Is the traditional way to sell a home over forever?
At least every few days I receive a phone call, text message or email from someone who wants to make a cash offer for my home. These are mostly local home flippers. Now add in the likes of “iBuyers” such as OpenDoor, OfferPad, Knock, Zillow, Coldwell Banker, Keller Williams, wait… Keller Williams the #1 franchise in The U.S. by sales volume, ranking number one in agents and units sold in 2017 Keller Williams?
That’s right, Gary Keller has stated they don’t want to get left behind so are adding this as a product offering.
What can we read into these announcements as well as headlines like “Offerpad’s latest funding round brings total capital raised to nearly $1 Billion”. It may mean the future of how you sell your home may be nearer than you think.
Are the days numbered for the traditional model for selling your home? The old model: Get the name of a good Realtor from family or friends, have them come out to a home and present a comparable market analysis (CMA) containing recent comps in your neighborhood? These comps are used to “arrive” at what listing agent realtor (and you) feel is going market rate for your home. Home is listed and put in the MLS for buyer agents which then bring their buyers to view home. Eventually, a “meeting of the minds” where seller and buyer agree on a purchase price and a deal is consummated.
From the seller perspective, this may mean months of keeping home show ready, last minute showing requests, home sellers forced to leave home during showing “window” which sometimes do not show up, unexpected/unannounced showings catching sellers in compromising situations. And what happens after the sale is completed in the traditional method?
Buyers typically want to move into their new home as soon as possible with average times to close 30-45 days from contract acceptance. In most cases home sellers need to find a new home to move in to, this may be due to upsizing, downsizing or moving to a different area. Since most home sellers do not have the financial wherewithal to obtain a second mortgage or have the necessary amount needed for a down payment before closing on their old home, this may lead to several months of being in between their old house and finding a new permanent home. This would require the need for an interim or temporary housing situation.
Property management companies tend to deal with 1-year minimum lease period homes so finding a temporary or monthly (month-to-month) home may prove difficult.
iBuyers give home sellers a cash offer thereby eliminating the majority of headaches. Get a cash offer, no showings and close on your schedule. Can you say CONVENIENCE? It is this convenience that has some stating that by 2024, 60% of all home sales will be to iBuyers? This may cause some traditional real estate brokerages that work with home sellers and buyers and may also conduct residential home property management to take notice. At least two have already. How far behind will the others be?
For real estate brokerages and Realtors yet to see the emergence of these companies or realize their impact, I am posting this analysis of Uber’s and Lyft’s growth:
In just over four years, Uber and Lyft went from less than 10 percent market share to over 72.5 percent market share. I noted that this is the sort of growth curve if you can solve consumer pain and do it for less than the traditional ways (taxis and limos and rental cars). Can the iBuyers somehow overcome the pricing discrepancy issue or bring it closer to what a potential home seller would realize in the open market? If the answer to this is yes, then estimates for 60% of home sales going this route in the next five years could prove to be low.
Eric Wu of Opendoor is on the record as saying that he wants the home sale experience to cost nothing. Zero. Nada. That’s removing friction all right.
IBuyers are not investors. They’re not doing the buy-and-hold thing. They’re not looking for asset appreciation. They’re looking to solve consumer pain and charge a fee for the convenience. So they’ll be turning that inventory as quickly as they can.
Meaning, the 3.24 million homes sold is 3.24 million homes bought by an iBuyer, and then 3.24 million homes sold by an iBuyer within thirty to ninety days.
3.24 million annually works out to 270,000 monthly….. Do I have your attention now?
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