Beat the immediate buyer
Being so close to Halloween, I thought of writing the scariest article for real estate investors and real estate agents that I can think of. iBuyers are zombies that eat your chances. They kill growth and kill dreams!
Let’s start with what iBuyer is and what it does, and what we need to do as agents and investors to adapt to this new standard. iBuyer is the Immediate Buyer. They use technology to evaluate the property and determine the offer price immediately. The property owner will contact the company and get a cash offer at his home on the same day. This looks great for a scary seller and for agents and investors, but let’s dig a little deeper. Among the major iBuying companies, all will need to inspect after renting a home to determine the necessary repairs. From there, they require repairs or change their bid price. The offer is always below market value and there are general fees associated with this process. Prices vary from iBuyer to iBuyer and from one market to another, but they tend to be between 6% and 10%. The top three iBuyers are Opendoor, Offerpad, and Zillow. Redfin also reached the market.
So what do real estate agents do?
It seems that iBuyers and agents can work closely together, and this trend increase will actually help proxies acclimate and benefit. Here are two ways:
Reference Prices: Most iBuyers will pay a reference price. According to Opendoor’s website, they want to pay 1% fee to agents if they bring in customer. They also claim that once the home is sold, the agent will get the buyer. According to the website, 87% of shoppers prefer to use an agent when buying, so they won’t actually buy a home from iBuyer. There are many agents who will work with buyers and get three or even four offers from iBuyers. They will work with the buyer through inspections and provide all offers to the seller. The seller can decide to work with iBuyer or not. If they do, the agent will get their referral rate without much of the work accompanying the template roster. These are one-way agents advertising “guaranteed offers” in their marketing.
Listings: Zillow has been in the leading business field for years. They produce thousands of potential buyer customers who forward agents for fees. This is your main income generator. Now that they have entered the iBuying space, they are also creating leads from sellers. From what I read, Zillow buys only about 2% of his offers. With every offer made, they collect a large amount of seller data. Since they collect a lot of data, the barrier to working with Zillow is very high, which means these top quality prospects can now either sell to agents or ask for fees. I know many agents who are happy to pay a lot to potential clients like these.
The iBuyers are not yet a real threat to customers. In Phoenix, the most established market in iBuying, less than 6% of homes are sold with this strategy. This number is closer to 0.4% nationwide.
What happens to investors?
I think iBuying represents a greater threat to investors than agents. One of the biggest advantages that investors have or possess is their ability to make quick decisions and quickly close homes. IBuyers take advantage of this competitive advantage in a big way. However, there are two advantages that investors have.
Higher price: creative investors can pay a much higher price. Now, if you notice a strict cash offer, investors may have trouble competing, but what if the investor plans to keep the property longer? In general, they can finance these properties with adequate financing, allowing them to pay more than iBuyer will pay for their prices. But it goes beyond that. Investors can also be creative and offer offers to homeowners that involve payments over time, which increases what they can pay for the home and can have huge benefits for the seller. What happens if the seller does not need or does not want to spend all the money from the house, preferring a monthly income or higher return than he will receive at the bank?
Real fix and volatility: There was a time when investors could easily find repair and exchange opportunities as homes don’t need much work. They can fix the house in a month for less than $ 20,000 and sell for huge profits.