Will iBuyers take over the high-end market? | Is an iBuyer Program Feasible in the Bay Area??

Are you seriously thinking about selling your house to a robot? Recently, I was reading through Inman, a real estate publication, when an article caught my attention. Today, I wanted to touch on that topic and share it with you. The article was listed under the technology section. It’s titled, “Huge number of homeowners willing to consider an iBuyer: Poll.” So what is this article all about? Let’s unpack and talk about the iBuyer program, how it might affect our local real estate market, as well as the national conversation.

The article quotes a poll recently released by a brand marketing and design agency called 1000watt. Essentially, it suggests that home sellers would very seriously consider selling their home to an iBuyer program for various reasons. I want to get into this because I think it’s really important to know about as we move forward in this real estate world and economy.

62% of homeowners surveyed said "Getting the absolute highest price possible" would be most important to them.

There are a couple of things I found incredibly interesting about this article. First on the list was about the most important thing for people if they were to sell their house today. 62.17% of the respondents said they valued getting the absolute highest price possible for their home the most. That’s consistent with my experience as well. When I meet with people who want to sell their homes, that’s pretty much what everyone wants to do. They want to get the most they possibly can. And with this, they can go on and do whatever they want to do. They want to reap the money back that they put into the home.

There were conflicting answers when respondents were asked if they will consider selling their home to an iBuyer program.

The respondents were then asked if they‘re willing to take 510% less for their home to avoid the hassle of a traditional sale. Over 77% of the respondents who said, “Yes, they want the most money” said they would also either “Yes, probably,” or “Maybe” when asked if they will consider selling their home to an iBuyer program.That is interesting, because generally speaking, it’s documented that those programs do not yield the highest possible price. Those two things are very much in conflict.

 

So when you dig further into this article, they talk about the theoretical concept of iBuying. It’s very simple. It’s streamlined, and there’s no negotiation. You don’t have to do open houses, stage a home, nor paint. In summary, you don’t have to do anything. You just sign the contract, move out, hand in the keys, and then they send you a check. It’s really simple, and that simplicity is the pitch. That is what it is that people are getting so excited about. That is why people would either say “Maybe,” or  “Yes, probably,” when what they really said they wanted is also the most money possible.

What this tells us is that, in this market, there is a barrier to getting to the highest price.

Most real estate sellers think they have to do all this stressful work. Frankly, they do. They have to move, pack, and go through the emotions of moving out of a childhood home. Or, perhaps selling a parent’s house or leaving the place where they’ve made a ton of memories. Not to mention packing, moving, boxing, and what not. That sucks. It’s terrible, and everyone hates that part.

On top of that, there’s this financial burden. The sellers might have to carry the house, plus the rent fees or other expenses for the new home for a while. All of that becomes incredibly stressful. So the question then becomes, “Are people seriously willing to take a bit of a discount for the convenience of having it streamlined and simplified?”

70% of homeowners surveyed who had sold their homes before said the experience was stressful, and 43.9% said that the selling process itself made them feel stressed.

In this poll, people said that they wanted the most money possible. However, when you dig into the data, they were actually saying that it wasn’t maybe the most important thing. Many folks said the whole moving and selling process is incredibly stressful and disruptive to their lives. It’s also really tough for them to have an open house and have strangers walking through their homes.

That is especially true if they’re still living there. These inconveniences start to add up and begin to have a monetary value to people. These are some of the reasons for the emergence of an iBuyer program. It is trying to spread that value of providing someone the simplicity of an easy transaction.

50% said that they preferred the certainty of a cash offer.

The other thing I found so fascinating about this was this concept of certainty. Now, we can all agree that it is challenging to predict to the dollar what something will sell for on the open market. The market is really hot right now. Some properties are hitting, and some people are going bananas over certain things. Sometimes you just get caught up in a vacation cycle, and you don’t do as well. There’s a lot of uncertainty.

However, when people are trying to make these moves, take financial stock, and create a spreadsheet or a budget for the next phase of their lives, they want certainty. And an iBuyer program also provides that to them.

50% of respondents said the certainty of the cash offer had value to them. Most of them favored that certainty as opposed to a buyer with financing which has a chance of falling through. In addition, avoiding the time and hassle of selling with an agent came second. Almost 42% of the respondents said that that was a factor for them as well.

What we're learning is that there's a hassle factor and a certainty factor.

We see that this is it’s not so much “iBuyer” for the sake of “iBuyer.” It’s “iBuyer” because of what it gives to the sellers or what they assume it brings them.

It’s a pretty compelling pitch when you’re looking at this very seriously from a consumer standpoint. You take a little bit less, but it’s guaranteed, and you simplify your selling process. That seems like a really nice pitch that at least most people would consider and listen to.

 

However, when you’re actually looking at the numbers, this is where I think things get really interesting. You’ve got to figure out where the breaking point is. In other words, how much is someone willing to pay for that convenience? There’s a reason why there are do-it-yourselfers versus contractors. There’s a reason that people try and sell their houses themselves. They’re not at a threshold where they believe they can get more value from paying someone than they could by just doing it themselves. And that’s sort of what we’re talking about here.

