“Don’t get too comfortable with what you think you know. You have to adapt. You need to plan!” Barry Habib
What home buyers, sellers and REALTORS® need to know about the smoke and mirrors of I-Buyers… my notes from an AMAZING webinar that shines a light on the I-Buyer sites.
I’m sharing my note with you dear reader, not my opinions, taken from this amazing Facebook Live Webinar that was offered on April 17, 2019 by three of the most significant and respected mortgage professionals and REALTOR trainers in our industry.
What is an IBuyers? Glad you asked! An eye buyer is a big company like Opendoor.com that takes possession of a home. I’ll be using Opendoor.com as an example of this type of company because they are the #1 company, larger than Zillow.com (offers), Trulia, Redfin, REX, etc., that does this, and they are in California now. Opendoor.com is estimated to own 15%-20% of all AZ homes for sale!
They are not licensed agents; they are an auction site. They buy low and sell high and buy high/sell high. What does this mean? The buy low (9%-22% below market value) and re-sell at market value is their main strategy. But, they also “buy high/sell high” meaning they buy at retail (market value) and then re-sell at retail (market value) and make their money on fees alone.
Opendoor.com competes directly with OfferPad.com and Zillow.com-Instant Offers as an IBuyer Investor looking to buy quick and sell high. Opendoor.com makes cash offers to entice sellers to work with them.
Opendoor.com is also working on an internal mortgage system. They pre-approve their buyers and provide them with a list of all their inventory for sale; each with their own self-service lock boxes on them; Yep! “All Day PRIVATE Open Houses 6am-9pm 7 days per week”; no need for a REALTOR® to gain access, the buyers let themselves in. Opendoor.com controls their inventory and they are lending their own money, so guess what…extremely short escrows are now possible. Inspections are done, preliminary title report and NHD is already pulled and appraisals are completed or not necessary in some cases. Yikes!Let’s discuss one of the “cracks in the veneer” of these I-Buyer models: they offer much lower than market value. Don’t believe me, here’s the actual breakdown of valuations and or offers made by these third-party discount sites as presented by Wellington on the webinar:
Their using potentially skewed comparables (this actually happened to Wellington in his experiment) that support their low bids and banking on naïve buyers and sellers, especially Millennials to not realize how invalid these comps are! They also charge a 7.5% “service fee”. Service fee? Sounds like a commission to me! They also have the audacity to create false comparisons between themselves and the “traditional” REALTOR, creating a skewed reality and almost false scenario based on assumptions and far-fetched scenarios (seller concessions and overlap owning costs specifically) that seldom exist, in fact they are anomalies at best.
Wellington added a Reality Column to demonstrate the actual price the property would sell for retail and the actual fees when working with a REALTOR®. Wellington got these numbers by actually having Opendoor.com bid on a property he was pretending to sell. The scary thing was they bid on it without verifying that he owned the home. Yikes!
Opendoor.com appears to be confusing if not misleading consumers with improper comps-allowing them to lower market values, confusing scenarios and front-loaded fees on future costs. That is to say, charging the seller fees against Opendoor.com’s future expenses-seem fair?
People willing to accept fast, low-ball offers can do what they wish, in fact they can For Sale By Owner and don’t need any representation. They’d have a fool for a client willing to lose potentially $100,000 in this scenario on their own or with Opendoor.com, but so be it. They are also sabotaging their neighbors’ fair market value of their homes in that neighborhood. They are hurting fair market value and equity in that neighborhood.
Sellers looking for top dollar and are willing to wait 30-45 days to acquire it, to the tune of $100,000 difference for waiting in the example above, I’d say now more than ever before, you need to work with a trusted advisor, you need a REALTOR®.
For more information, please contact Thomas J. Nelson 858-232-8722
or www.ThomasJNelsonRealtor.com I’ve included the link below to all three moderator and their webinar for your own viewing and due diligence.
Information was provided by Wellington Pendell of:
With additional commentary contributed by
Watch for yourself here. I-Buyers BEWARE!