iBuyer vs Realtor – Use these scripts for real estate agents to overcome listing presentation objections when sellers want to sell their home directly to an iBuying company.
This iBuyer vs Realtor discussion is a hot topic. How should you handle iBuying companies? These are companies that go out and buy houses directly from sellers and then either hold them or flip them. They are, in theory, competition for you, because sellers that would normally list with you on the open market could instead sell directly to an iBuying company. In today’s blog, I’ll tell you why you shouldn’t be worried.
VIDEO: iBuyer vs Realtor – iBuying Company Scripts for Realtors
iBuyer vs Realtor: the wrong way to do it
Let’s address the elephant in the room first. Zillow Offers iBuying program is no longer “with us.” I predicted this would happen, and it happened even faster than I anticipated. Why? Because they started paying significantly higher than market value.
Many Realtors came to us and asked what they should do about Zillow Offers. They couldn’t compete with these insane Zillow offers. We advised our clients to wait it out. Zillow won’t be able to keep up like this. As predicted, they couldn’t keep up, because they were overbuying. Their ship sank after only six months. It invalidated their credibility as a company, and they had to lay off a large percentage of their staff. Not a good look. Because Zillow’s failure, iBuying companies, in general, got a bad rap.
Home price appreciation has been at approximately 15% per year over the past two years. You’d think that if you overpaid for a house, the crazy rate of appreciation would cover you. Alas, Zillow was overpaying so much that even in the most quickly appreciating housing market in history, they still couldn’t make their money back.
“Big flippers” Offerpad and Opendoor
The Zillow Offers story is a cautionary tale in the iBuyer vs Realtor saga. However, the two iBuying companies that you need to “worry” about are Offerpad and Opendoor. I put worry in quotes because you shouldn’t worry, but you should take notice. They are nationwide flippers — that’s how you need to see them. Most iBuying action from these companies come in the big cities. That said, you’ll start to see iBuying in every market soon enough.
These iBuying companies have a simple strategy. They buy properties, and they either flip them right away, or they hold them until it’s a good time to flip them and sell them.
I would say that in most of the MLS groups across the country, approximately 10% of all properties are purchased and sold by investors. In some areas, it’s as high as 25%. iBuying is well documented at under 1% of any MLS. They are predicting that in the next five years it may go up to 2%. iBuying companies are really just “big flippers.” And regardless, they are likely not the biggest flipper in your market.
Does flipping scare you?
You probably know the biggest flipper in your market. Does the biggest flipper in your market bother you? Do they scare you? Do they make you feel like the profession of Realtor is in danger? This is the way you should view these iBuying companies. Offerpad or Opendoor are not in any way fundamentally different from your local flipper.
If you are scared of these iBuying companies, you are buying into the fear mongering of click-bait ads and opinion pieces. Know that if you lose a listing to one of these companies, the only thing that means is that you need to work on your skillset as a Realtor.
iBuyer vs Realtor: the scripts you need
When it does come down to your seller choosing an iBuyer vs a Realtor, what can you do? From a Listing Presentation standpoint, if your seller says they are going to list with an iBuying company, you first ask why. Are they okay? Because the only normal human being that would consider using an iBuying company is a person who is in distress. Here’s why.
The seller that chooses to sell to an iBuyer is selling their house to a company that is going to turn around and sell it for more to make a profit. You can tell your seller this short script. You are taking all the profit from your home sale and giving it to this iBuyer company. Why would you not list with me, pay a smaller commission, and you keep all the profit? It makes no sense.
The reason Zillow Offers had many Realtors scared was because they were paying so much. But, that’s also how Zillow Offers went under. That strategy wasn’t sustainable.
Offerpad and Opendoor are paying market value, if not less, because they want to flip it and make a profit. It makes no sense in this market for a Realtor to ever lose out on a listing to an iBuyer. Everybody has so much equity in their home, so long as they purchased their home more than 6 months ago.
Do the math for your seller
Housing prices in the last 12 months have gone up, nationwide, over 19%. That is almost 2% per month. How much do Realtors charge on average? 6%. This means that sellers should earn enough to pay the average Realtor full commissions with 3 months of equity. If they purchased their home 3 months ago, they’ve earned enough to pay their Realtor. Why give your profit away to an iBuying company?
As Reatlors, we are in business to make the most profit for our clients. We take a relatively small percentage as a commission. Why would you list with a company that is going to take all of your profits?
Break it down for your sellers with this iBuyer vs Realtor script.
iBuyer vs Realtor script
Here are the two options. Option A: You use the iBuyer company. This is what your home is worth. This is what Offerpad and Opendoor will offer. That is market value. Option B: How much do you owe? Let’s conduct a CMA and see how much your home is worth. We’ll pull comps. Now, we’ll subtract what you owe from the value. This is your gross profit.
For example: If you owe $300,000 and I can sell your home for $450,000, the gross profit is $150,000. Subtract closing costs and commissions (use 8%). At most, it will be 2% for seller’s side closing costs and 6% for commissions. This comes to $36,000. Your net profit is $114,000. That’s how much you will walk away with by selling with me. Why would you give Offerpad or Opendoor $114,000?
iBuyer vs Realtor: no contest
This is why I’m not worried about iBuying companies. The client’s profit is not in their best interest. This is why they are not in direct competition with Realtors. Their market share is going to get smaller. The only time these iBuying companies make so much money is in a hot market like this.
It won’t last forever! iBuying companies are not disruptors. The Realtor profession will carry on without further ado.
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