The iBuying real estate trend has shown to be very popular in the US right now, and has reached Australia with the recent launch of Brickfloor an a hybrid offering by Sellable back in 2017.
For more information about what iBuying is, see our other article: What are iBuyers and Instant Offers in real estate?
There is a lot of debate around whether iBuyers provide a benefit or pose a threat to real estate agents. Some agents are completely against iBuyers, viewing them as predatory businesses that provide low-ball offers; while other agents see them as a necessary tool or alternative selling method to offer their clients.
In this article, we will touch on a few of the points arguing for and against iBuyers, to help you see both sides.
Arguments supporting iBuyers in the market
- Rejected iBuyer Offer Leads
The data collected in the US indicates that less than 1% of offers made by iBuyers are actually accepted by Sellers. iBuyers are then selling these rejected leads to other Agents in the form of highly qualified Seller leads. In most instances, these Sellers are still in the research stage around property prices and haven’t yet begun reaching out to Agents let alone listed their property for sale on the market, which makes them a quality referral.
- An appraisal tool for Agents
Some Agents who are embracing iBuyers in the US are successfully using them to increase their value proposition in a listing appraisal. The Agent will receive an Instant Offer for a potential Seller’s property prior to the listing appraisal so when they are at the appraisal, they can present the Seller with their first all-cash offer. This is an excellent way for the Agent to stand out from others by highlighting their diverse use of skills and technology.
- Conditioning Sellers around property pricing
During an appraisal or a sales campaign, the iBuyer offer can be used to help condition the Seller around the market value of their property and manage expectations. The iBuyer offer should usually be able to support a price estimate just above the iBuyer offer.
- Guarantee price floor
If an Agent was to seek an iBuyer offer prior to a property campaign, then they can guarantee their vendor a minimum price they would be able to achieve for their property. This is an excellent way to remove the uncertainty and stress associated with the sales process. This proposition is how Brickfloor is positioning their service.
- More buyers during a property campaign
During a sales campaign (and in particular an auction campaign) Agents could use the iBuyer to increase competition by adding them to the number of interested buyers. Remember, the iBuyer is simply another party who is willing to purchase the property and can be counted as thus.
Here are some arguments against iBuyers
- Low Ball Offers
From data collected in the US, iBuyers there are typically offering sellers anywhere from 90% to 98% of the market value of their property. Some iBuyers are known to offer above market value but after the offer acceptance, they adjust their offers down once a physical inspection is performed. Due to this, some Agents can see them as parasites confusing the selling process.
- Cutting agents out
iBuyers are usually catching sellers at the very top of the real estate sales funnel before they have even researched or contacted an Agent. This means that if the seller uses an iBuyer to sell or buy their property, then the Agent is removed from the transaction altogether. This is a potential threat for Agents if there is a massive growth in Vendors selling to iBuyers
From the perspective of Real Estate Agents, there are obviously arguments either way around the support for and against iBuyers.
The process makes more sense when looking at it from the consumer’s perspective around what they want, and then determining how to go above and beyond to meet their needs. If people see value in the iBuyer offering, then Agents need to embrace this and use this as a tool to be more successful.
Agents will always be needed in the real estate transaction, although their role may change – perhaps more towards that of a “Trusted Advisor” or consultant. In my opinion, when iBuying takes off in Australia (and my belief is that it will), then agents should embrace these companies and use them as a means to firm up their own value proposition to consumers.