The Real Estate Rundown

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.

Adam Contos CEO of RE/MAX | Taking Action & ”Partying With the Beast”

This week Kala does a one-on-one interview with Adam Contos, CEO at ReMax.

Adam has a new book “Start With a Win” that is being released October 19th.

A Little Background

He worked his way up through the ranks at ReMax to become it’s current CEO. Adam grew up in Denver and joined the Marine Corps right after high school, his goal was ultimately to become a police officer. While he was an officer he developed a real estate agent safety program that ReMax eventually bought and hired him as a consultant to teach. Later he accepted an offer form the ReMax CEO to learn the business form him and accepted the position, eventually making it to the C-suite. I’t about focused effort and working hard - caring about the people around you and doing what you can to make a difference.

His book is really a tactical how-to on achieving amazing things.

On iBuyers

He looks at iBuyers as cash buyers, there have always been and always will be cash buyers in the real estate space. So to anybody who says iBuyers are new he says it’s how cash buyers are doing things that is new, Burt ultimately we can see that how we are doing a lot of thing sin life is new. Evolution is business is nothing new. A lot of this change is through clarity of communication.

There is a report out saying that 77% of people say they would give up some equity to use an iBuyer and have an easier, faster sale. Contos says he doesn’t doubt the 77% statistic that people SAY they would be swilling to use an iBuyer, you just don’t see that many people actually doing it. What we are seeing now is iBuyers becoming more efficient and offering a less friction option, but I challenge you to show me an iBuyer making profit at this point.

It is nice to have iBuyers in the space to give agents and sellers options, we can share our sandbox.

The ReMax motto … MORE

The ReMax motto “MORE” is our value statement. We wanted to re-align ourselves to our north star - the way we are following. M.O.R.E. The “M” is for max, as in deliver to the max; the “O” is Obsessed, be obsessed, care with everything you’ve got; “R” do the right thing - we are ethical, honest and trustworthy people; and “E” everybody wins, this is what should happen with every real estate transaction.

What does a “win” mean? So many people go through life just doing things, the way Adam looks at it is that everything we do is a little mission. You either complete the mission and win or you don’t and you lose and learn. Everything we do in our lives we should look at and appreciate the opportunity to do it. Have the right attitude and take action, then you’ll win.

What is the beast and why would I want to party with it

Inside all our heads and hearts is this beast that causes us to doubt ourselves; doubt our knowledge, preparation, ability … Right when you get to the point where you need to do what you need to do that beast is going to come at you. You have to decide is that beast going to take away your power to do what you know you can do? Or are you going to go in there and use the beast as what it is, your realization that you know what yo do … that beast is your best friend and you have to decide if you are going to party with the beast or let fear stop you.

Action.

There is one solution to fear, doubt and being overwhelmed, and the tis action. The reality is that nothing happens thill you take action. Enabling is allowing people to get away with not taking action. Empowerment is encouraging people to take action. We deserve what we tolerate. Helping people take action is what leadership is all about.

A lesson about vulnerability

The interesting thing about vulnerability, people who have wrong intentions will use it against you. You have to be strong and vulnerable at the same time. If we are confident and strengthen we are vulnerable and we own what we say and how we do things and we are honest with other people, the reality is you’ll find out it’s ok and we don’t have to hide things and live in fear. We have to allow ourselves to trust other people.

The future of real estate

Every industry eventually goes through a complacency with the level of service clients. That is when disruptors come in and say “you’re going to go away” but really what we should be hearing is “raise your game” get better, provide a greater experience. There is a need for evolution, what the consumer wants is an expert. Let’s raise the bar, its like the difference between putting on a band aid and performing heart surgery. Let’s become heart surgeons.

BREAKING NEWS Zillow Stops Buying Homes | The iBuyer Experiment - Stop & Chat #37

Zillow Slams the Brakes on Home Buying as it Struggles to Manage its Backlog of Inventory

Zillow will stop buying homes through Zillow Offers for the rest of the year, as the company's iBuying program goes from full speed to full stop.

The company announced on Monday it would not contract to buy any more homes in 2021 in order to work through the backlog of homes it has already bought.

