When I first hear the term “iBuyer” I ignored it.
To me it sounded like some kind of weird techy thing that a) was made for other markets, and b) surely would not be penetrating my kind of business, the business of staying in touch with those who know, like and trust me refer real estate business.
I proceeded to merrily ignore this iBuyer concept even after it made its debut in the Twin Cities market.
Once again I told myself eh, it’s not going to affect my sphere.
And I was wrong.
I trust that I’m not alone in my initial reaction to the iBuyer phenomenon, so let me first say that I understand if you’ve not been paying attention.
I understand if you don’t exactly know what it is. And yet what’s important to underscore is that this IS affecting our market and it WILL continue to grow, and you need to know what it is and how you’re likely to lose business (or go out of business) as a result of it if you don’t make a plan right now.
What is an iBuyer?
Once I finally read about it, I realized that this whole iBuyer thing is just a new name for something that’s been around forever – it’s called the cash buyer.
Anyone who’s been in real estate for a while knows that there’s a certain set of property owners who don’t want to mess with preparing their house for market. These may be folks who’ve inherited a property from a deceased relative. They may be elderly folks who need to go to assisted living. Or they may be homeowners with equity who are nonetheless facing foreclosure. There are a whole host of people who, for whatever reason, don’t have time or interest to paint and stage and market. They want the house sold yesterday.
There are a couple of ways that the real estate community has dealt with this over the years. One way is that the agent partners up with an investor who is willing to buy fixer-uppers (at the right price of course.) This can be a significant value to a seller who just wants the property gone ASAP.
Another way that agents have dealt with this is by making offers themselves. For example, they might say to a seller:
Based on the market analysis, if your home is all fixed up, I predict it will sell for X. And if you do not fix it up, and we put it on the market as is, it will sell for Y. Alternatively, if you don’t want to put it on the market at all, Z is what I’ll offer you myself, today.
So these two methods work pretty well, and yet not enough agents have been offering them. The number of sellers who want an offer number today is apparently larger that most Realtors suspected.
This is no doubt related to how the consumer is changing and increasingly demanding information NOW, at their fingertips.
So the iBuyer programs are simply cash offers, made now.
There are a few key differences though, between what you can get today versus what you could get from a Realtor or an investor partner making this kind of offer in the past.
Perhaps the most significant difference is that a homeowner can now get an offer online, at any time of day they want.
They don’t have to wait for an appointment with you, the Realtor.
And frankly, why wait for an appointment when you can get the information that you want online? If I can get my groceries online, my TV shows online, my socks and my undershirts online, any time of day that I want, why on Earth should I wait for a phone call and an appointment with a Realtor just to get an offer on my house? Especially when I’m only just curious anyway?
The other difference is the fees.
In the old-school way of the investor or agent making a direct offer to the seller, there was (at least as far as I was aware) often a commission discount. In fact, if the agent themselves was making the offer, they might well waive the entire commission (of course they’re offering a lower price as a result, so perhaps it ends up being a wash to the seller.)
In today’s iBuyer scenario, we’re talking about an online offer that’s guaranteed, backed and administered through an organization. And that has a cost. IBuyer transactions tend to actually cost the consumer more money than a traditional sale, in terms of percentages.
So why is this happening? Is it a good deal for the consumer?
In some cases, a quick cash offer is a great deal for the consumer.
Depending on their situation, they may be fine with getting a lower price and a higher fee in order to divest themselves of a property quickly and with no hassle. We know there are cases where that is true.
Here’s the other reason it’s happening:
(and by IT, I mean the proliferation of iBuyer companies and activity overall)
The consumer wants to know what they can get for their house today.
I mean seriously, wouldn’t you want to know too?
That’s why consumers have flocked to Zillow for all these years – because Zillow tells them what (they think) their house is worth, and the homeowner doesn’t have to talk to anyone. They can find this information at two in the morning if they so choose.
Getting an instant offer is just the next step in the progression from looking at Zillow (or whoever’s) online valuation, now it’s not just what’s your house worth, it’s actually what will a real entity pay you?
Why is this a big deal for real estate agents?
I can hear what you’re thinking already:
Who cares?
Most people (the ones who are not desperate, just curious) won’t take the offer – it will be too low for them.
You’re right! Most people won’t take the offer. And that, you see, is the whole point. The offer itself is not the point.
The point is finding out who is thinking about selling their house.
If you’re an agent, do you buy leads?
The real estate agent’s perennial challenge is lead-generation. It’s finding out who’s thinking about selling in the near future, so that we can get into contact with them and hopefully assist them when they’re ready.
What better way to find out who’s thinking of selling their house than to make offers to anyone who comes to your website?
I mean, right?
Think about it. Let’s say your aunt is considering selling her house. You have no idea this thought is in her mind, because she hasn’t told you yet, and frankly you may not have kept in close of touch with her as you could.
So one night, at 11PM, she decides to visit an instant-offer site, to see what someone would give her for her house. She receives an instant offer of $250,000, though the market value of her home (properly prepared) is more like $325,000. She’s not going to take the offer, of course, because she’s not ready to give up that extra $75,000.
No problem! Says the agent from that same company who contacts her the very next day. We can list your house in the traditional fashion and get you a higher price! I can come out to discuss that with you at 3PM this afternoon, or would Saturday at 10AM be better?
And before you know it, your aunt’s house is listed with ABCIbuyer & Co, and you’re all like: but Auntie! Why didn’t you call me?!
And she’s like: well it just all happened so fast… and I didn’t want to bother you…
And now you have to go to Thanksgiving and act like you’re feelings aren’t hurt.
And this, my friends, is the future.
So the questions are:
How is your company adapting in order to help keep you in front of your consumers?
How are you adapting?
We know that many of these industry-disrupting firms that are bring iBuyer programs actually desire to remove the real estate agent from the center of the transaction.
Does your brokerage have a strategy?
At Keller Williams we believe that we must adapt to the consumers’ changing needs. We also believe that the agent provides a critical fiduciary value to the client, and should remain at the center of the transaction in order to do so.
If you would like to learn more about what Keller Williams is doing to provide a higher level experience for our consumers AND give agents the tools to stay at the center of the transaction for their clients, reach out to me and let’s chat about it.