One of the most anticipated sessions at our sister publication Houston Agent magazine’s inaugural Accelerate Summit, held on Oct. 2 at the Sawmill Lake Club in Missouri City, addressed a trend that has not necessarily been met with open arms by the real estate community: the era of the iBuyer.
But like it or not, tech companies have entered the real estate game, and they’re offering something that many sellers find appealing: fast, automated cash offers on real estate listings. It is in some ways a natural progression, said Chris Crocker, vice president of HomeLight Agent Services, a tech company whose Simple Sale platform is building a network of cash buyers across the country. “I have instant gratification on my phone right now for almost everything in my life — why not real estate too?”
In many ways, that’s what iBuyers are offering – convenience along with speed and certainty. “Our data shows that people using our services prioritize convenience,” Crocker said. “And if an iBuyer can offer them 94 percent [of their home value], it would be irrational for them to hire you.”
Welcome to the rise of house flipping, Silicon Valley-style. While the iBuyer concept is currently the most mature in Phoenix, where similar housing stock makes it easy for algorithms to come up with a price, it is already a reality in many cities across the country. “iBuyers will make up 15-20 percent of the market in the next 24 months,” predicted Crocker, who was formerly with Zillow.
Currently, iBuyer companies like Opendoor, Offerpad, OfferDepot and Zillow Instant Offers tend to work with homes that follow certain perimeters, such as being priced under $300,000. But the panelists agreed that the iBuyer space is likely to expand. “Studies show that 80 percent of sellers would entertain an iBuyer offer,” said Toni Nelson, director of strategic initiatives for Better Homes and Gardens Real Estate Gary Greene. “We can’t just stick our heads in the sand. Agents need to address it upfront and let sellers look at all their options.”
One way some brokerages are addressing this new reality is by opening up their own in-house iBuyer programs. “Our goal is to give our brokers a seat at the table,” said Charles El-Moussa, president of Coldwell Banker Texas. “And our job as brokers is to educate our sellers about what their options are.”
The option of selling to an iBuyer makes sense for certain clients, said Nelson. “This model works well for those wanting to take advantage of a new construction opportunity by leveraging an iBuyer,” she said. “Or it could be, their pain from a previous experience was so great, they’re willing to take a haircut. When we trade in a car, we know we’re not going to get the same value, but we’re eliminating the hassle. We as agents have to be open to offering them these options.”
Just how much of a haircut they’ll take is unknown, and agents need to help their clients determine that. “You need to know what their estimates are and why they’re not accurate,” said Crocker. “But showing them instant buy opportunities puts you at the forefront as the expert. “Let them know this is an option and you’re going to be their guide.”
Since iBuyers are a relatively new phenomenon, whether or not they’ll thrive when the market shifts is unknown. “Their margins are slim,” Nelson said. :From an economic standpoint, we don’t know about the long term. But for now, we need to let clients know it’s an option.”