The "iBuyer" model used by Zillow and other real estate companies entails purchasing homes directly from sellers, and then re-listing the properties after doing minor work. But thanks to the current shortage on labor and materials, Zillow can't close, renovate and resell the homes fast enough. "We're operating within a labor- and supply-constrained economy inside a competitive real estate market, especially in the construction, renovation and closing spaces," said Jeremy Wacksman, Zillow's chief operating officer, in a statement.

"Pausing new contracts will enable us to focus on sellers already under contract with us and our current home inventory," said Wacksman. Zillow will still market and sell the homes it has acquired through Zillow Offers, which has been on a purchasing tear this year. It bought 3,805 homes in the second quarter -- a record high for the company and more than double the number of homes bought in the first quarter, according to a note to company shareholders.

Zillow, known for its online real estate listings, introduced an iBuyer program, Zillow Offers, in 2018 and now operates in 25 cities. Like other iBuyers -- such as Opendoor, RedfinNow and Offerpad -- Zillow Offers uses data and algorithms about the property and the market to make a cash offer on an off-market home, and buys directly from the homeowner.

IBuyers appeal to home sellers because closings can take place anywhere from 7 to 90 days after the contract is signed and can provide some certainty and control over the sale of their home without the hassle of finding an agent and prepping the house for market. According to Zillow, the fee to the seller for Zillow Offers averages 5%, but can vary based on market conditions.

Home purchases by iBuyers now account for about 1% of the market, according to a report from Zillow. The share is still a tiny part of the whole market, but shows tremendous growth over the past few years as the iBuyer share in some cities, like Phoenix, Atlanta or Charlotte, North Carolina, now tops 5%.

Zillow wasn't alone among iBuyers in buying a lot of homes this year. IBuyers bought more houses, at higher prices, in the second quarter of this year than in any other quarter, according to research from Mike DelPrete, an independent real estate technology strategist and scholar in residence at the University of Colorado Boulder. That has surprised some skeptics who did not think the iBuyer model would be appealing to home sellers in a hot market.

His research suggests that sellers are drawn to the certainty and ease of iBuying and the market conditions fueled its growth. Zillow's move to halt purchases is surprising, he said, particularly because it is so sudden.

"iBuyers have access to a tremendous amount of data, they can see months into the future and plan their inventory," said DelPrete. "So the fact that Zillow didn't see this coming and wasn't able to make adjustments before it had to resort to an iBuying lockdown is pretty surprising."

This shift, he said, demonstrates how difficult this business model is to scale up. Large iBuyers need to be skilled at both managing billions of dollars in capital, but also the logistical specifics of prepping a home for sale, down to drywall and painting and closing deals.

"There is only so much that technology can do," said DelPrete. "At the end of the day you need people to process a lot of transactions."

However, the halt appears to be a Zillow-specific problem, not an iBuyer industry problem, DelPrete said. "Zillow just kept barreling down and now they've hit this wall," he said. This is not the situation a growth-focused company wants to be in, he said. "If you're trying to be number one in the market, slamming on the brakes is one of the worst things you can do," said DelPrete. "You want to make some adjustments before you get to that point -- slow down, switch gears. This is not the preferred outcome for Zillow." Opendoor, the leading iBuyer ahead of Zillow at a distant second, said in a statement it is still open for business.

Getting the Attention of the CEO of Zillow | The iBuyer Experiment - Stop & Chat #36

This week we are starting out with a viral video from Sean Gotcher that just asks a simple question.

He took on the big iBuyers with shit simple questions … What if? And that got the attention of the CEOs of Zillow and Red Fin!

What if everybody uses a home search site? And what of this site was collecting data about the buyer’s searches on the site? And what if in those neighborhoods buyers could afford some amount of money to live there? And what if this large company decided to buy up a bunch of houses? And what if they buy 30 of these houses at about the same price? And what if the 31st house they pay some amount over market value? And what if THAT house becomes a comp for similar homes in that neighborhood? And what if those 30 homes they bought at market price are now worth as much as the 31st? What if … They’d make about $1.2 Million in just that one neighborhood.