What it means for the future for home sellers?

What does this mean for the future? Well, to me, it’s a big opportunity. I think for anyone who’s either looking at listing their house, considering an iBuyer, or interviewing agents, this is something, and this is a lens through which you should look through. Additionally, any agents watching this should also consider this very seriously. You have to know your market. You have to know what you’re competing against and what you’re trying to accomplish when that person hires you. The data clearly suggests that the certainty of the sale, the certainty of the number, the stress relief, the ease of the transaction, and all of that are paramount to today’s modern home seller.

 

Let’s look at this really quickly: often, when iBuyers are making offers, there is some level of a stated discount.

 

In addition to the discount, there are also fees that are sometimes less or sometimes the same as the commissions, right? When you’re looking at percentages of sales, the numbers vary base on price point. Consider someone taking the low end of the comps plus a 5% fee or a commission. Suppose we’re talking about $100,000. Going with an iBuyer with 5%-10% less of that price would translate to a deduction of $5,000 to $10,000. But for the sake of discussion, let’s just say about $5,000 or $7,000 swings.

Now, suppose it would cost people seven grand for a moving truck and everything in a traditional selling process. It might be worth it then to go with an iBuyer with 5%-10% deducted from that original $100,000 price. With the same deduction but with less crazy hassle to go through in the selling process, going with an iBuyer at that price point makes a lot of sense.

 

However, it is a totally different story when we’re talking about, like, a million-dollar price point.

On that million-dollar price point, that $7,000 becomes $70,000 for that same percentage. So it will be fascinating to see at what price points, in what markets, and under what conditions these iBuyer programs become viable. Are they scalable across all major metros and all price points? To be determined. My opinion? Probably not.

I know that I probably wouldn’t do that as a consumer. There’s nothing wrong with just taking a guaranteed 90% of what I could have netted, that sort of thing. However, there’s a point at which I would take the risk and try and get more on the market. Suppose the chunk of the money is big enough, like, we’re talking about $70,000 rather than $7,000. In that case, I would still definitely try to go with an agent and a traditional selling process. It’s definitely something to consider and think about.

Something to consider if you're thinking about selling or you're an agent

Whether you’re thinking about selling or you’re an agent trying to attract business, here’s something to seriously consider. Is this a viable part of our market? It is undoubtedly in the conversation. It will be fascinating to track and see what happens with these various price points in these various markets. Also, finding out where that threshold lies would be interesting as well. What are people actually willing to value that guarantee and that certainty at? It’s because, at some point, it’s not going to make sense to folks anymore. And when we reach that point, that will probably be our threshold then.

 

 

Something to seriously consider for real estate agents

 

So speaking to the real estate agents watching this, here’s something to consider seriously. When you’re going into a listing appointment to talk to that seller about what they’re going to do and pitching yourself to represent them, potentially, think about how you can use this data to help you. Most importantly, think about how it will help you help them. They clearly care about certainty. They care about the ease of the process. If you can offer both of those things, then it would be great for you. That’s clearly why the iBuyer pitches are attractive.

 

If you’re a seller, think seriously about what that’s worth to you. How much money are you willing to lop off the top to have that certainty and that easy transaction? How prepared are you to let go of that flexibility and that streamlined approach? Where does the threshold lie? Think very seriously about how to partner with an iBuyer or an agent to get that done effectively.

Now, let me share my personal opinion: as the price points climb up, it will probably make less sense to go with an iBuyer program.

It’s because the zeros are so big, and the swings are so gigantic at that high-end price point. Most people will want to have the home exposed to the greatest number of potential buyers, and so forth. And as sales increase, the more money is deducted with that 5%–10% lower price.

 

But at a lower-end price point, this could make an absolute ton of sense. For somebody who wants to sell an $80,000, $100,000, $130,000house, or $200,000 or whatever, going with an iBuyer makes sense. The zeros aren’t there in the same way as compared to some of the higher price points.

 

So, hopefully, you got something out of that. I’ve linked to the article HERE. Hit me up and let me know what you think about this. Let’s chat it out. I’d love to hear if you’re thinking about an iBuyer, what that’s really worth to you.

If you’re an agent and you’re competing against iBuyershow was your experience? Let’s approach and figure this out as a community. After all, our ultimate goal is to do our best when serving our clients, sellers, and everyone who is trying to transact, because that’s what it’s all about in the end.

I hope my blog on "Will iBuyers take over the high-end market? | Is an iBuyer Program Feasible in the Bay Area??" has helped you.

If I can give you more context on the process of buying or selling your home, please do not hesitate to reach out. My information is below. 

Here’s to all your success!

Best,

Hans Struzyna

 

The market has shifted and you need to be aware of where we are going. I have created a free resource packed with all the information I tell all my clients when they start shopping.

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Will iBuyers take over the high-end market? | Is an iBuyer Program Feasible in the Bay Area??

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