The Real Estate Rundown

BOLD Real Estate Predictions for 2022 | The iBuyer Experiment - Stop & Chat #42

The iBuyer Experiment

Stop & Chat #42

Eliot, Keith, Kala and Jason break down their top BOLD predictions for the real estate industry coming 2022. There's a lot of potential big moves that could come into play this next coming year, listen in as the Zoodealio team breaks them down.

Top 5 Stories The Defined Real Estate in 2021 | The iBuyer Experiment - Stop & Chat #41

Stories that Defined Real Estate in 2021

This week the group will discuss the top stories of 2021 in the real estate industry.

First, Zillow acquired Showingtime for $500,000,000. The industry exploded .. It was like stepping on an anthill. But really if you look at it, they actually got a good deal on that data. They are able to see how many houses are opened on a daily basis in real-time. And this gave them a seamless “agentless” showing system, which helped live offers work.

The next big story is “Zillow Fail” Zillow quit iBuying, they didn’t necessarily fail, but they struggled with how to flip a property with the actual boots on the ground. Zillow severely underestimated the complexity of the real estate transaction and what it takes for that transaction to take place. Zillow will likely be an aggregator for iBuying and poor buying. 60% of their plan worked, they will be back.

The institutionalization of America … The reason Zillow was able to unload 7,000 or so of the homes they had purchased is because of the institutional buyers. A couple of weeks ago Mike with Altos Research shared with us that quarterly about 10% of homes sold are to an institutional buyer. That means that a fairly large percentage of our housing stock is being turned into long term single family rentals, and more of these types of buyers and transactions are coming.

Let’s touch on the insane market conditions next. We’ll define a “normal” market as something like one million homes available on the market on any given day and about six million homes sold nationally per year. The total unit count is going to be crushed. Here in the Phoenix metro even with really low inventory day to day the annual units sold is up. Nationally this year we are going to surpass 6.5 million homes sold, and that number has been trending up year-over-year. At the beginning of 2021 the average rate published by FreddyMac was 2.65%, and for one didn’t expect rates to still be as good as they are at the end of the year, but we are still at 3.12%. These are still historic low rates and that is helping feed the market. REALTORS have had to change and up their game, do things like we are doing to address the fast changing market.

Finally the biggest story, which isn’t getting the attention it should be. DOJ withdraws from the settlement agreement with NAR in July. The U.S, Department of Justice and the National Association of REALTORS came to an agreement because there were potential antitrust practices form NAR and it’s members that were deemed to be anti-competitive and were affecting buyers and sellers. DOJ felt that the settlement would prevent them from making future claims. This tells us that the DOJ is going to continue to investigate NAR and that affects all of us.

It’s been a wild year and 2022 is likely to be more of the same.

Craig Proctor, Real Estate Agent Coach | Getting The Motivation to Succeed

This week I’m joined by Craig Proctor, he created the “your home sold, guaranteed” program, one of the precursors to the current iBuyers.

 

In year three of his real estate career he was one of the first REALTORS to offer an upfront written guarantee to the seller. That moment he says he completely separated his unique selling proposition from all of the other REALTORS as was named the #1 ReMAX agent in the world that year. It basically worked like this, if they bought any of his listings he would guarantee the sale of their house. Today we know this is something sellers want.

 

A lot of real estate agents when they hear about guaranteed sales or iBuyers have a negative perception of these. We have to understand the reason they exist is because this is what sellers want! Usually when agents don’t like it they say something like it's a bait and switch, or you  give the seller a really low offer, they just don’t understand how it works. With the guaranteed sale program we are not offering 100% of what the house would market for, but we are offering an aggressive number because we want the seller to take it and buy Ione of our listings. 

 

“The only vote that counts is the customer.”

 

A lot of agents did not like the program, I really did create an unfair advantage for myself, buyers and sellers loved it and other agents didn’t understand it.

 

“To be successful real estate agents need three things - Systems, Intellectual property and technology.” 

