The Real Estate Rundown

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

Generating Leads through YouTube, Making Money in your Sleep

This week we have a special guest. Levi Lascsak of YouTube fame with his Living in Dallas Texas Channel is joining us to talk about how you too can use social media to generate leads while you sleep!

 

Levi and his team doubled down on YouTube about a year ago and already have more than 4,300 subscribers and can directly attribute some $12,000,000 in production to the leads from the YouTube Channel.

 

He explains his process for us. I wanted to attract business with social media, I knew going into it that I needed to change strategies. I wanted people calling me, I didn’t want to door knock or cold call. I looked at FaceBook, Instagram, TikTok, and YouTube.

 

Once I decided YouTube was it, I took 2 months and learned all I could about it, I read several books, searched the internet and watched YouTube videos - then I put together a business plan. Because basically if you treat youTube like a hobby, it’ll pay you like a hobby, but if you treat it like a business it will pay you like a business. So put together a plan, don’t just dabble.

 

I planned out content and filmed the first 10-15 videos before the first one was released. People get stuck, they put out a video or two, life happens, they get stuck in the grind - it happens to all of us. I had a month of content ready to go before we even published the first video, from there I have always been ahead on content creation.

 

There are two main things that drove to the YouTube decision. 

 

#1 Warren Buffets says you will never be rich till you make money in your sleep. Well that also goes for lead generation. You’ll always be stuck in their lead gen unless you generate leads in your sleep, real estate becomes a business if you have a constant lead generation platform going.  

 

#2 It compounds your time … the time you spend creating content is compounded, so if it takes you 2 hours to create your video as soon as it is watched for 2 hours and 1 minute you have a net profit on your time. 

 

Coming up with content is simply looking for what people are searching for. Research the topics people are earthing for, see what is being searched for the most. If you make videos on things you want to do then it will take people a very long time to find you, people aren’t searching for agents by name unless they already know you. If you make videos on topics people are searching for you will be found.

 

Now I know what kinds of videos will resonate with my audience and can make some videos I want, but in the beginning I didn’t make a single video that I wanted to make. I made them all based on search results. This is an evergreen strategy, there is always going to be someone new searching.

 

We built an SEO loop where everything points back to YouTube. Pinterest links to the blog site, that links back to YouTube, Google my business links back to YouTube, everything does it’s the ultimate goal.

 

We are happy to let others know how we have done this. If you go to TheReelAgents.com we’ll walk you through our 20 minute video where we’ll explain out origin story. When we filmed this the call to action was $100,000 in 100 days because that is what we did! We’ll reshoot this at the year mark. There is an option to schedule a call if anyone is interested in partnering.

iBuyer Earnings Calls and a new investigation for the 800-pound Gorilla

This week the discussion centered around a new FTC investigation of Zillow and recent quarterly earnings calls for the big iBuyers.

 

A pair of republican lawmakers have asked the Federal Trade Commission (FTC) to investigate Zillow’s business practices. This stems from their acquit ion of ShowingTime and the potential harm to consumers it presents. 

 

How can Zillow buy a home one day and list it the next for $100,000 more? Does that seem fair to the consumer? This begs the question then has there been manipulation, or has Zillow just made good bets? They do have access to big data and surely use that in their decision making. They also have most of the internet traffic. Zillow commoditized real estate data and made it make sense to the consumer, kudos to them for that. This acquisition will give them access to some of the most accurate forward looking data there is.

 

We are living through the institutionalization of real estate. For agents to survive it boils down to advocating for our clients, that is how the agent fits - the agents who adapt to this market and to the iBuyers are the ones who are going to crush it and the others will slowly wither away.

 

Let’s talk earnings calls

 

At Recreate in Atlanta last week they talked about the Open Door quarterly earnings call. They put out that they bought some 8,500 homes last quarter and have nearly as many under contract. 

 

The question is do you think 8,500 people don’t know a REALTOR? Of course they did, and they decided not to work with them. It is the “done for you” solution the consumer is demanding. Open Door is taking down 185 home a day across 39 markets (and growing!). Their CEO attributes it to the “seismic shift in consumer behavior” … And guess what they created that. 

 

We can be the agent iBuyer, we can be the Open door for agents. With the power of the agent we as a collective 1.4 million REALTORS, if we band together, we can be more powerful than these huge companies.

 

What should agents be doing, what is the messaging you should be putting out there? If you are in a market where the iBuyers aren’t as prevalent, this is an amazing opportunity. You can be the Open Door of your market, and you’ll crush it. Start with this message, we’ll buy your home for full market value and even let you lease it back for 6 months. 

200 engaged agents + 5 world-class speakers = an amazing inaugural Disruption Day

Let me start by saying DISRUPTION DAY was amazing!

