What is an iBuyer?
“iBuyers” refers to firms like Open Door, Offerpad, and Zillow that purchase real estate directly from the owners for the purpose of resale.
These companies use an algorithm to determine the value of a home and provide a fast offer to the seller, usually within 48 hours.
Why Should We Care?
While the essence of the iBuyer value proposition is not new--cash for your home companies have been around for a while--the amount of money these companies have IS.
iBuyers are collectively spending millions of dollars a month on marketing. In their target markets, they are everywhere... In the mail, on tv, on the radio, and online.
They are doing everything they can to get our customers’ attention. And while this can feel unsettling--like technology is trying to push the real estate professional out of the transaction--iBuyers and their marketing can actually provide a unique opportunity for business.
The iBuyer Opportunity
The biggest opportunity actually comes from all the marketing iBuyers are doing. All that money and all of those ads will A) build a market of people interested in the fast-transaction model and B) spark more people to consider selling their home.
However, despite how easy their marketing makes it sound, selling a home is a HUGE decision. While some sellers may like the idea of a quick closing, they are still going to want--and need--help and guidance through the process.
This is where you, as a market expert and real estate professional, need to step-in. People are unsure and wary of iBuyers, and you can be the voice that clarifies exactly what they represent, if an iBuyer is the right choice, and so on.
Essentially, you can reach out to that giant market they’re creating, offer your expertise, and find a lot of new clients by doing so.
Randy Lewis is a Marketing Club member with the 10X Home Team with ReMax serving the greater Phoenix, Arizona area. Phoenix has been a test market for iBuyer for over 5 years now, and they currently control about 10% of the market share.
Randy has adapted to this shift: he’s on track to complete 25 iBuyer transactions this year, and hopes to ramp up his marketing efforts enough to double that number in 2020. iBuyer transactions have been a valuable addition to his business model--and they can be for you, too!
Tips for Working with iBuyers
But Randy has adapted to this shift: he’s on track to complete 25 iBuyer transactions this year, and hopes to ramp up his marketing efforts enough to double that number in 2020. Because he knows that with the right narrative, iBuyer transactions can actually be a valuable addition to his business model.
The NarrativeWithout you to educate them, your clients are going to get all their information from the iBuyers themselves, who are of course predisposed to skew the facts their way. So rather than pretend like the iBuyer option doesn’t exist, try this script during your next listing appointment:
“Now one of the options we have is 'direct buyers,' who will close on your house quickly, freeing you up to buy your next home without contingency. This isn’t the right option for everyone, but if you’re interested, then it’s something we can explore together.
It’s also important to know and be able to position your value in an iBuyer transaction.
Your real estate knowledge — Because it’s so new, submitting a iBuyer offer can be daunting to sellers. They may not know how to get all the answers to the questions iBuyers ask in their forms, and what to disclose or not disclose is also tricky. As a licensed professional, you can of course access that information much more easily than they can.
Your marketing expertise — Make the home even more attractive to a iBuyer with your marketing know-how. You can play up features that they pay a premium for, or you can disclose ahead of time repairs that need to be made so your seller can get an accurate offer more quickly, without having to wait for the home inspection.
To market a home effectively to an iBuyer, you’ll need to understand their “buy boxes.” Buy boxes simply refers to the requirements each iBuyer has for a property to make it eligible for purchase. For example, Opendoor advertises that their listings are available for showings 24/7. Therefore, Opendoor’s buy box often excludes homes in gated communities, since that would prevent some people from being able to easily access the home.
Buy boxes differ from market to market, iBuyer to iBuyer. In addition, each iBuyer uses a different contract. Randy suggests that the best way to get familiar with the buy boxes and contracts of the iBuyers in your area is to set up meetings or calls with representatives for those companies. You should also submit your own home for offers, which will give you first-hand experience of the process.
You are their advocate — Finally, perhaps your most valuable role to a seller in an iBuyer transaction is as an advocate with a personal touch. So much of these transactions is automated and programmed to benefit the iBuyer at the expense of the seller. Without your knowledge and expertise, your sellers don’t have any weapons to negotiate better rates with, or to know when to walk away and try a traditional sale.
Cash Offer — In Randy’s experience, “cash offer” usually means “discount” to consumers, so he refrains from mentioning this benefit unless the client has a specific need that a cash offer would satisfy. For example, if they need to buy another property quickly or if they’re afraid of their house falling out of escrow.
Choose Your Closing Date — In a traditional transaction, because mortgage rates are only locked for 60 days, that’s usually the timeframe for the sellers to vacate the property. But iBuyers are more likely to work with your sellers’ moving schedule. For example, Randy recently had an iBuyer allow for a seven month extension so his seller’s new build could be completed.
Minimal Repairs — iBuyers will schedule a home inspection, just like a traditional buyer would. But in Randy’s words, “it’s not as scary as a regular inspection because you know the iBuyers want the home.” Usually, the iBuyers will give the sellers a choice: make the repairs yourself, or we’ll give you a credit of some amount of money.
No Showings — Showing a home takes a lot of effort. Cleaning, staging, dealing with strangers in your house… some people just don’t want that hassle. With iBuyers, the home is purchased basically “as is,” so there’s no need to prepare the home for showings or open houses.
The Agent Benefits of Working with iBuyers
A listing agent selling a home to an iBuyer can enjoy a quick and profitable transaction. There’s no need to pay for photography or videos, for example, and the energy you need to put into marketing is relatively minimal.
iBuyers typically pay a 1% referral fee to agents who bring them seller clients. Randy doesn’t take this deal, however. Instead, in order to best be an advocate for his client, he has them sign a regular listing agreement, which means that he takes his normal fee on the transaction, less the amount he would normally pay to the buyer agent. Rather than a commission split, iBuyers charge certain fees.
Sometimes it’s true that a iBuyer offer is the right option for a client. But that doesn’t mean you have to lose out on the deal!
Using the tips and tools above, you can position yourself as an expert and an advocate for the sellers in your area, helping them use all the facts to decide what kind of transaction will best satisfy their concerns.
If you’re interested in learning more about iBuyers join us on our free training this Thursday at 12pm ET. We’ll discuss discount brokers, iBuyers, and other agents who discount their fees and how the “Perfect Pre-Listing” packet can help make sure you never lose another listing to them again!
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