As you know, I’m a huge bull on the Market Maker iBuyer concept. You could call me the Cretan Bull on that idea, since I’m on record as suggesting it will be 60% of transactions by 2024. (Sure to be wrong, but… I win even if I lose since I get to hang out with my friends!)
The leaders of the real estate industry, of course, have been very busy either outright dismissing iBuyers as We Buy Ugly Houses dressed in tech finery, or a niche product for desperate sellers.
Thing is, I am starting to see signs that the people with boots on the ground — the actual agents and those who know them the best — are seeing it differently. They have recognized that the iBuyer phenomenon is real, and they’re acting on that recognition and placing big bets down.
Today’s piece of evidence comes from the startup world.
Meet Offerbarn, a new pre-VC startup, that a friend of mine who is an agent, a broker, a leader, and a tech enthusiast in Atlanta is involved in. I met with one of the co-founders at Inman, and hope to get them on a podcast soon to talk about Offerbarn and the iBuyer phenomenon.
Offerbarn in Brief
In a real way, Offerbarn is no different from many of the other startups trying to aggregate iBuyer offers in one place. Zavvie out of Colorado might be the first to try this, but I know for a fact that others are doing the same thing left, right, and center. I know that W + R Studios offers an aggregator through its CloudCMA platform. And I met the very smart founder of OfferAI at Inman as well, who stood out because he looks exactly like Robert Plant. But is not. Robert Plant, that is. Although that would be cool if the former front-man of Led Zeppelin became a proptech startup founder. But I digress….
I’m going to use Offerbarn as the example here because of this:
That’s a nice clear video that makes the important point:
“Did you know more than 40% of sellers look into iBuyer options before listing their homes for sale? This number will only climb as companies continue to promote this new way to sell a home.”
Like all the other iBuyer offer aggregators, Offerbarn’s purpose is to “keep the agent at the center” so they don’t get cut out by the direct-to-consumer model of the major players. “Listing leads! Seller leads!” are the new battlecries of the new millennium.
Keep the Agent at the Center
The core idea behind all of the aggregators is that since consumers are looking into iBuyer options, the agent might as well provide some kind of services around them doing that.
If you recall, the first incarnation of Zillow Instant Offers before they jumped in with both feet was as a platform that would aggregate instant offers from various investors and Opendoor and present them to the consumer along with a CMA report from a local Premier Agent. I’m old enough to remember when Zillow was the first aggregator.
Obviously Zillow pivoted, but in those very early days, the concern was “How does Zillow keep its customers, the real estate agent who pays them, at the center of this new phenomenon?” They eventually decided not to worry and to cross the Rubicon, and become a direct player itself, with all of the consequences that decision entailed.
This new breed of aggregators are simply picking up what Zillow put down.
What Services Would the Agent Provide?
Let’s assume arguendo that the agent using Offerbarn (or Zavvie or OfferAI or whatever) is going to play it straight. That is, let’s assume that he’s not just using it as a bait-and-switch tactic to do everything in his power to convince the seller not to go down the iBuyer road.
What services would the agent provide?
Offerbarn’s suggestion appears to be the “Offer Analyzer” that would generate some kind of a dashboard that the agent could share with the seller. If you pause the video and look at the screen, you can see the “Estimated Net” number based on fees, closing costs, etc. Offerbarn also says the agent could enter local cash investor offers.
In my Red Dot on iBuyers, I speculated that new business models would emerge in the aftermath. One example I had in mind was insurance brokers. Think SelectQuote whose core promise is “we’ll compare all term life insurance plans to save you money!”
The Offer Analyzer brought SelectQuote immediately to my mind.
What else could the agent provide?
I thought the agent could provide actual advice, by looking beyond the price to the terms and other benefits to help the consumer make an informed decision:
“Company A is offering $5,000 more, but Company B pays your moving expenses. Given the moving rates around here, I think it might be the smarter choice.”
Or something like that. Maybe it’s by looking at the details and the fine print and interpreting them as an honest advisor to the seller. Maybe it’s knowing market conditions, proposed local regulations, or something else that’s very hard for computer algorithms to compute to help the client get an edge.
There are likely other services that will sprout up around a new phenomenon like iBuyer. After all, 20 years ago when I was still dating, there was no such thing as an online dating profile writer. Today, it’s a cottage industry. Instagram models did not exist ten years ago. Now, it’s one of the top career aspirations of a certain demographic.
But… here’s the thing….
Honesty and Transparency Are Paramount: The Agent
The only way I see this working is if the real estate agent trying to stay at the center of the transaction is an honest dealer with absolute and full transparency.
That is, they really have to approach the iBuyer offers with real integrity, rather than as an opportunity to generate a listing at 3% commission. That will be the major challenge for real estate agents.
