iBuyers Knock Opendoor and OfferPad
The latest iteration of change in the Atlanta real estate market is the iBuyer. Atlanta is ground zero in war among iBuyers Knock Opendoor and OfferPad. The last thing this big for Atlanta real estate was when General Sherman burned Atlanta to the ground.
Technology has one constant – change. At The English Team we have embraced technology in every facet of our business. As an early Internet adopter and now as a premier marketer through social media, data portals and artificial intelligence we bring an edge to home sellers that has put us far ahead of the competition.
This is the second in a series of articles about iBuyers. IBuyers are the latest iteration of change in the Atlanta real estate market and use technology as an alternative way of selling your home. Atlanta is ground zero in war among iBuyer Brokers: Knock, Opendoor and Offerpad.
Embracing change is the only way to stay ahead of the technology curve. The first step is to get an understanding of the change that lies ahead. This is the first in a series of posts examing the iBuyer concept.
What the heck is an iBuyer? I had some help here with my Inman News subscription:
IBuyers are investors that use automated valuation models (AVMs) and other technology to make quick offers on homes, close in days and then resell them. But they’re not home flippers masquerading as tech companies, a panel of iBuyers said at Inman Connect.
Home flippers “buy as low as you can, fix it up as much as you can and try to achieve top of the market,” said Jerry Coleman, CEO of iBuyer OfferPad. “Our goal is not that. We want to pay as much as we can for the home.”
Instead of buying at a steep discount, iBuyers charge a service fee ranging from 6 to 14 percent — which is ultimately supposed to net a homeowner considerably more than selling to a traditional investor. SOURCE: Inman News
Why would anyone use an iBuyer given the costs appear to be higher than just selling your house yourself or selling through a traditional real estate brokerage? Inman Connect held a forum in NYC where OfferPad and Knock shared their philosophies on selling your home to an iBuyer
“It’s all about ease. The culture is moving [toward on-demand]. People like an easy transaction. They like it smooth. They like to have a situation planned for them. Models like ours are a perfect fit for that,” Dan Mayes, senior vice president of product management and analytics at OfferPad
“We’re literally reinventing the way people buy and sell homes. And we’re doing it by … facilitating a seamless swap of your home, We’re trying to make homes liquid. People hate the 120-day listing process. They hate the repairs, shelling out of pocket for repairs. They hate inconvenient showings every time someone wants to come through their house, and the uncertainty that it’s going to actually happen. We alleviate all that and make it pretty much instantaneous.” Sean Black, co-founder and CEO of Knock
What does all this convenience cost a home seller. With OfferPad the fees are more transparent. Knock states they charge a 6% commission which is typical for Atlanta. But the cost of repairs is opaque I am not certain how the cost of repairs is factored into the equation for a house sell. For instance – I bought a home in Tucker for $125,00 and made $140,000 in repairs before selling it for $310,000. I wonder how it would be valued. Here are the comments at Inman Connect from the iBuyer companies
At OfferPad, sellers pay a service fee ranging from 6 to 13 percent of a home’s purchase price. The fee is based partly on a “risk metric score” calculated according to factors including ZIP code, location and market trends.
At Knock, sellers pay 6 percent, the standard fee paid to agents in many markets. The cost of repairs is factored in at closing.
Considering that sometimes sellers end up paying more in fees to iBuyers than they would traditional brokerages and some in the industry question whether iBuyers really pay market value for homes, are sellers valuing time and ease over money?
Because of the holding expenses of staying in a home longer, which could include mortgage, utility, and homeowners association costs, “it’s really a wash,especially if the seller doesn’t have to do repairs. “I don’t think it’s a financial decision really from the consumer’s perspective. I really don’t think they look at it that way. They look at it, once they understand the model and the convenience, it fits for them,” Dan Mayes, senior vice president of product management and analytics at OfferPad
Black disagreed. Knock’s typical sellers are usually young families with children looking to trade up or retirees trading down, and each kind of seller needs “every penny” they can get out of their current home. We charge the same 3 percent as a traditional broker to sell your house and the seller of the house that we buy on your behalf pays us 3 percent,” Sean Black, co-founder and CEO of Knock
In future posts, we will examine the mechanics of each iBuyer from a home seller’s perspective. We will also evaluate the level of activity in the Atlanta real estate market.
By Tim English, Marketing Manager and Realtor, Sally English and the English. Tim has been active in the Atlanta residential real estate market place since 1982 as a developer, builder, investor and Realtor. He holds an MBA with concentrations in Finance and Real Estate from Columbia University and a BE in Chemical Engineering from Vanderbilt University. Tim and Sally are married and have three adult children. They live in Northeast Atlanta in a neighborhood convenient to Emory, CDC and CHOA.