On the heels of our first-ever Agent Appreciation month, Inman is leaping into February with our Residential Finance theme month. Join us as we investigate how buying and selling a home is changing, from companies backing consumers in new ways to integrated services that handle the entire transaction.
Big and permanent change is coming to the real estate industry.
Consider the amount of capital pouring into iBuying, fintech and new business ideas around closing, title, escrow and rentals. The number of transactions from these new models are increasing as Realtors, broker-owners and the public embrace new ways of buying, selling and renting homes.
The industry is searching for a new language to describe this burgeoning real estate eco-system. Who are all of these new companies, where do they fit in and what exactly do they do?
Many will go bust, of course, but those left standing seem on track to reinvent the industry.
Here is my attempt to coin some terminology, add structure and provide clarity to the plethora of new real estate businesses. Under the umbrella of a new iMarketplace, a thirty-trillion dollar asset class — residential real estate — is being reshaped and unlocked.
Homes will be more easily traded with new sources of liquidity and demand and more transactions, leading to a more dynamic market. Long-term, supply will be freed up and new home starts should increase.
This emerging trend also begins for the first time to integrate the steps to homeownership — home sale, loan and title — and gives consumers more choice and certainty.
New opportunities for proactive Realtors
IBuyers, iFunders, iClosers and iRenters all sit inside this new iMarketplace. This is a starting point for explaining where this is headed.
Ted Irvine
iBuyers
These companies generally use institutional capital — private equity and debt — to purchase a seller’s existing home from them fast. These speedy sales offer the customer instant liquidity for their home equity, promising certainty to the home seller and even more so for the move-up buyer. The big players in this space are Zillow, OpenDoor and Offerpad. Redfin has a small share but is expanding. New start-ups here include companies such as Sundae. Traditional franchises and brokers are also entering the market.
Bringing more certainty to Realtors as well, they are getting paid faster when sourcing these new options for their clients.
iFunders
These companies help provide capital for consumers to purchase a home. Sometimes, they fund the purchase of a customer’s new home with cash before they sell their old home. This way the buyer can purchase before they sell and keep all of their home equity. iFunders offer an array of financial services including co-investing, shared equity, rent-to-own options and a home trade in with a cash offer.
A horde of start-ups are entering this market including Homeward, Orchard, Flyhomes, Ribbon, Knock, Divvy, Unison, EasyKnock, Point, PatchHomes, Equity Key, Landed, ZeroDown, Fleq, Landis and Hometap. All of the big iBuyers like Zillow and Open door are also offering clever new financing schemes.
Consumers and Realtors should benefit from new ways of financing deals, reducing the number of mortgage hang-ups and delays.
iClosers
These companies generally enable iBuyers and iFunders, title and escrow companies and tech brokers to deliver a streamlined closing experience. Some are trying to upend the traditional title companies. They include Qualia, StatesTitle and Spruce.
Realtors benefit from a speedier and easier closing.
iRenters
These companies enable both tenants and landlords to deliver a better renting experience. They include Bungalow, Doorstead, Avail, Cozy, Latchel and ValetLiving. Short-term and vacation rentals powered by apps and tech may also be included here such as AirBnb, VRBO and HomeAway.
A new Marketplace
Under the umbrella of a burgeoning new iMarketplace, these companies offer an alternative to the traditional MLS broker-cooperation marketplace that ruled the industry for 100 years. All of the companies make one common promise: certainty. One uncertainty, however, is how many of these start-ups will survive as they fight for market share and relevance. New business models are hard to build and harder to scale.
A broader transformation may be at work here. Inman editor-at-large Clelia Peters imagines “home as a service,” in which consumers increasingly recognize their home as a financial asset. They will have greater expectations around the ease of leveraging and using their houses. This better fits a mobile workforce and expectations about homeownership by more transient generations.
Imagine signing a lease that you can take with you from home to home.
For now, the two marketplaces — the MLS marketplace and the new iMarketplace — will overlap but also sit side by side giving consumers new ways to finance, sell, buy and rent a home.
Realtors will be more in demand as consumers sift through more choices.
