Friday Flash: Good and bad

Multiple companies with big balance sheets are getting into the business of push-button home sales, or, as we have come to call it, iBuying.

This is self-evident.

A non-trivial percentage of homeowners are willing to entertain the idea of selling in a way that maximizes speed and convenience, while perhaps giving up a little on net proceeds.

It is certain that the biggest players in the iBuyer game are doing tons of consumer research, so this is a reasonable inference.

The big iBuyers seem willing – and, more importantly, able – to treat the home sale as a loss leader. They are not investors; they are real estate services companies with other profit centers to exploit now (mortgage, for example) and new strategic possibilities to unlock in the future, should iBuying get big.  

I find it odd that more people don’t get this given the prevalence of the “home services” brokerage model, but I think it is clear at this point that scrutinizing the spread between the purchase and sale price on an iBuyer transaction is somewhat beside the point.

To summarize, it is now clear that:

  1. This is an opportunity that has attracted a lot of big players.
  2. A fair number of consumers seem to be on board with the idea.
  3. This is a sprawling, long-term play to which current unit economics are largely academic.

So iBuying is going to be a thing. Is it going to be 25% of home sale transactions in 10 years, or will it be 5%? I don’t know. But I believe that it is, in any event, very likely to have a material impact on consumer attitudes and behavior, and therefore the industry.

We are then left with one interesting question:

Is iBuying good?

My answer is yes.

I come to this answer by way of three criteria I laid out in a talk I gave at Inman’s CEO Connect last January in which I posited a “better” real estate industry might be a place where:

  1. Selling or buying a home is meaningfully less difficult, time consuming or costly.
  2. Technology and data create a more liquid, vibrant and ultimately bigger housing market.
  3. Great agents and great brokerage companies do not have to fight for dollars, trust and respect with those around them who aren’t great, or even good.

Now, I’m not laying out a moral philosophy here, folks, just offering an opinion. But I have a feeling most of you would agree that a future in which at least some transactions become less complicated, the housing market becomes bigger and bozos get forced out of the industry is more or less good-ish.

I think iBuying will move us, in ways not yet fully understood, toward such a future.

It’s clear that iBuying can make a home sale less difficult and time consuming. For now, it seems to be more costly, but that may change.

If this scales, it will, in fact, make housing a more liquid asset. This, in turn, could very well create a bigger (in terms of transactions) real estate market.

If iBuying goes truly mainstream – reaching, say, more than 20% of home sales nationally – it absolutely will stress many uncommitted or incompetent agents out of the business.

Please don’t take this as a wish for iBuyers to take over residential real estate sales. I don’t want that, and believe most people will always want, and get value from, a skilled real estate professional.

My point: how you view this new phenomenon at a high level conditions your response to it.

If you view iBuyers as inherently bad, or as a mortal threat, you’re likely to retrench, recoil or even waste time trying to copy them. If you view them as a new force that’s likely to do the real estate market some good in the long-term, you are more likely to think through your own market position headed into the future and make plans now to become a better, sharper, more competitive version of yourself.

Your angle of approach toward an uncertain real estate future matters a lot. If you acknowledge that there is some good in this new way for people to sell their homes, it means that it doesn’t have to be all bad news for you.

Enjoy the weekend.