This month’s National Association of REALTORS® Power Broker Roundtable discusses iBuyers, and their challenges and opportunities.
John P. Horning
Executive Vice President, Shorewest, REALTORS®, Milwaukee, Wis.
NAR Liaison for Large Firms and Industry Relations
Better Homes and Gardens Real Estate Metro Brokers, Atlanta, Ga.
Allen Tate, REALTORS®, Charlotte, N.C.
Better Homes and Gardens Real Estate Gary Greene, Houston, Texas
John Horning: In our industry, it seems there’s always some shiny new penny—a new way of doing things, a bid for attention that distracts us from the business at hand. The true test of good leadership may be how, and how quickly, we respond. At the moment, in many markets, the new distraction is the iBuyer issue—the “i” aptly standing not for internet but for instant—in which aggressive entities like Zillow, Opendoor and others are snapping up homes from anxious or uninformed sellers who forfeit a sizable chunk of change for the convenience of an instant sale. How is this windfall for investors impacting traditional real estate? We’re asking our panelists, all consummate professionals from prestigious companies in aggressively targeted markets, how they are meeting the challenge. Craig, what’s the status in Atlanta?
Craig McClelland: Let me say first that I’m a big believer in disruption. I see it as a wake-up call to do something differently—an opportunity to change for the better. That said, the iBuyer trend began in our market two years or so ago, in areas where home prices are at the low end of the market, smack in the sweet spot for investors. Today it’s impacting maybe 10 percent of the market, and it’s most assuredly on the rise, in large part due to very aggressive marketing. So while we understand why the “instant move” is attractive to certain consumers, we know it’s our job as trusted advisors to help them navigate those waters and understand the pros and cons and options.
Phyllis Brookshire: I’d say the iBuyer market in the Charlotte/Raleigh market is currently at 6-8 percent, primarily due to heavy marketing on the air, in social media, and in print. Words like “simplicity,” “convenience” and “instant money” can be very powerful persuaders—and the fact is, these instant buyers do, in most cases, deliver what they promise. But we also know that many sellers don’t know what they don’t know—that they’re paying dearly for that convenience, and that there are other, better options even when they are anxious to sell. We want our agents to educate sellers, in part through our partnership with zavvie. It’s a platform that collects all the iBuyer offers and helps agents and clients compare the financial options, including a sale on the open market, so sellers see realistic outcomes.
Mark Woodroof: A recent survey by the Houston Association of REALTORS® says some 40 percent of consumers in our market are looking at iBuyer options—not surprising when they see provocative ads like, “We’ll instantly write you check.” As Phyllis indicated, some of these sellers don’t realize how much money they’re leaving on the table, and it falls to us not to let them stick their heads in the sand. We, too, use the zavvie platform to inform and help compare options, and we’re also advising immediate appraisals to show sellers what their property is worth and whether the speedy move or the instant check is worth giving up 10 percent or more.
JH: That’s a great approach when the agent gets a listing appointment before the seller goes to the iBuyer. How do we get to sellers before they go that route?
CM: It’s not my job to dictate how the market works. My job is to be the trusted advisor we have always been to our customers. We’ve built our reputation on building relationships at the local level, and we’re doubling down on that with consumer awareness campaigns and more aggressive reach-out. There are bridge loans for sellers who need to move quickly and other relevant ways to meet their goals. These are the things sellers need to know, and we’re doing what it takes to be sure they know them.
MW: The devil is in the details, and that’s the message we’re getting out to sellers. It’s the power of personal relationships. If the iBuyer option is what you want, we’ll be your intermediary. At least we can be sure you understand exactly what you’re giving up. We’re counting on our history as a trusted local resource to encourage consumers to get the facts before they make a decision.
PB: Despite the hype, The Wall Street Journal reported recently the iBuyer business may not be sustainable. They’re operating on thin margins, flipping houses is expensive, and some are working with microscopic profit margins, if they make money at all. Reports I’ve read say Zillow lost more than $4,000 on average on each home sale in the third quarter of last year. In the short term though, for us, it’s all about the sphere of influence. Our agents are aggressively reaching out to every single person in their database. We want you to max out when you sell your home, and we’re the company to help you do that.
Appreciate the comments given by the participants in the discussion.
As Realtors, we all must do our best to make consumers aware that they are not “represented
To me, the “IBuyer” program is nothing more than an updated phrase from 30 years agothat phrase being: “If we can’t sell your home, we’ll buy it,” or we have a “guaaranteed sale program in place.”
The “ibuyer” and investor market in the “Inland Empire” of So Cal where I work is growing. I personally get phone calls from investors looking to purchase my investment properties every day. They’re basically looking for flips. OD and Zillow are looking for fiips, basically. My belief is as soon as the market shifts, their will be greater losses for these companies.
My greater concern is the Redfin business model which is basically, in my opinion the real threat. It’s the “online” real estate service that we’ve all feared. Are the transactions built on relationships? No. Are the “agents” skilled or local? Not usually Do their agents go the extra mile (show up at appraisals, mediate inspection requests, get ahead of problems before they rear their ugly heads), NO, I don’t think so. But once again, they are TEARING into our market share. Why does NAR and CAR not spend $$ combatting this business model? Because they can’t because Redfin is part of NAR/CAR. So, what are the answers here. These non traditional organizations are gainly momentum and quickly.
How do small brokerages align with Zavie?
Right now we – zavvie – are focused on keeping up with demand from large brokerages, but have plans to expand our offering to brokerages of all sizes. STAY TUNED!
Excellent information! Thank you for your time.