In May, there were 8,789 new listings, up 16.97 and 38.12 percent from the previous month and year, respectively. At month’s end, 6,470 homes went under contract, up 5.65 and 10.5 percent from
Is Selling Your Home With A Click Worth The Price
Written by: Bruce Lund of Mastery Inc.
Talk, hysteria, fear. It's all happened before in real estate. In fact, it's a regular occurrence actually. There's always another "lion coming over the hill" in real estate, and the iBuyer business model is the newest one.
Predictions by sober minded smart people in the industry are predicting that iBuyers will control 10%, or 20% or even 40% of the market in a "few short years" as they deliver convenience and certainty to the real estate transaction.
This is just another shiny object. Explain to me how this idea is materially different from the "we buy ugly houses" idea? Or from the "bandit signs" stuck in the ground at every intersection around town by starry eyed investment seminar goers that scream, "We buy houses for cash!"?
It's the same-same. When you strip away all of the hoo-ha, it's just the same idea backed by venture capitals who are salivating over the quick profits promised by the classic "fix-n-flip" formula. A formula that right now luxuriates in the loving embrace of an appreciating market.
They say that it's about convenience and it is. Right now. Right now, some Sellers will pay a "convenience fee" of 6-10% of the fair market value of their home to get a solid price and moving date and the certainty that comes with it. But what happens when the market shifts? This % must change. The formula changes because iBuyer companies will then have to factor in the price of risk.
When the average "days on market" goes from 35 to 95, what happens to the iBuyer business model? No appreciating market to coddle the iBuyer business model then, and the holding costs go up.
What happens when the average "days on market" goes from 95 to 365, or 500? Oh reality will kick in fast and force the iBuyer business model to radically shift as the price of risk becomes the biggest variable in the magic "formula".
And they'll have another problem grinding on them: they have investors. Investors who have written checks for hundreds of millions of dollars. And that's millions, as in "Where's my money?" These investors will be pounding the table with sweaty clenched fists, demanding to know about their "return on investment".
The real ugliness will start when they start want to get their money back and they find out that it's all tied up in real estate. Real estate in a depreciating market. Real estate that's competing with other properties that are listed by the same Agents who they arrogantly dismissed as irrelevant to their glorious business model when times were good. Agents who are local, who understand the market and who know how to get things done when things aren't easy.
That's when our industry starts asking them questions. Questions like, "Apples? Pigs like apples. How you like them apples?"
The CEO's of these companies have never sat across from the table from a Seller who needs to sell in a down market because they lost their job and they need to "move back home". They've never looked into those eyes and seen the barely disguised panic as these Sellers ask how they can salvage every last dollar from the sale of thier one remaining asset to pay for the move.
In that market, the iBuyer business model changes from offering a value proposition of "convenience" to a Seller to the bare-knuckled reality of a hard money loan. This is when the price of risk goes from 6-10% of the property's value to 15-25%.
Tell me I'm wrong.
When the sales rep from the iBuyer company waltzes in and sits down at that kitchen table in that market and offers a purchase price that is 15-25% lower than fair market value for the "convenience" of a price certain and a predictable closing date, they will look like exactly what they are: a pig.
What the CEO's and investors in iBuyer companies don't know is the same thing that outsiders have never known about real estate: it's really about solving problems face to face, belly to belly, at the kitchen table. Problems that involve real people, dealing with real challenges, in a local real estate market. It's not about a simple formula, or an algorithm. And they don't know that every real estate transaction is different. Oh they all have a Buyer and a Seller, a couple of Agents, and a house, and an inspection and a loan. All that is true. What they don't know is that in every deal, the Buyer and Seller are different, the Agents are different, the house is different with different inspection issues, the loan is different and the market is slightly different. Every time. Every single time. And each transaction has different problems that need to be solved, face to face, belly to belly, at the kitchen table. Houses are not commodities like orange juice or pork bellies. That's what they miss. Every single time.
This is what we really do. This is our real value proposition. We solve problems. With compassion and skill and talent. We come up with the solutions. We are creative. We tap into our network of other committed professionals and we pull rabbits out of hats.
Don't believe me? Ask an Agent. Ask them if some real estate deals are harder than others. Ask them if they've ever gone above and beyond to save a deal and help a Client. Then sit back and listen. You'll be amazed at what you hear.
And there is one other thing that we do that will never be replaced. Not by AI. Not by an algorithm. Not by some iBuyer's business model. Certainly not by some arrogant Johnny-come-lately CEO. We care.
I will always believe in the skill and compassion and dedication and determination of the professional real estate Agent to find a way to solve problems and get our people where they want to be.
Professional Agents have the "X Factor" that often makes the difference between yes and no. Between stay or go. Between a deal that closes and one that crashes. We are the ones who make the difference. We turn the impossible into the possible. And all of the great Agents have it.
In my humble opinion, iBuyers are simply the latest shiny object in real estate. The newest "lion coming over the hill". We will adapt and prevail, we always do.
And in some ways, real estate is like the stock market, where the one universal truth always has been and remains, "Bulls and bears get rich, and pigs get slaughtered".
As a Colorado native, real estate broker since 2006, and real estate investor for over 15 years I have the expertise and knowledge to help guide you and your family through the most important transact....
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