In some cases, iBuyer companies pay a referral fee: Opendoor, for example, famously offers 1% finder’s fee to agents who bring them a seller. (I know of at least one agent in Houston who prefers to refer sellers to Opendoor, since he doesn’t need to do any actual real estate work after the referral.) I believe Offerpad does as well, while Zillow does not. (Zillow uses one selected agent team in each market, but pays them commission for work, not a referral fee.)
Even if it is less work for the agent to refer, however, the fee will be less money than the listing side commission.
So the question is, does the agent still treat iBuyer offers honestly? Or does the agent downplay them, disparage them, and talk up his own ability to list and sell the house in “mere days, for the most money” in an effort to land the listing?
If the latter, consumers will quickly tire of the bait-and-switch. That tactic has been around real estate for decades. The agent-managed iBuyer offer becomes a variation of the old “Guaranteed Sale” ploy. Consumers will turn off in a hurry.
If the former, then we have the start of something new and interesting and the only question is how the agent will monetize that service. Will the consumer pay a fee to have a professional agent aggregate and analyze offers? If not, will the iBuyer companies pay the agent for sending them business? Who knows.
We are still in the very early innings of this iBuyer transformation game.
If the agent does the aggregation, analysis and advice thing honestly, then we’re talking about the rise of a new type of real estate agent. That agent would function more like an investment advisor who gets paid for being right than a stockbroker who gets paid for executing a trade. That’s a big shift.
Honest and Transparency Are Paramount: The Vendors
Which brings us back to the startups like Offerbarn, Zavvie, OfferAI, CloudCMA, and others.
If the agent has to be honest and transparent, then their tools have to also be honest and transparent.
In this screenshot, there’s a lot of information and data missing that could make even an honest agent into a liar without meaning to.
For example, holding costs have to be included. “Market Listing” has an estimated net that doesn’t take into account that the seller might be paying his mortgage, HOA dues, property taxes, lawn maintenance, and whatever else for the 60, 90 or whatever days it would take to list and sell the home. Because once you take that into account, the Opendoor offer is awfully attractive in the sample above.
On the other hand, to the extent possible, there has to be way for the agent (or the consumer) to enter the cost of repairs (which the iBuyer companies will try to recover as seller concessions) into this. That might make iBuyer offers far less attractive. But on the third hand, those cost of repairs cannot then be left off of “Market Listing” either.
On the fourth hand, because I’m like a Hindu deity in these things, these tools should include some analysis of “sale to list” percentages (even in hot markets, the “sale to list” might be 98%), some risk analysis that the deal falls through, etc. The iBuyer offer is a bird in hand; the Market Listing is two in the bush. There has to be a way for these tools to present at least some range of possibilities such that the agent can inform the seller.
The point is that these tools, which are being sold as listing lead generation tools to brokers and agents, must evolve into actual data analysis tools. The screens have to get more complicated. The tool has to be more powerful and be “professional grade.” There has to be more in the way of real-time data feeds on things like interest, taxes, utilities, repair costs, market conditions, average DOM, etc. etc.
I completely understand how difficult that will be for these startups who are trying to sell these platforms to brokers and agents who are in turn freaked out by the prospect of losing tons of listings to iBuyers with billions of dollars in capital. But that pivot has to be made. These platforms have to be honest and transparent themselves, in order to enable their customers (the agent) to be honest and transparent with their consumer clients.
Because the future is not in agents pulling the wool over consumer’s eyes, playing bait-and-switch games, and using these “Offer Analyzer” tools as a way to generate listing leads. The consumer is not stupid. They’ll figure it out, and once you lose consumer trust, you’ve lost it forever.
The future is in agents getting paid (somehow, by somebody) for providing actual data-driven, fact-based advice. If that still leads to the seller wanting a traditional market listing, then so be it! The agent will get paid more, because the agent has to do more. That’s 100% fine; consumers understand that.
And if it leads to an iBuyer transaction, so be it! Agent will get paid less, because the agent has to do less. That’s fair, honest, and transparent. Note further that some of those agents are going to build successful new businesses as advisors, instead of middlemen.
To support the contention that the agents with boots on the ground know that the iBuyer phenomenon is real, let me tell you a story from earlier today.
I heard a radio commercial while driving around Las Vegas. There’s an eXp agent here in town named Aaron Taylor whose radio ad touts the fact that he can get the seller multiple iBuyer offers, help analyze them, and present alternatives as well. (Here’s an article about Aaron Taylor from a self-interested source, Advertising in Vegas, by the way.) It was a fascinating commercial, and I did not tune away from the radio station.
Between that ad, and the thousands of agents signed up on Zavvie, and the proliferation of startups like Offerbarn wanting to take advantage of this opportunity, it seems clear to me that no matter what the CEO’s of their national franchises or the President of NAR or their broker with dozens of offices say on stage at Inman or T3 or wherever, the agent on the ground knows that the iBuyer phenomenon is real.
And they’re acting on that knowledge.