WHAT CAN AGENTS LEARN FROM IBUY PROGRAMS?

iBuy, or iBuyer, programs are changing real estate in numerous ways.  It seems like almost every week, a new iBuy option or variation is being rolled out. They all share basically the same concept that works like this: real estate companies will make what's essentially an "instant offer" on a home, typically meaning, sight unseen or with a limited onsite evaluation. Companies use statistical modeling algorithms, which are called AVMs (automated valuation model), that evaluate the worth of a home using overall market data.

Zillow and Opendoor are two of the most popular companies that do this, although lots of people are flooding into this game now, including Keller Williams, RedFin, JPAR, and more. 

Here are two huge points to understand before we move into some ways that agents can think and grow in the age of iBuy programs.

1)  Speed

Once a seller decides to sell, if they choose to go with an iBuy program they can close in two or three weeks. This is substantially faster than the 45-120 days that it normally takes to sell a home. The iBuyer has to hold it for 30-60 days, then they will typically try to repair and resell it for a profit. 

2)  Cost

What does an iBuy program typically cost the seller? Here is how it breaks down, as outlined from the RedFin article linked at the top:

"iBuyers generally pay 75-100% of market value for a home. For example, if you have a $1M home and the iBuyer gives you 85% of value and charges a 7% fee, you’d end up with 16% less than selling on open market if you paid 6% on agent commissions. However, after repair costs, seller concessions, and potential mortgage and rent overlaps from a traditional sale, the seller won’t get to keep all that extra money, and it’s easy to see how iBuyers can provide similar or superior value."

As you might imagine, the iBuyer program causes some worry/concern for agents. Oftentimes they focus on the negative and even play the victim in how this is all shaking out. But it doesn’t have to be that way.

How agents can think and interact with iBuy programs.

• These programs are new but are not new. We've always had the "We Buy Ugly Houses!" signs everywhere. This is the same essential program, just with more tech and marketing involved.

• These programs have exposed a weakness within the traditional real estate transaction. Buyers today want to feel that they are in control and understand the process. For decades, many agents and mortgage professionals have made the home buying process unnecessarily complicated. Buyers today like simplicity. iBuyer programs typically have 3-8 steps that are clearly laid out on how the process works. No intimidating and unfamiliar words used. The process is not confusing, but to the point. You want to sell your home and we want to buy your home, here are the steps to get it done.

• iBuyer programs have hit on the fact that speed is the currency of choice in our culture. Many times, working with a traditional real estate agent is not only confusing and complicated but can also be slow. Between setting up a listing appointment, to the photographs, to the open house, selling a home can be a process that seems to drag out longer than some buyers would like. This can be the Amazon of selling real estate: simple and convenient.

• Net profit is not the number one goal for some buyers, and agents should be thankful for the growing popularity of iBuyer programs for this one reason alone! Over the last five years, the most significant objection I hear that agents deal with is them having to justify their commission. In an age of discount brokers, a flood of amateur and rookie agents, the days of 6% commission being a given has gone anyway. iBuyer programs are proving that for a growing segment of the marketplace, net profit on the sale of their home is not the number one goal. Most iBuyer programs will cost the seller between 10%-22% - and agents should love this! What that means is that if you can find ways to lean into and incorporate the strengths of the iBuyer programs, you can also lean into not only justifying your 6% commission but look at going even higher.

The car industry went through this change over two decades ago with CarMax. In order to buy a used car, before this period, you had to go to a used car dealer who held all of the information. They controlled the narrative, the timeline, and the process. Then CarMax came along and said we want to simplify the process. All of our cars will get a 125 point check to maintain the high level of vehicle that we sell; we will simplify the search by placing it online and letting you look at all of our locations, we will make it more transparent by posting one final price for everyone. Close to one million people bought cars from CarMax last year. People want the ease of process.

I don’t think iBuyer programs are going to eliminate agents. They’re not a good fit for every buyer, especially more traditional buyers or people who think about their home value in a certain, specific way.

However, the agents who are able to learn from and listen to what current iBuy programs have exposed will better position themselves for significant success in the coming years.

How can you use iBuyer programs to your advantage?

-Greg