 

Most agents think of a real estate coach as someone who will hold them accountable, or maybe share some ideas, or maybe a motivator. What we do is very different, it is a systematic way we teach  agents - A lead generation system, a conversion system, a presentation system, a recruiting and training system … Every part of growing a large real estate team. We leverage the agent in three different ways, we fix their lead generation system. Then interdict technology to increase capacity. Then we teach them how to hire the right people. Eventually the real estate business starts to run itself, that is when you have a business and not a job.

 

Everything you want to do in real estate has already been done by thousands of people. If I wanted to learn to play golf, I'd find a good golfer to teach me. The problem in the real estate industry is a lot of coaches and trainers have never held a real estate license … and big names too! They have never had a buyer in their Carr, never negotiated an offer. Because I was a successful agent for 20 years I probably understand agents better, because eI was in the trenches for so long. It’s hard for a coach or a Guru to understand the life of a REALTOR if they have never been a REALTOR.

 

In the beginning I knew nothing about marketing, I wasted thousands of dollars on advertising that did nothing. Then I attended this conference and learned about direct response marketing, and that the only reason you should spend even one dollar on marketing or advertising is if it is trackable, and you can test it and show a return on your investment. I took some of these concepts, they asked what sets you apart from the other agents, I didn’t know! I talked to my dad(he’d been in real estate for years) and asked what would be the boldest offer I could make to a seller? His answer was If I don’t sell your house, I’ll buy it. I started advertising “Other agents will promise to sell your house, Craig Proctor will guarantee it, in writing.” I think in my career of order 25 years I’ve only ended up buying two houses.

 

In real estate the pricing algorithms are getting better. We used to have travel agents and stock brokers … Now my 82 year old dad doesn’t use a stock broker and he outperformed my broker last year. What is happening in real estate is technology is getting a better handle on what houses are worth. This is going to be a bigger thing, people want convenience. Social media, the way we deliver our message, the way we retarget, the omnipresence - It’s just an exciting time to be a marketer.

 

“In order to make a quantum leap in your business, you first must make a quantum leap in your thinking.”

 

When REALTORS come to me they typically say Craig I want to do better, but I don’t want to change what I’m doing. I tell everyone on day one, you didn’t come to me to learn how to do what you do now a little bit better, you came to me because you want to learn radically different ways to get exponentially better results. For that to happen we undo what they have learned to do and we’ve got to start all over again because how we think controls what we do, and what we do controls the outcome. If you think the wrong way you’ll never do the things I teach and you’re never going to get these results. You may be very good at what you know, but  getting better at what you know will only give you incremental gains. To get exponential gains you have to learn what you don’t know, so be curious and don’t immediately judge a concept or an idea. We want to know what is going to be big and to be ahead  the curve on it.

 

If this resonates with you, set up a free call with me and my team, go to proctorcall.com. this is not a big sales pitch, I’ll ask you some questions about your business now and about your vision for the future of your business. If after that 45 minute conversation you want to work with us, great! If not you’ll be on your merry way and keep doing what works for you.

Mike Simonsen CEO of Altos Research | Inventory Predictions for the Upcoming Year

This week we talk with Mike Simonsen of Altos Research

There are a lot of misconceptions about the real estate market, Mike will help us sort it out a bit.

The Real Estate Market

The market has been on fire, it’s been a big year for home prices, but the real story for this year, and last, is the lack of available inventory. There are 350,000 single family homes on the market nationwide. Not long ago, like 5 years ago, there should have been a million homes on the market this time of year. This is a trend that has been falling over the past decade, but really dropped off at the beginning of the pandemic and has continued into this year. Both the supply side and the demand side are accelerated so anything that does come on the market is gobbled up quickly.

We have rates super low, locking in forever - 30 year mortgage rates. As a result if you find a house it’s going to be affordable forever, this drives a ton of demand. A small change in the interest rate makes a big change in monthly payment. So affordability is really impacted by mortgage rates, much more than it is in a change to the price of the house itself. At the beginning of the pandemic rates bottomed out and even with 10% price appreciation the affordability was up.

