After a momentous year for iBuyers, where do instant offer companies like Offerpad, Opendoor and Redfin Now go from here? All February, Inman will dig into iBuyers to determine what the new year has in store, where opportunities lie for real estate agents and what brokerages should expect. It’s iBuyer Month at Inman.
This article was last updated on January 31, 2022.
In this era of same-day delivery and instant gratification, real estate’s hurry-up-and-wait industry standard can seem frustrating to clients. In that regard, the iBuyer concept makes a lot of sense.
If you had told me when I was first starting out in real estate more than 20 years ago that one day I’d sell more than 50 homes through my own iBuyer platform, I would’ve told you that you were nuts.
In a climate ruled by I-want-it-now expectations, it only makes sense to meet your clients where they are and let them sell and buy their homes (mostly) on their own terms and timelines. And that means either establishing your own iBuying platform or creating a third-party pathway to iBuying.
I know what you’re thinking: iBuying? Didn’t you hear about what happened to Zillow!? Yes, I heard. The truth is: iBuying for a traditional brokerage or team is an entirely different animal. It’s not about using a computer to price homes.
I’m talking about an iBuying program that keeps agents at the center and ultimately benefits the consumer — not necessarily with the highest market value final sale price, but with the highest possible level of convenience. Today’s consumer is all about options.
If you want to future-proof your business, you can’t keep your head in the sand on this one. If we had ignored the pandemic-friendly opportunity of iBuying, we would have literally missed out on millions in sales volume as a team during the past year.
If you open your mind, you can turn the entire process of iBuying into a pipeline-building opportunity and an inventory machine. Here are four reasons why your brokerage or team needs an iBuyer solution — either DIY or off the shelf.
Offer homeowners exceptional convenience
Though we had always given our clients the option of a “guaranteed offer,” we realized during the height of the pandemic in 2020 — when consumers’ fears of having strangers walking through their homes hit an all-time high — that we needed a one-click system for giving clients easy instant offers.
That’s when we set up a simple digital pathway for letting clients explore the option without any pressure. Homeowners can now simply put their address into our site and receive an offer from us in 24 hours.
Suddenly, our mantra of “If we can’t sell your home, we’ll buy it,” had been turned on its head, especially in a seller’s market where homeowners saw how quickly homes were selling — and for how much. “Do we even need an agent to sell?” some wondered.
But then came us, playing the convenience card: “How would you like to sell your home with zero showings, a locked-in closing date of your choosing and a guarantee of a full cash offer — so you can go buy your next home? You won’t have to shuffle the kids or pets around for open houses, keep things spotless or leave your home office at a moment’s notice while you’re trying to work from home.”
Of course, some sellers said yes, even though we explained they wouldn’t necessarily sell their homes for the same price as they might putting their home on the traditional open market. They wanted that convenience and, during COVID, that feeling of safety from germs.
With iBuying, sellers also save on staging and preparation costs that are usually required for marketing. They can retain their privacy because digital photos and videos of their home needn’t be posted publicly.
When presented with the idea of iBuying, some sellers turned it down. But iBuying got them in the door. Then they saw our innovative, low-pressure way of doing things and trusted us enough to sell with us using the traditional pathway. Win-win.
Provide homesellers a cash guarantee
Finally, there came a third — and much larger — group of sellers who would have preferred the traditional path but needed cash to close on their next home. In a hyper-competitive market full of bidding wars, cash is king.
We expect this trend to continue in 2022. In fact, this is where we see the most growth in iBuying — sellers looking for a more aggressive buying strategy of their own. It’s worth noting that an estimated one-third of homes sold in the U.S. in Q1 of 2021 were full cash offers.
The real key with iBuying is the cash stability. I have seen more deals fall through over the last year than I’ve ever seen in my life, even in this strong market of multiple offers. Buyers lose their jobs. Buyers’ incomes change. People get COVID in their family and have to pull back.
In one case, we had a client whose home sale fell through and subsequently put his next home purchase in jeopardy. We offered to buy the home through our iBuyer platform and he was quickly on his way with a guaranteed closing date, with cash and a clear way to get his next home for his family — all at record-low interest rates, of course.
Leverage your real estate market knowledge
Part of why Zillow failed in its iBuying push — at least this time — is that the organization didn’t have enough of the peripheral real estate connections. They missed the mark by not knowing the nuances of local markets, which is what we know as agents.
Traditional brokerages and teams like ours have a team of agents on the ground, but they also have those connections Zillow can’t seem to scale — close ties to options for home mortgage loans, titles, appraisals, moving companies and property management services.
Real estate teams of the future that want to thrive, not just survive, during the digital revolution will offer a suite of services in an effort to become the “Amazon of real estate” by handling every part of the process, so consumers don’t have to stress and work so hard to get the job done. iBuying is definitely part of that. Today, we’ve built our iBuying option into our listing presentations.
Focus on exceptional home valuation
With our iBuying program, we get to decide the amount the home is worth based on local market data and local market expertise — not AVMs (automated valuation models). Our iBuyer prices aren’t necessarily set to a firm markup or a certain percentage below market value.
We determine iBuyer values on a case-by-case basis. We’re not going to lose money on a deal, but we’re going to be smart about our offers, so our clients feel treated fairly and tell their friends we’re worth hiring because we can do anything.
Sometimes, when we evaluate these individual offers, we’ve found it can create a domino effect of up to five transactions as we work with clients on both sides of the transaction.
After acquiring homes, we typically renovate and resell them or — because we have a property management division — we can turn them into rentals. And that’s a game-changer too: Especially now when there’s a record-low number of units on the market for rent and/or for sale, iBuying is a way to literally create your own inventory.
Putting it all together
If creating your own iBuying program feels too daunting, there are other third-party solutions out there, such Zavvie, an iBuyer offer aggregator that facilitates instant offers, bridge loans and other pathways that let consumers bring in their own agents.
Zavvie, the brainchild of Lane Hornung, a broker-owner of 8z Real Estate in Colorado, and Homeward, another umbrella service, both vow to keep agents at the “center of the transaction” — aka “on commission” — while providing more modern selling and buying options.
Consumers will continue to increasingly seek different real estate pathways. RedfinNow, Opendoor, Offerpad and other national iBuyers aren’t going away. Why not stake your claim on a piece of the action — versus getting cut out entirely? Your customers will thank you.
Brandon Brittingham is the CEO and team leader at the Maryland & Delaware Group of Long & Foster Real Estate in Salisbury, Maryland. Connect with him on Facebook or Instagram.
