By Riki Markowitz
Some heavily advertised and funded tech companies that offer instant offers for homes may be coming soon to Austin. Sometimes called iBuyers, such as Opendoor, Knock and OfferPad, these for-profit companies have a similar business plan. Reviews show customers have experienced everything from a positive transaction to misadventure at every turn.
Sellers go online, provide information about their home and are given what appears to be a fair market offer. If the owner agrees to the company’s terms, the wholesale company then turns around and sells the house at a profit. The offer presented to sellers is based on photos, comps and tax records. Once a seller agrees to a wholesaler’s list price, an inspector goes to the home and compiles a list of repairs (like how it works with a traditional buyer). The seller has the option of doing all or some of the repairs. The company will provide a monetary advance that they will recoup at closing or sellers can elect to have the wholesaler do the repairs and the cost is deducted from the sale price.
One agent living in a large Georgia metro area, according to Inman News, wanted to see what it was like to work with some of the more popular wholesalers in his area. After providing information about his home on their websites he received an initial offer, which he found disappointing. He said their final offer was nearly 6.6 percent less than a recent appraisal, which in his case represented a potential $125k loss.
While some sellers are willing to trade some profit for closing quickly, many people simply don’t realize how much money they’re walking away from. For the most part, it’s due to a combination of their need to sell fast, impatience with the process, lack of knowledge about real estate and discomfort negotiating. Other homeowners don’t want to deal with making repairs or simply can’t afford it.
Another pitfall may be limited customer service. Shawn Rooker, a REALTOR with Realty Austin, has had clients who fired their agent from next-gen tech brokerages, mostly due to avoidable problems. “The best agents provide value through their customer service. Period,” he says.
Another example: A homeowner who lives in a town outside of Dallas. He needed to sell his house and wanted to do it quickly. He saw another home listed by a wholesaler that perfectly matched his needs. Everything about his initial experience was perfect. He had a REALTOR and was able to see the house on his timeline, but then he needed some basic information and called the company listing the home. Because he said he had an agent, the company wouldn’t talk to him. It turns out his REALTOR was on vacation and he was worried that someone might come along and snatch the house before his agent returned. He pleaded with the company and explained the information he needed was available to the public, but it would be time consuming for him to track it down. The customer service agent still wouldn’t budge. The homeowner left the company a bad review online and pledged to never work with a wholesaler again. He said this never would have happened with a traditional brokerage.
The agents RealtyLine spoke with agreed. According to Rooker, no matter where you live — whether it’s a hot market like Austin or a sleepy market anywhere else, wholesalers “are only good for transactions where nothing could possibly go wrong.”
Steve Crorey, 2018 ABoR board president, says there are some pros for owners who choose to work with certain wholesalers. Namely, they get cash quickly, they’re guaranteed to close extremely quickly and they don’t have to make repairs. Another advantage of working with a wholesaler is that you don’t have to keep your house clean for showings.
In the end, these iBuyers are not going anywhere. In fact, there’s an entire industry of marketers training traditional REALTORS on how to start their own instant offer platforms. One suggestion is to pepper your market with handwritten lawn signs offering fast cash to buy your home. The trainer says this works because the signs appeal to people who want to sell fast and hassle-free.
Kenny Klaus, a team leader for Keller Wiliams Realty in Arizona, whose team consistently ranks in the top 125 teams in the United States by the Wall Street Journal and where these wholesalers already operate, advises REALTORS to think of wholesalers as just another buyer in the market.
“Research them and understand their model and make a decision on how this could be implemented in your business model,” he advised in an email to Mary Lynne Gibbs of Keller Williams Realty’s The Gibbs Team in Austin and 2018 Central Texas Regional Director of the Residential Real Estate Council. “Clients will go to them and you may not get the chance to even compete. Let clients and your marketing pieces say you are aware of these types of program. You can get the offers for them and show them both instant offers plus go to market values.” RL