Looking forward to 2022, if rates stay the same and prices continue to increase we lose some affordability, if rates rise then we lose affordability, and we are likely to see a little bit of inventory build because demand weakens at some point. If rates fall, then what happens … ?

Seasonal Inventory

Inventory is definitely seasonal, peaking in late June and typically the 2nd week of January is the lowest inventory, it’s a very smooth cycle. What happened last year is people kept buying through the holidays so inventory never really peaked in 2020 and it just kept falling. This year the low point came in April and a little inventory climb in the summer, and now buyers are accelerating again. It looks like new record lows to start 2022 and really no sign of new inventory increasing.

Hidden Inventory?

With low rates it’s affordable to hold on to your house when you buy a new one, so now you have two houses at 3% … Now you have an investment property. This has taken 8 million houses off the market and turned them into investment properties, we lose about 10% of the inventory every year to investors. Most of these are individuals, something like 90% are owned by someone who owns one to four investment properties, so no sign of these flooding the market.

We had a mortgage forbearance process with some seven million people opting into the program at the start of the pandemic. At the time we wondered if people would have to sell or be foreclosed on. With the big increases in price everyone has equity and even if you can’t make your payment again you can sell and take your cash. As it turns out, almost all of the people in the programs have figured out a way to make their payments and keep their house, so none of these are going to increase inventory either.

Where Are The Bargains

If you are an investor waiting for bargains to come along, they are not coming. There aren’t going to be mass short sales because no one is short. For them to have a foreclosure you need to be in a bad mortgage situation, like a permanent loss of employment; and not be able to sell your house. People have equity, they have ultra low rates and homes are selling fast, so there is no foreclosure inventory coming. It’s a really good time to own right now.

Prediction for 2022

Number one - record low supply, number two - there will be fewer price reductions and demand will increase along with price. Tight supply and strong demand will continue through the first two quarters.

Sarah Richardson CEO of Tru Realty | Women in C-Suite Positions, Technology, & Green Eggs and Ham

Today we are talking with Sarah Richardson, Founder and CEO of Tru Realty

Sarah is a visionary female leader in our space, she is the founder of Tru Realty and is an early adopter of the Zoodealio platform.

Tru started in 2010, Sarah was coming from commercial real estate. Commercial is a different animal, the sales cycle is a lot longer and it takes much longer to scale up, but there is a different level of professionalism there. When I came into residential I was working mostly fix and flip and investor deals. What I found was a lot of agents on the other side needed help … help with negotiation, with strategy, overall contract help and I saw there was a huge need for education in residential real estate. As fix and flip changed after about 2013 I decided to educate brand new REALTORS and get them up and running quickly. 43% of new agents with Tru have their first deal in escrow within three months of completing their training, the national number is in the 6-9 month range depending on the area.

The average age of agents is in their mid 50’s and they are using 15 different technologies in their business in any given week … and we wonder why we have adoption issues in technology. We are finding that new agents, those coming into real estate as their first career, even right out of university or occasionally still in university, pick up technology very quickly. It’s very intuitive to people in their 20’s to pick up a CRM, to use marketing tools, to actually run an ad on social media and make them work.

Sarah has taken the lead on all things technology and has led the way with crypto currency in real estate transactions. We adore our partnership with Zoodealio and being a start up we firmly believe in what you guys are doing in engaging the agent and making the REALTOR part go the iBuyer experience, this is critical to all our future. The consumer needs the help of a trusted advisor because they don’t fully understand all of the deal terms on an iBuyer transaction.

As for technologies, the set it and forget it mentality is interesting. Several years ago when each began to enter into the real estate space there was this notion that technology should replace the relationship. Over the course of 6-8-10 years we realized that we are a relationship business and that technology should NOT replace our relationships with clients and the consumer. Now it is all about the tech running in the background - our drip campaigns, our marketing campaigns, have everything turned on so when we are in front of people we can have better, more impactful conversations.

