I had the honor of representing the Council of Residential Specialists (#CRS) at the Inman Connect Conference in San Francisco (#ICSF) last week. While at the conference, news broke that once again makes it seem like the real estate world is ending. Instead of jumping to conclusions like many on social media, I listened to what I heard on stage, and CCIAOR has asked me to share it with you.
For those unfamiliar with Inman Connect, the conference covers innovation in our industry, and it is skewed somewhat towards the Millenials and Gen Xers in real estate. As a Baby Boomer with over 30 years in real estate, I’m fascinated by the lack of fear and the amazing attitude of what can be accomplished that this next generation holds, and frankly, that our way of taking on the industry is considered stale for this next generation of REALTORS®. So when the status quo is challenged, it creates disruption for those of us who have done business a certain way for many years, and obvious from the social media storm about it, a sense of fear and uncertainty.
As Gregg Schwartz of Zillow said during his presentation this morning, Zillow is creating convenience and certainty with instant offers and addressing a certain – and, it must be noted, small – segment of Sellers who want immediacy. Some sellers do not want to stage their homes and do not want deal with the anxiety and stress that goes along with selling a home.
What does this mean? It means that the seller is entering a situation where an offer is being made with a closing in as little as 3 days. There is a cost to this that is borne by the Seller in the form of either higher fees or less equity in exchange for getting an offer on the spot. Gregg was not willing to share the actual numbers behind that or the number of Instant Offer transactions this year, but did say that Zillow calculates the delta of purchase price to true market value at close to 5%. An ancillary aspect of the ‘Instant Offer’ is that Zillow partners with one of their Premier Agents to create a market analysis for the Seller and to deliver a lead to the Premier Agent.
To add some deeper perspective, other companies that spoke at Inman Connect are actually earlier innovators of this “iBuyer” model. OpenDoor, represented by Eric Wu, plans on 5,000 transactions in limited markets this year. Jeremy Coleman of OfferPad charges 7% and has says his company has done 2000 transactions. Jamie Glenn, COO of Knock, says they will be listing more homes this year. Knock gives an upfront offer and lists the property, but guarantees the sale at at least their initial offer price, another take on the guaranteed sale programs that some use. Knock’s fee is 6%, and they buy only 20% of homes that they list and plan on executing 350 transactions in 2017. With the enormity of the social media discussion, you would expect that Zillow, OpenDoor, OfferPad and Knock will end our industry as we know – simply, they won’t!
While some REALTORS® may be resentful that they are purchasing leads from a company that can be seen as competing as an ‘ iBuyer,’ these companies are simply offering a service to their members who may or may not wish to be a Premier Agents. While Zillow did announce that they are expanding their test markets to include Phoenix, and that Zillow is partnering with Berkshire Hathaway and America West, the current impact to date has been minimal. In fact, no seller has accepted an Instant Offer, but many REALTORS® have received listings from the program. Will it expand? Of course it will. Where there is a market, there is opportunity.
How do we, as REALTORS® react? We react by being the best REALTORS® we can be, with ethical, honest service to our clients, getting educated about the issues that impact our industry and by being integral parts of our communities where we know values and the needs of our clients better than any “IBuyer” ever can.
For more on this topic, read the CEO’s Take on Instant Offers.