 

And we just started working on Disruption Day Denver. Details to follow.

 

Agent response was great and the energy was super high - it was nice to be back in that environment again after so long!

 

Agents embraced everything being said. Seeing people who have adapted to the market time and again, and listening to them teach what they are doing in their business, agents will continue to adapt if they keep themselves in this environment.

 

Agents who are getting clear on the mission of disruption and realize what is happening, and that they must adapt, see us at the head of this change, they know that together we are stronger.

 

Disruption Day speakers were awesome. The agents there really responded to them and to the Zoodealio products. The whole team wanted to thank the speakers. 

 

Thank you so much to James Rembert #ZillowKiller for coming out and bringing down the house! He dropped a ton of invaluable knowledge on the group, and he came out here on his own - no travel fees, no speaking fees, nothing - just to add value and good will.

 

Big thank you to Blake Clark for pulling back the veil on his operation and sharing with us how he is scaling and growing his business using social media.

 

A special thank you to Sarah Richardson. We were blown away just knowing she sold the first property using crypto currency. She’s out there talking about things that matter, they may not be sexy, but $200 million was lost to wire fraud, if we don’t do something about it we are doing a disservice to our future clients.

 

Joshua Smith always brings it! He’s been in real estate a long time, and producing at a high level. He has had to adapt time and time again to stay on top. There is something about the high producing agents who came into the industry at about the time he did, they are the ones that seem to understand the need to adapt and are willing to take a hard look at their business and make the moves needed. 

 

And finally a shout out to our very own Kala Laos! Its not easy to get up in front of all of those people and opening up, sharing your story. It was absolutely extraordinary, thank you!

Inman Reviews Zoodealio Technology and Says It's Fun

Zoodealio team reviews Inman tech article, Inman says Zoodealio is a cocktail of iBuyer and power buyer products. Special announcement about Zoodealio sponsored event.

Own Your Weird, Niche Down and Grow Your Business to Seven-figures

This week’s special guest is Jess Lenouvel of The Listings Lab.

 

She coaches agents and makes a very bold statement … She and her team will help agents go from six-figures to seven-figures! And she means every word of it.

 

She takes aN “own you weird” attitude to branding and uses it to help agents “niche down” to help stay relevant and bring their business to the next level while freeing up their time by knowing what to work on, what to automate and what to outsource.

 

One of the more jolting exchanges came when Jess said that relying on repeat business and referrals isn’t really running a business. After the initial shock of hearing that it makes sense. “you have no control over if somebody has that conversation, you are essentially relying on others to market for you … The stuff that comes from your sphere is the icing.” Using a predictable system to bring people into your world and convert them form stranger to client is the cake!

 

“People don’t like to hear this idea, they are so attached to this ego thing that 100% of my business is referral, I say to people if 100% is from referral then you are not running a business, and I see it as a sign of laziness.”

 

Talking about tactics to support that bold statement earlier Jess said there are basically 6 pillars to go from six-figures to seven-figures.

 

1. Mindset
2. Sales Skills
3. Operations and systems
4. Lead Gen
   1. Organic
   2. Paid

5.  Clients and signature precess (How clients are handled and your signature process)

6.  Team and Hiring

 

She talked about building small, nimble, lean teams “we don’t teach building large expansion teams.” This keeps things scalable and allows agents to not live in a situation where they can’t not answer the phone at dinner. “You are fully supported in your business.”

 

You need to rewire your brain for high performance. “For a lot of people once you get to a certain point in your business you don’t have business problems anymore, you have personal problems the appear in your business.”

 

Agents also need to know the psychology of sales, not just spew the same scripts everyone else has. The disruptors are there because we have let them be there, “if everyone says the same things and keep everything transactional then we are opening the door to automation taking over.” 

 

You’ll recognize this theme from several of our talks and guest speakers. 

 

She continued to say that 50% of agents should quit. “Not that I don’t think agents are valuable, but 50-80% aren’t.” What they are doing is talking business from the agents that are valuable to clients and they actually make the rest of the industry look bad. Agents complain that they are not treated with more respect, and that the industry is not seen in the light they would like. They say “I would never do that to my lawyer” … Well your lawyer performs in a very different way, first I don’t know very many part-time lawyers. Lawyers are “niched down” that is they specialize. You want to be seen as an elite professional then the whole industry needs to shift.

 

Old school niching down was geo-location based, think of the farming you learned early on in your career, new school niching down is human demographics based. It is applied in terms of life transition, are they sizing up, down sizing, first time buyers, first time investor or what? What is it they are looking to do and all are different.

 

You’ll also hear one of our team role play with Jess on finding his niche and beginning the process to apply these pillars to grow to seven-figures.

 

Be sure to check out The Listings Lab website https://www.thelistingslab.com