Let’s pivot for a moment and talk about the fact that something like 65% of REALTORS are women and 7% or so are represented in the C-suite of companies. There is this underlying notion that women are coming into their own and getting stronger in leadership positions. There is a shift happening. But at the management lever, not the managing broker lever - there are a lot of women that level, but in the ownership and C-suite level at brokerages and in the prop-tech landscape there are very few women. I think it is good for us to draw attention to that because there may be a lot of women who want to be in management/ownership, who want to be entrepreneurs and are apprehensive because they feel there can’t do it, ultimately it’s very daunting and it’s a huge risk.

Entrepreneurship was not a thing when I was in college, they didn’t even have entrepreneurship as a degree at ASU then. Now everybody wants to create their own hustle and be masters of their own future and create their own destiny. If we went to sit on a campus right now and listened to the people who want to be entrepreneurs and get into real estate in their 20’s, 50% are men and 50% are women. So I'm starting to see that anyone who wanted to be an entrepreneur is not just a man by any stretch of the imagination. Training people to take risks earlier makes it easier down the line. Putting your mortgage at risk, taking a full commission job, accruing a lot of debt is scary to a lot of people, and especially to women.

What would her best piece of advice for REALTORs going into the new year be? There are a lot of answers to that question! For the agent who might be struggling a little, she ay even be living commission to commission - Put together a year long marketing plan. Sit down and write out a plan for 52 weeks over the holidays. There are many you can find on the internet. These are little touchpoint so you can get face to face conversations with people.

And finally, what book would you recommend every agent read? This is a bit of a joke around the office but “Green Eggs and Ham” is a great book for REALTORS to read. Sam I Am never stops, he never gives up. Its the tenacity of an agent. I've said many many times you need grit and tenacity to be good in real estate and Sam I Am is the epitome of grit and tenacity.

Nick Friedman Co-Founder of Accept.inc | The ”Rich Uncle” of the Real Estate Industry

This week the team talks with Co-founder and COO of accept.inc, Nick Friedman

Zoodealio is now partnered with accept.inc to upgrade buyer offers to cash! We are very excited about this new and powerful partnership and it is our pleasure to have the opportunity to have Nick join us this week!

The conversation begins with Nick explaining what accept.inc is.

We are basically a mortgage company that upgrades any offer to a cash offer. We purchase homes for buyers who we predict will secure a mortgage, then we sell the home to them at the same price we purchased it for. We basically become the buyer’s rich aunt or uncle who buy the home for them.

We began the company by looking at what is real estate today and how can it be fixed, what would we do differently if WE could do it all over again. What is the simplest transaction and how can we give that to every buyer and seller? It didn’t take long to figure out this is a cash offer. Now how do you give the cash offer to everybody?

We had no real estate background or experience at the beginning. We failed for a couple of years and learned every way to NOT make someone a cash buyer, but the lack of experience played to our strength … We went in and said “Hey we’re just going to go in there with the bat and see what we can hit!” By not being jaded by the industry going in we were ablate figure out that this is the model we want to have, this is a model that is appealing to buyers, sellers and agents today.

Next he expanded on their value proposition and explained how they gained agent mind-share. Looking at the Denver market, it’s a great place to live and we ended up picking a market the really grabbed on to this model quickly. Our value proposition is not you all can have a rich aunt or uncle … that appeals not only to buyers and sellers, but also to real estate agents. We market to agents and they are able to tell their sellers to not settle for anything other than a cash offer and they tell their buyers to not submit anything less than a cash offer.

