8 1/2 Reasons Real Estate Agents Should Work with iBuyers

Published by Brian E Adams on May 25, 2022May 25, 2022

Haven’t heard of iBuying yet?

I created an introduction for you!

Is iBuying the future of the real estate transaction?

I don’t know.

But I do know that there is a lot of ways that real estate brokers can take advantage of the expansion of iBuying that many are likely overlooking!

Objections to Working with iBuyers

Agents and brokers are likely wary of iBuyers for a few reasons. They mostly boil down to “iBuyers are trying to steal my potential clients!”

iBuyers Are the Enemy

If you think Opendoor’s goal is to become the default method for homeowners to sell their home and put agents out of business, you are …. mostly right.

I’m sure Opendoor would love nothing more than to become exactly that.

If your strategy for avoiding that outcome is to deny them your business, then I’d say you have about as much chance hope as did the anti-Zillow campaign intent on denying Zillow advertising dollars. You are cutting your nose to spite your face.

Moreover, I rate Opendoor’s odds of succeeding at this goal as far fetched, at least for the foreseeable future. Their operations are still limited to narrow buy boxes in a minority of major metropolitan areas. Most homeowners don’t even have an iBuyer as a selling option. In their most dominant market they’ve been active in since 2014, the total iBuyer share is about 10%. That’s enough market share for a very profitable business! But not enough to claim a place as the “default method of selling”.

You will stand more to gain by working with iBuyers than trying to defeat them.

I Will Lose my Client to an iBuyer

This is possible!

Maybe you educate a customer about iBuying and they go on to use that iBuyer without you! Cutting out the middle man!

But if you can present your USP well, you should be able to sell yourself as the subject matter expert who can help them navigate the new iBuyer model and get the most for their home. After all, iBuyers are buyers, too. They still care about the things normal buyers would, because they are going on to sell to normal buyers. The same principles that will maximize your home value as a traditional listing will maximize it when selling to an iBuyer.

Moreover, iBuyers have become more realistic over time that they cannot displace the agent. Companies like FlashHouse (in Ohio) and Offerpad are very deliberate about cooperating with agents. They are looking for ways to cut you in on the deal if it means growing their business.

Just like Zillow pivoted to working with agents instead of against them, these models are figuring out that agents are an integral part of the process for the foreseeable future.

Reasons to Work with iBuyers

1. Lead Generation

“Sell Your House Cash” is one of the best lead magnets in our industry.

In the past, it made no sense if you didn’t have an investor network behind you. And you could only convert on those leads after your investor network had bought and flipped it for you as a listing agent.

With iBuyers, you can utilize this lead magnet for free!

Instead of an investor network prepared to lowball your clients, you can offer your services to shop their property around different iBuyers. You can offer to be their subject matter expert in getting the most money from their home should they choose to sell to an iBuyer, and give them better confidence in that novel process.

Below is an iBuyer guide from HoustonProperties.com that is a great example of how you can leverage iBuyers in your business to earn more prospects.

2. Rock the Listing Presentation

Chances are your competition isn’t talking about iBuyers in their listing presentations. Maybe they think iBuyers are the “enemy”. Maybe they don’t understand how working with iBuyers helps their business so they don’t even offer it as an option to customers.

So how much more are you going to stand out when you are able to present the full menu of options available to sellers in your market?

Even if they elect to list traditionally (which will be most sellers), you’ve established that you

are knowledgeable about all the options availble to them
have their best interests at heart by presenting all the options

That’s a huge leg up on your competitors who are just trying to sell the homeowner on listing traditionally.

3. Fiduciary Obligation

Speaking of having their best interests at heart, one might argue that you have a fiduciary obligation to your prospective clients to educate them about iBuying options.

If your job is to get your client’s home sold, and there is a potential offer sitting there just a contact form away, why are you not soliciting that offer?

4. Home Needs Repairs

IBuyers generally will not purchase major flips, e.g. homes needing $50k+ or more in repairs or complete tear downs.

