While iBuyers aren’t really active in Chicago yet, other markets are seeing a vastly different picture. That’s why the session on iBuyers was one of the most highly anticipated panels at the Accelerate Summit event put on earlier this month by our sister publication, Houston Agent magazine.
Panelists noted that, 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. 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 — noted it’s in some ways a natural progression.
“I have instant gratification on my phone right now for almost everything in my life — why not real estate too?” he said. “Our data shows that people using our services prioritize convenience… 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 to 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 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,” Toni Nelson, director of strategic initiatives for Better Homes and Gardens Real Estate Gary Greene in Houston, told the audience. “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,” Charles El-Moussa, president of Coldwell Banker Texas, said of their iBuyer plans. “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 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.”