What's the catch?! There isn’t one, we explain to them exactly where we are making our money. We are a mortgage company add we have an in-house title company, so we make money there as well. Those are standard across the industry. Today even mortgage company and every title company make money. People do get a little confused when we layer on that were are a cash offer company that allows you to upgrade your offer to cash, so the question becomes how can you do all of that and still keep rates competitive? We let them know that tour marketing costs are very low and we don’t pay commission to our loan officers, they are on salary and the savings on commissions basically offset to costs of floating the home. Finally we are only holding the home for a week or two so there really isn’t any carrying cost. In this crazy market it makes sense to want to be a cash buyer, but why would a buyer want or need to be a cash buyer in a slower market? Simply the negotiating power that comes with a cash offer is key in answering this. Say you come to the table with cash and a quick close, ask for a $30k to $40k price reduction, the house has been on the market for 45 days and not been busy - the seller doesn’t want this deal to fall through.

What happens when something goers sideways? Things don’t come up often, but sometimes they do. We only own the home for a short time, so it’s pretty rare that we experience things like a burst pipe or something while we own it. We haven’t had any transactions fall out, meaning that the person we bought the home for ultimately purchased it from us. We have had some appraisals come in low, but that is the risk we taken ourselves and we take the loss. When an appraisal comes in low we actually lower the price and sell it to the buyer, we are willing to take that because we believe our offer needs to be a “true cash offer” and in order to do that we need to take on the risk of the home and the risk of the buyer.

An obvious question in the current makers in AZ and CO is do you let buyers overpay for a home? We do an internal value check which is what we feel the home will appraise for. Our value check is also a guarantee that we will fund that loan for up to that amount, if the appraisal comes in low we take the loss. The buyer can agree ahead of time to pay more in cash if they want to offer over the value check number, but we would have to verify those funds before the offer.

It does take a few days for the buyer to get the cash approval. It takes 3-4 business days to get it done. If a buyer finds a home immediately and they want to put in a cash offer in five minutes, that is just not going to happen. If they come to us a week or so ahead and let us know they are going be looking for a home, if they bring us everything on a Monday by the weekend they can be a cash buyer.

How are agents prospecting with this product? Listing agents pitch in the listing appointment that they will make sure that any offers that come in will be upgraded to cash. On the buy side they are telling people they can use their negotiating skills as na agent with a cash offer and you the buyer can win your first or second offer usually. Buyer’s agents use their use cases to help market themselves and this service, using testimonials from prior clients, the critical mass on that is about 3 transactions with us.

If you are listening to this in Arizona or Colorado Zoodealio has this available for you! And if you are a current subscriber you already have it and we will have it available in your back end soon!

Metaverse & The Business Advantages of New Technology | The iBuyer Experiment - Stop & Chat #40

Is iBuying still a thing?

This week the team talks about the aftermath of Zillow leaving the iBuyer arena.

The discussion begins with a bit about the Metaverse … the FaceBook “World.” Our first thoughts were of EXP, and that Microsoft started their own “Metaverse.” Will EXP world be the “world” people want to be in? With EXP the world is a software they license, you have to wonder how much the value of the world is tied up in their valuation. They started using the virtual world software from Virbela and eventually bought it, and maybe they’ll license it out beyond real estate, who knows, it’ll be interesting to see.

What kinds of things are going to become the new norm, like Zoom has in the past year or so. A year and a half ago you couldn’t use it because no one on the other end could manage to either technically get it working or be comfortable talking to a screen. Will iBuyers be it, will every consumer think about asking for a cash offer rather than talk to a listing agent? If the market softens there are those who believe the iBuyers will do even better. Much of it boils down to people not having any patience.

iBuying will continue because there's a ton of friction in the home buying process and that is THE problem iBuyers solve. We’ll see iBuyig continue to be strong going forward, the markets aren’t going to come crashing down around them.

Let’s define some terms - there is power buying, bridge buying, iBuying, FINTECH, PROPTECH and others … all the different strategies that people use to buy and sell, these terms are thrown around with out many people know what they really are. They are just structured sales, financial instruments, like a mortgage that allow people to buy. They are all similar in that they are simply ways for someone to unlock their equity so they can identify and at some point in the process move into their new home.