But for homes needing new carpet, paint, maybe a minor bathroom update or more to become turnkey and show ready, iBuyers absolutely buy those kinds of homes, potentially saving your seller $10,000s of out of pocket costs they would incur trying to get the home show ready.

Obviously the price offered for a home will drop if it needs some work. But iBuyers generally discount their offers approximately at cost for these repairs, meaning sellers aren’t selling at the steep discounts they might if they were selling to traditional flippers like Homevestors franchisees.

Some iBuyers even scan the MLS looking for as-is and “TLC” homes they can make competitive offers on!

For this reason, iBuyers are an especially attractive option for absentee owners or probate listings.

5. Customer Convenience

It’s not just the no showings and no repairs your seller might find convenient.

The leaseback is one of the best parts of working with an iBuyer.

IBuyers offer leaseback options ranging from just 3 days to a month or more. That’s a big relief not only to the seller but to you, Mr. or Ms. Agent who is trying to get them into their next home seamlessly!

Working with an iBuyer can take away the stress of coordinating a ballet of closings, or hoping to negotiate a temporary seller’s lease with a buyer.

Especially in down markets when buyers hold more cards, the continued option for a leaseback with iBuyers will only grow in appeal.

6. Guaranteed Offer

It’s not hard to sell a house in 2022.

But already there are strong signs the market is transitioning.

In the last down market of 2011, nearly half of listings in my own market of Killeen failed to sell at all!

As the market pivots, which it eventually will, simply having a guaranteed sale will be a huge value add for buyers. And it will be an opportunity for listing agents to get a paycheck they would never have gotten had they listed and failed to sell the home at all.

7. iBuyers Accidentally Overpay Sometimes

Even if your client’s goal is getting top dollar for their home and you know that, on average, an iBuyer offer is probably slightly under fair market value, it is still a disservice to not solict an iBuyer offer.

Because iBuyer offers are below market only on average.

The average pricing error is about 3-6% for iBuyers, meaning they pay 3-6% too low or too high for homes.

When I worked on the pricing team for Zillow, there was an Atlanta home we valued at 3000 sqft. The inspector confirmed it was 3000 sqft. We bought it, and discovered after the fact that we somehow missed something (probably the basement) and could only count 2000 sqft for our MLS listing. We had paid for 1000 sqft that didn’t exist.

The homeowner walked away with $100,000 more than their house was actually worth.

Meanwhile, Zillow was overpaying for homes in the summer of 2021 so often that it literally put us out of business.

IBuyers are always getting better at eliminating mistakes like these. But they still happen. There’s no harm in getting an offer and seeing if it is accidentally above market!

8. Homes are Sometimes Worth More as Rentals

This isn’t a strong reason to get an offer.

Yet.

To my knowledge, no iBuyers are underwriting homes as rentals, even if sometimes they sell homes to institutional buyers.

But especially if the market turns sour, I think iBuyers will begin developing more relationships with institutional investors looking for rentals.

And sometimes, your house is worth more as a rental than it is as a flip!

Not only is there less risk for investors in buying rentals, but investors are able to save on holding costs and repairs to the tune of $10,000s when avoiding the full flipping process. Once iBuyers start doing this more, they will surely be able to pass those savings on to customers to increase conversion, sometimes earning more than you would as a traditional listing.

1/2. Multiple Offers

I know some agents who solicit offers from iBuyers and then advertise their listing as being in a “multiple offer situation”, trying to gin up other “real” offers above ask.

Considering iBuyers almost never offer above ask (and will often drop the price if you list the house AFTER getting an offer from them), chances are you are just trying to use the iBuyer to get a better, traditional offer.

I labeled this as 1/2 because I don’t recommend doing this and think it’s unethical, even if technically true.

It is not a violation of the Code of Ethics by my understanding. And I suppose one might argue that it best serves your seller and therefore you have a fiduciary obligation to advertise yourself to be in multiple offers. But it still doesn’t sit right with my unless your seller is sincerely considering accepting those iBuyer offers.

Speak with your broker first if you are thinking of employing this “benefit” of working with iBuyers.