We’ll discuss this and what that might do the the market and the company and the neighborhood.

Consumer Psychology & Equity for Corvettes

This week we’ll start with out Deal Deep Dive because Keith has to lead soon to finish up that deal.

 

This one was a month in the making … The seller originally got a cash offer and a trade in offer, and either would have worked but after some deeper investigation by the agent and asking what they are truly trying to accomplish, the agent found out they wanted to access most of their equity and stay in their home. Their agent explained our Sell and Stay program and got them the numbers and it WORKS! This is a $1.3 million home in San Jose, CA - Everyone is excited, not only are the sellers going to get the equity out they need right now, they are going to stain their home for 12 months. It’s just a huge win-win for everybody.

 

It’s great to have options as a Zoodealio subscriber that you can bring to your clients to make things like this work out where everyone wins. Very cool.

 

It really is cool, the cash offer would have worked get them the funds they needed for what they wanted to do, but through the relationship of the agent, and the seller and Zoodealio they had options to work through and found the optimal solution. That is what it is all about.

 

Mortgage rates have hit a 15 year low, and people are thinking it isn’t because of a lack of demand, but rather from fear of the delta variant of the COVID virus. The fed is keeping things lower to keep the market moving even with greater fear out there about the virus. It was reported that the 15 year fixed mortgage rate was at 2.12%! That is insanely low.

 

When you go to your mailbox in the coming months, in stead of seeing 5 mailers advertising refi, you are going to see 30 of them. Because the tappable equity (the equity in a property above 80%) of American homeowners is through the roof! It’s $9.1 Trillion right now, that is enough to stack $100 bills for more than 4 round trips between New York and Chicago. What are Americans going to do with this money? We’re going t o see a lot of cash out refis and people using this money for all kinds of things. A lot of people will remodel - And some will buy a new Corvette. It’s their money they can use it how they want.

 

People are wondering how the big iBuyers are going to do in a down market. One theory is that they will do even better. If we do get to a point where the market price fluctuates a bit then people will value the certainty of the cash offer even more. 

 

It has been said that Home sales is consumer psychology. Very few agents really think about the psychology of buying and that we really do need to be armchair Psychologists. We need to know more about how humans thing and behave. One key thing is loss aversion … Most people will do more to avoid pain than to seek pleasure. The iBuyer model is changing consumer perception and its a big deal. It goes against the natural loss aversion and uses the idea that it will be easier and a more pleasurable experience. REALTORS can use that and show how they can avert the pain of selling. Ultimately remember YOU are the expert that is going to be their guide … their real estate sherpa.

The Stunning Rate that Real Estate Market is Changing

In this week’s podcast we’ll cover a new publicly traded company we all know and love, OpenDoor’s explosive growth and a new segment!

 

Offerpad went public this past week, they were expecting a $3 billion valuation, But ended up somewhere near $2.6 billion. Even-tough they took a shot at us we’re still happy for them. It’s just part of the real estate space continuing to innovate and bringing extreme opportunities. 

 

We have a new segment of the show starting this week, the “Offer Deep Dive!”

 

We get a ton of offer requests and acceptances all the time now, so we decided to do a deep dive into some of the more interesting of those.

 

We have an accepted offer with agent David Scott out in California for about $530,000. The seller is a bit of a hoarder. She and her family are now quickly going get the cash they need to move on the their next adventure and David found a solution for someone who really needed it. 

 

 OpenDoor Beat their expectation to be in 44 markets now, they are a few months early with this. They are opening up new markets all over the country. As open door moves into these markets they are paving the say for new things to be done, new ways of doing things. You have the opportunity to align yourself with that change, don’t be afraid of it, embrace it!

 

Look at the recent reporting from OpenDoor, quarter over quarter they went from about 3500 houses bought to about 8500 bought - Than is insane growth and they are still operating in the red with that growth. But the attachment of other services in a bundle like title, lender and other  closing and real estate service providers is offsetting some of that.

 

1000 Watt recently come out with a research report with information about what home sellers really thing. One question was would they be willing to give up some equity for a frictionless transaction. The answer was a resounding yes. In fact 77% of home owners would give up somewhere between 5% and 11% of their equity for a noon-traditional sale. One of our Zoodealio users dug around into the data for us and had some great insights.

