In this episode, we will address the threats of new players entering our market to steal your commissions and your clients! Welcome to the Real Estate Redefined Video Series.
Good Morning, Dan Forsman here –
Today, we wanted to bring your attention to several new competitors entering our market that are trying to steal your commissions and your clients. These new competitors are called iBuyers and include companies like OfferPad, OpenDoor and Knock. They offer the seller an option to buy the property directly and avoid the hassle of showings. Their business models are to buy properties and then sell them again. They make commissions and other fees on both transactions. They are backed by Wall Street investors and use their capital resources to acquire the properties. Since they are new to the market, they are heavily advertising on TV, radio, direct mail, billboards and social and digital media. A recent Inman News article was titled, “Atlanta is now ground zero for iBuyer war!” Metro Atlanta is being targeted since we have a very robust market for homes under $500,000 which is their target market. Over 80% of all Metro Atlanta transactions fall into this segment.
Guaranteed home sale offerings have been around a long time. Mark Spain Real Estate is a good example. We recently saw one of their agreements and the offering was 70% of fair market value with a 10% commission and $495 transaction fee. Yes, there is a reason Mark Spain has never had to buy a home!
Each of these new iBuyers offer a little different twist.
Knock.co has been in Atlanta since late summer 2016 and targets homes from $150,000 to $500,000. They offer a listing period of 6 weeks to sell the property or they will agree to buy it at a pre-determined market value price. Knock also has an additional offering called PreList.me where they will list for 2 weeks on Zillow and host an open house. These properties are NOT listed in the MLS. They are clearly trying to attract a direct buyer and avoid the buyer’s agent commission. If they do not get a direct offer in 2 weeks, they will buy the property or provide the option to list the property in their 6-week program. Knock is only in the Atlanta market for now. A recent Inman article quoted them as saying they were on track to close 350 properties in 2017.
Opendoor started in 2014 and operates in Las Vegas, Phoenix, Dallas and now Atlanta! Consumers go online and fill out a form about their property. Then, they get an offer from OpenDoor within 24 hours. OpenDoor schedules an inspection and may adjust the offer based on the inspection. If the seller accepts the offer, then OpenDoor buys the property. They will perform some repairs and then place the property back on the market for sale with a home warranty and 30-day satisfaction guarantee. Opendoor also has their own mortgage company and is offering a 1% incentive off the purchase price toward closing costs.
OfferPad just started in Atlanta. Their offering is very similar to OpenDoor. Complete the form, get an offer in 24 hours. Once again, offers are subject to inspections and other terms. OfferPad includes a free local move (within 50 miles, up to 2,800 square feet and 13,000 lbs. plus you pack your stuff). OfferPad is also one of the investors participating in the Zillow Instant Offers program.
There are other new competitors entering our market and trying to steal your commissions and your clients. For example, HomeLight is advertising heavily and offers consumers a match to the best real estate agent. They are advertising to get between you and your prospective clients and charging you a 25% referral fee. TRIO is another new provider trying to offer financing for people who might not otherwise qualify – and yes they are also charging a 25% referral fee. Redfin recently announced a 1% listing commission and continues to offer rebates back to buyers. They are also testing Redfin Now which is an iBuyer program.
Why are these new players swarming to the real estate business? The answer is simple – real estate commissions in the United Stated are estimated to be $75-$80 billion dollars in 2017. That is a lot of money and they want a slice of that pie.
So what should you do?
First, you need to be informed so you can speak intelligently to your clients and prospects. We will be covering this topic in detail with helpful scripts and dialogues on our Power Lunch training session this Friday.
You can win these discussions if you are properly prepared. Most importantly, you need to simply be reaching more consumers – you need to be there first! The good news is that today, most consumers do not know these new players exist. But these companies will be advertising heavily and will try to beat you to the opportunity.
NAR reports that 88% of buyers bought their home through an agent. Over 70% used the first agent they interviewed. If the iBuyer gets there first, they may win the client.
Another report showed that 74% of buyers and sellers NEVER heard from their real estate professional again after the closing. Twenty percent heard from them occasionally and only 6 percent heard from them consistently. It is no surprise that only 25% of sellers and 12 percent of buyers use the same agent again. If you do not follow up with your clients, the iBuyers and other interlopers will!
My challenge to you today is to make your prospecting the priority. Block time every day to reach out to people you know and people in your target markets. Call them and schedule appointments. Remember the purpose of your marketing is to get appointments. The purpose of prospecting calls is to get appointments. Yes – the more things change, the more they stay the same. Agents who have more appointments will be more successful. Agents who practice their scripts & dialogues and communicate their value will be more successful. Remember, every day in every way, you can get better and better!
Thank you for watching our Real Estate Redefined video series. We look forward to bringing you more relevant topics with insight, information and inspiration to take your business and life to a higher level.