Calif. CEO: Realtors Have Little to Fear from iBuyers
LOS ANGELES – Amazon all but destroyed shopping malls. Expedia dislocated travel agents. Uber sent taxis into a tailspin.
Now will real estate agents be next? Will iBuyers take over their business?
The advent of online companies paying cash to buy homes directly from sellers has sent shock waves through real estate brokerages across the nation. Are they cutting out the Realtor?
The chief executive of California Association of Realtors told agents Wednesday, Sept. 25, they have little to fear from iBuyers – provided they embrace change, technology and adapt.
The iBuyer “changes the way you do business as technology has done … to everything in the last 30 years,” said Joel Singer, CEO of the state Realtor association for the past three decades. “But it doesn’t change it in a way that should generate fear. It should generate a sense of opportunity.”
Singer, who long has preached the need for Realtors to adapt to changing technology, was the keynote speaker Wednesday at the state association’s 2019 convention in downtown Los Angeles, addressing a number of new business models and potential disruptors confronting the real estate industry.
His conclusion: The traditional method of selling homes in America has survived decades of innovations many thought would eliminate brokers, even as internet users increased to 81% of the population.
Citing figures showing 91% of home sellers used an agent this year, Singer said, “Our market share has not changed.”
The reasons are twofold, Singer said: First the industry itself has adapted and evolved. Seventy-seven percent of agents say they now are completely or almost completely mobile. Eighty-six percent use social media in their business. The average agent spends $2,000 a year on technology.
The other reason is the nature of home sales, which Singer said is more personal and complex than other transactions that have gone online – such as buying an airline ticket or buying a book.
“You cannot automate that (homebuying) experience,” Singer said.
Which is not to say there isn’t room for improvement.
Buying and selling a home remains a painful process. Twenty-six percent of homebuyers complain the process is too costly, while about a fifth say it takes too long, it’s inefficient, a “rough ride,” according to a recent Google consumer poll.
“What should be an incredibly joyous thing, buying a new house, buying your first house, … is often quite nerve-wracking, quite difficult, (with) a lot of uncertainty and stress,” Singer said. “Until we can figure out how to deal with that, we make ourselves as an industry ripe for certain amounts of change.”
There’s no shortage of potential disruptors. Among them, discount brokers, flat-fee brokers, brokerages that let agents keep their commissions and brokerages with their own exclusive listing services.
iBuyers are perhaps the latest disruptor to appear, surfacing in Phoenix in 2014 then spreading across the nation. Companies like Opendoor, Redfin Now, Offerpad and Zillow Now began buying homes in Southern California in 2017.
They provide easy-to-use websites that allow home sellers to submit information about their house, then get a guaranteed cash offer within a week or less. The iBuyers deduct the cost of repairs and charge a “convenience fee.”
In Phoenix, as many as 40% of home sellers are getting offers from iBuyers, many of them before selling with a traditional agent, Singer said.
“That becomes the norm,” he said. “You get their price and their cost, and then you get the Realtor price.”
There is a place for iBuyers, catering mainly to sellers willing to take less for their home for the added convenience or certainty of a cash sale, Singer said. He estimated iBuyers will handle 10-15% of all home sales by the end of the next decade.
But they won’t take over.
“There are things to fear in this world. There are a lot of things to fear,” Singer said, citing a potential economic downturn, the state’s housing shortage and falling homeownership rates as things that should keep Realtors up at night.
“But I don’t think we have to worry that much about changes being made in the brokerage industry,” he said. “We’re going to be in a world where the biggest competition today and your biggest competition in the foreseeable future really isn’t these outsiders. … Your major competition is each other.”
© 2019 The Orange County Register (Santa Ana, Calif.), Jeff Collins. Distributed by Tribune Content Agency, LLC.