 

Everything we are seeing boils down to agents have to start to align themselves with a platform that allows them to meet consumers in a different fashion than their current lead gen.

Greg Hague CEO of 72 SOLD; Business Model Exposed

If you’re in one of the 38 markets where 72SOLD is active Greg Hague will need little introduction, for those of you who haven’t heard of him he is the founder and CEO of 72SOLD, a real estate broker, and an attorney. His 72SOLD sells about a house every hour in AZ and generates 100 or so qualified seller leads a day for his 200+ agents, and that is just the Arizonan business.

 

His ubiquitous commercials (sometimes it seems you just can’t get away form him) are high energy and amazingly effective. And he’d love to share how he does them step by step with you, just for the asking. His vision is one where entrepreneurs remain the norm in the real estate industry and feels that replacing them with salaried sales staff is a step in the wrong directions. Love him or hate on him, hi and his team are very successful in generating listings and ending up with happy clients.

 

There is a lot of shade thrown his was and there is a lot of confusion about 72SOLD and Hague partners. Some agents even believe he isn’t licensed and that 72SOLD is not a brokerage, or real estate company at all. So for the record Greg pointed out that 72SOLD is in fact a brokerage in Arizona and that he has had a brokers license since 1981. 

 

72SOLD was founded to develop and refine a program he envisioned years ago. First to provide REALTORS (not just his agents) a program to give sellers a better experience and second to compete with the iBuyers. 72SOLD is now in 38 other states for example Kevin Holmes in Burlington Vermont is with KW and has been with them for a couple years now and is killing it. 

 

Hague’s passion for real estate runs deep, he tells the story of his father finding a job after WWII in real estate and building a successful company in Cincinnati. “My dads hard work and the real estate industry provided me the opportunity to have a private education, to attend Law School, and have so many doors open to me in life. All because of two things - My dad and this profession. So I am deeply passionate about keeping it as an entrepreneurial profession.”

 

The idea for the 72SOLD model came to Hague when thinking about how Apple handles the release of new phones and iPads, they use social proof and scarcity (whether real, imagined or built-in) to drive demand. They spend weeks prior to the release marketing and building buzz so when people show up they aren’t thinking “can I get a discount?” They are thinking “can I get one?” The best way to be brilliant is the look at all of the brilliant people and take their advice and do what they do.

 

Hague is very open with how he does things and freely shares with anyone for the asking. He said to email him and he will send you not just how they do it, but also copies of their brochures, what they use to present to sellers, everything they use to compete with all of the agents out there, so that they can try it and decide for themselves if it works for them or not. “The reason I do this is my #1 goal, why I’ll share exactly what we do, is to save entrepreneurship in real estate.

 

We better come together, the iBuyer’s ultimate goal is to displace us as entrepreneurs, to use their “we will buy your home” as a massive lead generator where they will get their salaried agents deals. They have a lot of money and can afford to take a loss buying homes. If we are doing things that will help everyone compete with this, I feel we should share that, there is enough business for all, unless it gets taken away by forces that would like to displace REALTORS.

 

Hague talks about how 72SOLD became ubiquitous in the Phoenix media market. It started with a couple or three thousand dollars for a budget to buy ads in community newspapers. We wanted to “look big in a small market” so we bought a couple of full page ads to test the message, and at the very beginning I committed to spend 40% of every commission back into marketing. Now they generate nearly 100 leads a day that get sent out to their 268 agents. 

Another unique part of their model is that 72SOLD doesn’t use the AAR listing agreement! They use what they call an authorization to market. It’s a lot easer for the sellers and agents. I wanted sellers to be able to read it, what seller reads 9 pages of fine print? It comes down to the user experience. Broker cringing out there, the world of consumer preference and taste is changing, if people sign up with you and then change their minds, you better just say fine … Be a Nordstrom, “we’re here to serve, we’re here to help.”

 

Kala Laos, CEO of Real Estate Software company Zoodealio, interviews Greg Hague CEO of 72 SOLD