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This may come as a surprise, but I don’t really care what the real estate industry thinks about iBuyers — companies that make quick, all-cash offers on homes and close the transactions in days. Here’s what I do care about: What do consumers think?
For the last couple of years, the traditional real estate industry has been aggressively debating the viability and sustainability of iBuying. During that time, tens of millions of dollars in venture capital has flooded into backing this new business model. Opendoor alone has raised over $1 billion in six rounds of funding. The national expansion by an increasing number of companies is being discussed by real estate agents coast to coast. The big brokerage firms didn’t sit idly for long, either: Industry giants have announced iBuyer programs, too.
But the bottom line is this: The only voice that counts is the consumer’s.
In a real estate transaction, the fiduciary duty of a real estate agent is to represent the interest of the client — in this case, the seller. If an iBuyer has the best deal for a seller, that’s great. That’s the offer the seller should take.
The problem is that the iBuyer process is a heck of a lot more complicated than it sounds.
More than ever, sellers need the help of a professional real estate agent, especially when there is an iBuyer offer on the table. But no one is telling them that. The implication is that they can either go it alone with an iBuyer or use a professional. The way I see it, there is no either/or here. Consumers need professional help to make the right decision.
That’s because not all iBuyer companies are the same. Not all iBuyer offers are the same. Not all iBuyer processes are the same, and not all iBuyer pricing methodologies are the same. Every iBuyer has a different set of standards for the homes it will consider buying, and depending on the condition of the home, its potential popularity among local buyers, the seller’s equity and a number of other factors, the seller could end up leaving tens of thousands of dollars on the table by working with an iBuyer instead of an agent — even taking an agent’s commission into consideration.
I own a real estate brokerage in Boulder, Colorado, and we have had experience with iBuyers. My company helps buyers and sellers find neighborhood experts who have street-by-street knowledge and know how to help folks evaluate multiple offers and know the nuances in iBuyer offers, because they are not all the same. One thing we have learned is some will take an application by phone, and others require everything to be done online. Say the wrong thing to one company, and it can cost sellers thousands of dollars in your home’s valuation. Check the right box online with another, and sellers can increase their home’s value. These processes — and the word choices used — are easily misinterpreted by the consumer, and mistakes can be costly.
We’re in the early innings of the iBuyer game, and sellers need to know they have a bit of a built-in advantage because companies are going to be more likely to pay more now than they are later on. History has taught us that about new business models.
That does not mean an iBuyer offer, even now, is going to be a seller’s best offer. Industry analysts have estimated that 90% of all instant offers are rejected and referred to a real estate agent, becoming a regular real estate listing and sale. That’s nine out of every 10 deals, indicating that iBuying is currently a very limited segment of the market.
But without a real estate expert on your side, someone who knows your market inside and out and who sells homes every day for a living, how can you be sure if you are in the 10% category or the 90%?
That’s why I still believe traditional real estate agents have a stronghold in a presumed iBuyer world. This is also another opportunity for finding an innovative way to engage traditional real estate agents with technology they may have resisted. There’s a business opportunity for every agent in the iBuyer world with these direct offers.
For example, when a seller gets an iBuyer offer, an agent can help them understand the true cost of the offer by preparing the seller for repair fees. Sellers may not need to complete the repairs themselves, but many will pay for them regardless. Repair fees are not calculated until after the (very thorough) home inspection, so the instant offer price can change throughout the process, significantly decreasing the seller’s net proceeds. And agents are experts at managing the home inspection.
Sellers should also understand that an iBuyer offer typically can be canceled by either party at any time — and sometimes the iBuyer walks. With a professional agent at their side, sellers have access to an expert who can negotiate some of the repair costs and help the seller find their next home. Agents can set the right expectations, provide steady counsel and advocate for sellers through the iBuyer process.
Whether the iBuyer market share is 10% or 30% of all transactions, it is the local agent who knows which homes are selling — and which ones are not. A local agent can bring more value than expected to the iBuyer decision making process for the consumer.
I urge the real estate community to stop talking about iBuyers among ourselves and start talking to our clients. Let’s remind them how important it is for them to come to their local agent if they are considering any offer, including one from an iBuyer. Let’s tell them the truth: iBuying is not as easy as it sounds. It can be complicated, and the guidance of a local real estate pro can help make sure sellers are making educated decisions.