Are iBuyer's replacing Realtors?

Are iBuyer programs replacing Realtors?

 It seems like every day you open a paper, social media or a news app you will see an article about another iBuyer program coming to the market place. Just the other day I was reading an article about how Zillow is going to dramatically increase its revenue through its program Zillow Offers. As I read these articles, it makes me wonder who this is going to affect the most, will it eliminate real estate agents and will the “Disruptors” really last.

 Who will it affect the most?

On the surface it would seem like it is going to affect real estate agents the most. I mean after all, it is eliminating transactions that a real estate agent would typically list, right? I actually think the group that will be affected by this the most will be investors, more specifically, wholesalers. I’m in the Houston market and we get TV ads, internet ads and mail outs on a consistent basis from the major players in the iBuyer market. Big players like Opendoor, Zillow and others have a very large advertising budget and seemingly unlimited funding to take down deals and they also have brand recognition. Take that and put it up against someone who may have bought a late night infomercial system and barely has enough money to buy the deal themselves and it will be a clear choice as to who may win that battle long term.

 Will it eliminate Real Estate Agents?

The short answer here is no. By the iBuyer’s own admission, they are not even able to buy the volume of properties. Zillow Offers is saying they want to buy 5,000 houses a month, or 60,000 a year nationwide. That is their 5 year plan. And they have the most aggressive plan of al the major players in the market. So, let’s say there are 10 major players (which there isn’t) and they all buy that many houses, that would be 600,000 houses a year that are bought. In 2018 there were nearly 6,000,000 home sales. That would represent 10% of the sales if everything went right for the iBuyer’s. And the flip side of that is they are still going to sell those houses, which still leaves the opportunity for Buyer representation in the transaction.

Will the “Disruptors” last?

I have often said about iBuyer’s, and most other real estate “disruptor” start up’s, that their business model works in good markets, but will they survive in a bad market? I was pleased to find that others are in agreement with me. In a recent Motley Fool article they commented on the same thing. The truth of the matter is sure they might buy houses, but they have to sell them or the carrying costs will eat them up. They will always have the option of renting them out, yet that can get them into just as much trouble if the market is not there as well. Another thing to note is that the big Brokerages have entered the iBuyer space as well and can greatly affect who actually gets the deal. Think of Keller Williams that has over 180,000 boots on the ground that can tell people about their Keller Offers program. Or any of the other big brokerages that have begun the process or that will. It will be a game changer for sure.

 It may be a little too early to tell how this will all play out, yet I think the Real Estate Agent will be fairly insulated from the affects of the iBuyer program for now. It will definitely be a trend worth watching though as shifts in the market will change how consumers make decisions and how “Disruptors” operate their businesses.