
I spend a great deal of time reading agent reactions to industry happenings. FUD (fear, uncertainty and doubt) reigns supreme when it comes to iBuying. From “iBuying will destroy the industry” to “the iBuying model will never work,” many agents bemoan the existence of the dreaded iBuyers.
What seems to be missing from most of these discussions is the fundamental understanding that not every seller is focused on squeezing every dime of equity from their home. It’s difficult to wrap your head around why some sellers might be willing to forgo a few thousand (or even tens of thousands) of dollars from the sale of their home.
Let’s set aside the facts that: 1) many iBuyers are paying “market price” within their buy box; 2) they all pay agent commissions on the purchase and sale of their homes (if there is an agent involved in referring the listing or representing a buyer); and 3) iBuyer fees are declining and approach real estate commission charges. Let’s assume that a seller will indeed receive a lower net when working with an iBuyer. This begs the question, why are some sellers willing to sell for less money?
Ease of sale
Let’s face it, selling a home is a painful experience. Yes, a great agent can reduce the pain, but it can’t be eliminated in a traditional sale. First, there is preparing the home for sale. Even in a white-hot seller’s market you need to get your home ready to sell. That means fixing obvious issues. Many buyers, even in today’s market, won’t consider a home with nonfunctional HVAC, a bad roof, or a defunct hot water heater. Few want to buy a home that smells of cat urine or cigarette smoke. You know who doesn’t care what your house looks or smells like when they buy it? Yep, iBuyers.
That leads to showings. Showings are a hassle for sellers. Your home needs to be clean, or at least somewhat presentable. The owner should vacate the premises. And there’s Fido the dog that has to be taken away, locked in a crate, or dealt with somehow. Maybe your kitty is psychotic, or your kids. And let’s not forget that pesky pandemic. Lots of folks would rather not have strangers traipsing through their home, touching everything and coughing God knows what into the air. Yeah, showings are a hassle. You know how to sell your home with zero showings? Use an iBuyer.
We haven’t even gotten past initial listing and showing, and iBuyers already have an advantage — an advantage some are willing to pay for, or take less equity, to realize.
How about offers, more specifically financing? Sure, you may get multiple offers, including some from cash buyers. You may also get one offer, from a regular person who needs a mortgage. Enter the uncertainty of knowing a buyer can actually buy your home. You know what eliminates the uncertainty of a buyer closing? You guessed it — an iBuyer.
Speaking of closing and uncertainty, how about that closing date? In a traditional transaction, the closing date is almost always determined by the buyer, typically gated on when they can get that uncertain mortgage. If you’re a seller, how nice would it be if you could pick the closing date. Well, use an iBuyer and you can pick your own date.
The “remote” seller
Here’s a personal example of a seller who might consider using an iBuyer. Almost two years ago I moved from Seattle to Texas. My wife and I drove to Texas to look for homes (at that time, flying into Texas required quarantining thanks to the aforementioned pesky pandemic). We had no interest in buying our “forever home” sight unseen or via a virtual tour. So we shacked up in an Airbnb while we searched, offered and closed on a home. That left us with a condo to sell in Seattle. You want to talk about a hassle, try selling a home when you live more than 2,000 miles from it. Smoking-hot seller’s market or not, great listing agent or not, it sucked. At that time, there were no iBuyers serving the Seattle market. If there had been, I can assure you we would have entertained their offers. Yes, even if that meant losing out on some equity. Our time and sanity have a value.
Another personal example here. Long ago my dear grandmother passed away. She very generously bequeathed her five grandchildren a rental property that she’d owned for years. The five of us were spread all over the country, which made locating, hiring and dealing with a property manager problematic, and yes, a hassle. (“Hassle” seems to be a recurring theme.) So we sold the property, which was also a hassle, but it was a one-time event versus the hassle of recurring and endless remote property management. Utilizing an iBuyer would have been the perfect solution.
The bottom line here is that there are some sellers willing to forgo maximum equity in order to sell a property with as little time and hassle as possible. Different people will put different values on their time and sanity, but denying these sellers exist simply does not make sense.
I have no idea what will be the ultimate market share iBuyers may achieve. Some industry prognosticators have claimed up to 50 percent of all sales may someday go through an iBuyer. I think that’s high. I see it in more the 10 percent to 15 percent range, but that’s just my personal opinion. Whatever the number may turn out to be, it’s more than zero, and probably unwise to ignore these sellers.
IBuyers are here, there’s a need for them, and more and more people are learning of their existence. Hoping iBuyers go away is futile. Why not leverage them when you can, educate your sellers and help them get iBuyer offers (all I’m aware of will pay you, so that shouldn’t be a concern)? You may not be aware, but your own brokerage or franchise may already have an iBuyer service. If not, your broker should investigate their options. The savvy agent isn’t wishing and hoping the problem goes away. They are investigating them, understanding both the iBuyer and their audience and implementing best practices to help build their business.
Jay Thompson is a real estate veteran and co-founder of AgentLoop living in the Texas Coastal Bend. Follow him on Facebook, Instagram and Twitter. He holds an active Arizona broker’s license with eXp Realty. Called “the hardest working retiree ever,” as the founder of Jay.Life he writes, speaks, and consults on all things real estate.