iBuyers, Traditional Real Estate and the Illusion of Maximum Price

Change is good. Particularly in an industry ripe for disruption. Case in point, residential real estate.

 Over the past few years iBuyer programs have carved out a high-profile niche, giving motivated, and in some cases, desperate sellers a quick transaction, albeit at a lower price.

 More recently, in early June, Opendoor and Offerpad launched traditional brokerage listing services to complement their iBuyer core business. Makes sense. Only a small percentage of home sellers have an urgent need to sell and are willing to take less money to get the deal done. Most people want to sell their home for the highest possible price.

 Need proof? Let’s check the numbers. According to a recent article by real estate industry analyst Mike Delprete, “iBuyers only purchase a small fraction of homes from consumers that request offers. In 2019, Zillow bought 6,500 houses of the 264,000 consumers that requested an instant offer (about 2.5 percent). The remaining 257,000 homeowners didn’t sell to Zillow, but many — upwards of 40 percent — eventually sold via a traditional listing.”

What is Maximum Price?

Clearly, iBuyer programs that also offer a traditional brokerage service gives consumers another option, which in this case has the allure of selling for a higher price than a discounted iBuyer offer.

But is a higher price than a discounted iBuyer the same a maximum price? Spoiler alert: No. It’s not.

In his article, Delprete makes an excellent point: Opendoor and Offerpad are using salaried employees rather than commissioned agents to buy and sell homes. “The tendency of disruptors to utilize internal, salaried agent employees is noteworthy,” says Delprete. “Employees offer a consistent, controlled experience, which yields higher conversion rates for converting seller leads.”

Totally agree. The traditional real estate model has diluted its value to the consumer with minimal training and education requirements to become, or stay, licensed. Making matters worse, brokers have zero control over their independent contractor agents.

Let’s face it, there’s 1.5 million real estate agents doing business 1.5 million different ways. That’s why 74% of consumers do not believe agents are worth their commission, according to a Gallup Poll.

While salaried employees are an essential building block of a consumer-centric model, the question now becomes, “What exactly is the consumer value proposition those employees are executing to sell a home to achieve maximum potential price?”

Innovation Focused on Increasing Seller Net Proceeds

Here’s the deal. The Principle of Price Elasticity says there’s no fixed price for a home. In fact, in any market there is at least a 15% range, or more, within which a home will sell.

Most innovation in the real estate industry over the past 50 years has been driven by technology. The Internet has empowered consumers with online home search and given industry players such as appraisers and loan officers as well as home inspectors and title companies, faster and more efficient ways to perform their services and execute documents.

At the same time, however, traditional real estate brokers have introduced few, if any, innovations that systematically manage price elasticity and add value to a home seller’s net proceeds (profit).


Take the Maximum Potential Price Challenge

From the consumer’s standpoint, selling their home for more than a discounted iBuyer offer is NOT the same as selling for maximum potential value. And while salaried employees reduce the inconsistency of the customer experience, consumers still haven’t been presented with a clear and disruptive alternative to the traditional real estate process itself.

Ultimately, the listing agent’s goal is to position the seller to negotiate from strength and sell for maximum potential price. How is that done? By proactively managing the variables that impact price elasticity.

While it’s a step in the right direction that consumers have another option from the iBuyers, what today’s home sellers really need is a detailed consumer value proposition, including the project plans and deliverables they receive, as well as the level of expert tools, systems and people employed to price, prepare and market their home for maximum potential price.

Want to learn more? Download our FREE Report >> 6 Reasons Why Traditional Brokers and Agents Can’t Execute the Maximum Value Home Selling System®

Lee Abraham
(512) 638-2020