7 minute read
Stefan Peterson – The Next
The Next Evolution of iBuyers: ‘Power Buyers’
Commentary by Stefan Peterson
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The past year has changed the way people buy and sell homes, with new buying and selling options gaining traction in the marketplace. In addition to the well-known iBuyers, these include a more recent category of companies such as EasyKnock, Homeward, Knock and Ribbon. The details of these programs vary, but one common denominator is dramatically increasing the consumer’s power as a homebuyer—hence our preferred term for these companies, “power buyers,” coined by global real estate tech strategist Mike DelPrete.
zavvie facilitates thousands of agent requests for power buyer and iBuyer offers each month. Analyzing the offer flow, we are most impressed by two megatrends that have important implications for real estate practitioners:
1. Power buyers are enjoying 2X to 10X growth this year by solving the biggest marketplace problem: lack of inventory. This makes it hard for potential sellers to buy a house, creating a “chicken-and-egg” scenario. Power buyers solve this for sellers by helping them buy without a loan contingency before they sell.
We conducted a study of offers made by one of our Denver partner brokerages, revealing that buyers with a loan contingency needed to make an average of seven offers before going under contract, while buyers utilizing a power buyer program had a 1:1 offer-to-acceptance ratio. For sellers and buyers, power buyers are a gamechanger.
2. The iBuyers are making stronger offers than ever. In fact, on average, their offers came in at an impressive 104.1% of market value during the first half of the year. Anecdotal reports from brokers across the country confirm that iBuyers are often making offers above prices expected on the open market.
At the same time, iBuyer service fees dropped from 7.2% in 2020 to 5.1% at the end of Q2 2021. Moreover, their average concession for home repairs fell from 3.6% to 1.9%. Combined, that’s 3.8 percentage points lower, equating to a 35% reduction in the consumer’s costs of selling to an iBuyer. That dramatic decrease brings the iBuyers’ fees in line with what sellers pay on the open market.
For agents, the takeaway is that iBuyers are making great offers, and these offers may be the best option for their clients. Agents who aren’t requesting these offers are missing out—and arguably not fulfilling their fiduciary duty to sellers.
Modern brokerages aren’t standing idle. They are proactively getting out in front of these changes and co-opting the power buyers, iBuyers and other options for selling and buying. By adapting to the changes in the marketplace, they’re getting more deals done.
These trends and others are presented in more detail in our midyear Seller Preferences Report at zavvie.com/seller-preferences. RE
Stefan Peterson is co-founder and chief data officer of zavvie, a technology company that is empowering the modern agent by making it easy to provide today’s consumers all the selling options: iBuyers, bridge and open market. For more information, visit zavvie.com.
Real Estate Recovery: Economic Factors to Watch
By Liz Dominguez
The real estate industry is unlike any other, exemplified through the market’s resilience during this pandemic while the overall economy was hit hard. However, much of real estate hinges on overall recovery, and there are several economic factors you’ll want to keep an eye on.
The Delta Variant Concerns over COVID-19 variants, particularly the highly infectious Delta strain, have begun cropping up, especially in areas with low vaccination rates where the virus has taken hold.
At press time, the Centers for Disease Control (CDC) had revised its mask guidelines, again recommending wearing masks indoors in parts of the U.S. where Delta is surging. Some areas are already seeing an impact at the consumer confidence level.
Inflation The Labor Department’s last Consumer Price Index (CPI), which is a strong gauge of inflation in the markets, reported that consumer prices increased by 0.9% in June, a sign that things are continuing to heat up. However, there are several elements that point to a stabilized real estate market: low interest rates, stronger lending practices and an increase in equity-rich households.
Interest Rates Fed rates are still holding near zero, with the committee optimistic that the economy continues to “strengthen,” according to a report on July 28. The Federal Reserve continues to state that it is nowhere near a rate hike. While Fed interest rates don’t directly impact mortgage rates, they are a good indicator of what’s to come.
The 30-year fixed-rate mortgage (FRM) recently increased slightly to 2.8%, still staying below the 3% threshold, according to Freddie Mac.
“As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all-time,” said Sam Khater, chief economist at Freddie Mac. “Largely due to the current environment, the 30-year fixed-rate remains below 3% for the fifth consecutive week, while the 15-year fixed-rate hits another record low.”
Supply Chain While real estate’s surging demand has been a boon for the industry, it hasn’t been without repercussions, particularly in exacerbating the nationwide inventory shortage. A slowdown in global trade and supply chain constraints, especially in lumber, have only lifted home values, pricing homebuyers out of their markets and encouraging a year-long competitive atmosphere that is just now starting to soften.
The future of these economic indicators heavily rely on the pandemic’s path. The growing concern surrounds new variants, and although another quarantine period is likely not in the cards, new indoor protocols could have an impact on consumer confidence and real estate business practices. RE
Liz Dominguez is RISMedia’s senior online editor. Email her your real estate news ideas to lizd@rismedia.com.
Leveraging Opportunities to Build Better Lines of Communication
Commentary by Allen Alishahi
One of the most fascinating shifts to come out of the past year has been the way conversations have changed for the better between agents and clients even though we’re spending less time together in person. While the real estate industry is built on relationships, it’s been a longstanding belief that we have to meet face-to-face in order to make those relationships meaningful. But when the pandemic hit and this was no longer an option, it opened up opportunities that we didn’t even realize existed.
One such opportunity is the ability to talk to clients at specific moments in their day when they’re able to fully process more information. When an agent discusses important details during a listing presentation or while at a showing, it’s all too easy for bits and pieces of the conversation to be glossed over or forgotten completely. But when talking with clients by phone or video, it’s much easier for the client to focus on what’s being said instead of being distracted by thoughts of where they’re headed next.
I’ve also noticed that when communicating via phone, clients feel more comfortable asking the questions they’re often hesitant to ask when talking face-to-face. There’s something about extra physical distance that makes it easier for clients to ask questions that make them feel vulnerable, which often pertains to anything related to their finances.
This level of ease shows up again when it comes to the many documents that make up a real estate transaction. Since cofounding DocuWalk, a document management company, I frequently hear about this during conversations. One common thread among all the agents I speak with is the fact that their lives became much easier when the expectations around the paper trail shifted to one where every single thing can be sent and signed electronically.
Though we’ve been sending files electronically for years, going over the most important or overwhelming documents in person is still a lingering habit for many. Yet, when it became necessary to do everything digitally due to COVID, agents found that clients had decreased levels of anxiety around this approach because they were able to read through files at a less pressured pace. Not only does it eliminate the stress of arriving late to an actual meeting because of traffic or trying to fit it in between work and family obligations, but clients also have more of a choice about when they open the documents and read through them.
This subtle change has led to improved conversations with our clients because we don’t have to spend time reassuring them about something they misunderstood because they were so overwhelmed when they first heard it. Instead, we can focus on building stronger rapport so that they come back to us for repeat business. RE
Allen Alishahi is president of ShelterZoom, the technology company behind DocuWalk. For more information, please visit www.docuwalk.com.