Over time agents are going to lose market share to the companies that are providing these instruments that are not branded to the agent. They are “Zillowing” agents, they are convincing agents that bringing their clients into the system with them is the way to go, in the short term they may get more deals, but eventually they will begin to chip away at market share. When it comes time for the client to transact next, they think oh, we used Knock for the buy, so lets call them and get our agent moving, then the company just pushes the agent aside because they don’t work for them. All of these companies are data companies first, these companies, if they are not already, will eventually be direct to consumer and sooner or later that are gigot to ask themselves how can we become more profitable and return more money to our investors? The answer is simple … Cut out the agents.

Bob Mangold Real Estate Strategist | Understanding the Department of Justice & NAR

This week on the iBuyer Experiment the team is talking with Bob Mangold. Bob uses Zoodealio with about 1,100 agents throughout his Homeboss platform.

Bob started his real estate career on the lending side and change to the agent side when he couldn’t find agent who could always get the job done. After several years he opened his own franchise brokerage, that is where he figure out that running a traditional brokerage isn’t the best way to build wealth. So he again teaching his agents a three-pronged strategy: One, build cashflow from your listing income; two, build referral income; and three, use the income from those to purchase income producing assets, like rental properties and Air B&B properties.

Another important part of being a real estate agent is keeping up on what is going on. Let’s look at what is login on with the Department of Justice and the National Association of Realtors. At a recent talk with about 1,000 agents only about 5% knew what was going on when asked.

The government is discussing regulating commission rates for real estate transactions. NAR is fighting this, but DOJ has more money and can spend enough to bankrupt NAR. In a situation like this it dopant matter if you win or lose, or if you are right or wrong … It just matters if you can survive. NAR will have to find a way to survive this.

At the end of the day this is all about the commission and how transparent we are. A lot of people question why the seller pays for an agent to negotiate against them, the sellers know how the system works though. In the listing appointment they talk about how much they need to net and what that looks like with the commissions paid to their agent and then add the commission to the buyers agent gets tacked onto the number to make the numbers work to get their net. What DOJ is saying is that the buyer does not understand this and specifically how the price of the home increases to cover paying the buyers agent. It really is form the seller inflating the price of the home to cover their agents commission.

Do we really want the government regulating what we charge for commissions? For Bob and everyone in the room that is a resounding no. If you are a real estate agent you have to know what is going on, these issues are coming for your career. It’s important that agents understand compensation and explain it.

The job of a real estate agent is actually quite simple. The job is to put your home in front o as many people who are ready, willing and able to buy it. The more people it is exposed to the higher price it will get.

Here’s a bit about how Homeboss addresses this NAR and DOJ issue. First the platform is completely open and transparent. We drive a lot of traffic to the property and do a big two-day open house (often with hundreds of people in attendance) that is well advertised and they open their platform to everyone to make their offers and set a date for them to be adjusted by. The seller pays them 3% and the buyers agent gets 3% (or what has been negotiated), BUT that is added to the price of the offer that was received, that way the buyer is paying their agent and can negotiate that rate if they want. Now the buyer and seller both understand how the buyers agent commission affects the final price paid. It is 100% transparent and it’s an answer to what the DOJ wants.

It is difficult for agents at first to understand how this helps buyer and sellers and the industry as a whole, but buyers like the idea when they understand it is about transparency. Agents just need to explain how this works in a way that shows the open and transparent nature of the system. Agents need understand that they are going to have to adapt or become extinct.

BREAKING NEWS Zillow Kills iBuyer Program | The iBuyer Experiment - Stop & Chat #39

BREAKING NEWS Zillow Kills iBuyer Program

Inman Connect Las Vegas & Co-Star Taking on Zillow | The iBuyer Experiment - Stop & Chat #38

Zoodealio is taking a trip to Vegas! Join us at Inman Connect Las Vegas 2021 at the Aria Hotel. Meet us at booth #115 and get to know the Zoodealio team and what we're all about! From October 26 - 28. Come along as Kala pitched Zoodealio at the 2021 Inman Pitch Battle & joins a panel to talk technology and advancements in the real estate industry and space.