I tend to keep the posts on this blog focused around strategies for agents, but with all the iBuyer talk out there one can’t help, but ponder the possibilities.
I’m a car nerd at heart; so it’s hard for me to resist the temptation of comparing the rise of iBuyers to the world of the automotive industry.
Selling a car sucks. You get tire kickers, low ballers, scammers, and all other forms of internet yahoo’s beating down your door, and creeping you out.
But is this the primary reason that drives people to trade vehicles in vs selling on the private market? My stance has always been there’s a much simpler desire. Something new. This is particularly magnified when monthly payments are involved, which encompasses the majority (66%) of todays homeowners.
Rob Hanh made an excellent point about the impact of holding costs on the consumer, and why it could actually favor some to sell to an iBuyer from a cost perspective. Holding costs (housing costs) even in a 0 DOM market can really add up, and for most Americans are the largest monthly bill to pay. This is a key reason many people trade that old clunker car in. The equity in the vehicle is important, but what really matters is the monthly cost. The typical American family struggles to afford one cost of living let alone floating a second for an undisclosed period of time. This doesn’t change their needs and desires. We still want the new/different car.
If the vehicle was totally paid off one would think we’d scoff at a dealer’s typically below true market value offer. That is unless we truly value the convenience of the service provided. Again selling a car, even with the help of an eyeball drawing market place is not the easiest experience.
Car dealers are not in the business of helping people sell their cars. They are in the business of buying inventory, and selling it for a profit. When that product is not exclusively available through a single dealer, and pricing transparency becomes widely available that really makes an impact on the margins in which one can do such a thing. So what’s a crazy Larry , sitting on his bull, with a fist full of balloons supposed to do to make a few bucks? Sell financing, and warranties.
What This is Really All About
I went car shopping with my fiancé the other day. My goodness was it awful. I spent my youth driving glorious $500 piles of crap so to even walk into a dealership for me is a bit of a foreign territory. The reason being I’m the buyer that they despise. The cash buyer.
When people pay cash, turn down the 10 year warranty, and pass on the 25 discounted oil changes boy does that sticker price have a way of being sticky. I’ve since learned to conceal the fact that I may be paying cash or have already been pre-approved by my local credit union until the bitter end of the dance.
This leads me to ask some interesting questions of where iBuying, and innovations in underwriting/financing are taking the industry. Clearly the iBuy crowd already understands that the margins are thin, and are looking at added services like mortgage, title, etc. to be the main driver of revenue from the transactions being generated. Non-homogeneous markets offer more opportunity for flip margin, but bring a greater risk of mis-pricing.
W.I.W.D.W.Y.D.J.A.L.B.B
Yup, this all makes a lot of sense to me. Big tech comes in, topples the industry, vertically integrates all the associated transaction fees, and we all go home.
One of the earliest lessons I learned as an entrepreneur was the power of a simple acronym. W.I.W.D.W.Y.D.J.A.L.B.B. Easy to remember right?
What If We Do What You Do Just A Little Bit Better. Okay, maybe I was being a bit cheeky about the easy part. First out of the gate is an advantage, but consistently better is what makes a race winner. From a strategic stand point (what this blog is all about) This is where the opportunity lies, and will continue to be so.
Think you can’t compete? Think again. Back to our auto-analogy; there are 45,000 independent used car dealers in the united states. Plus nearly 20K selling new cars. That’s a lot of dealers, a lot of choice, and a lot of people all asking W.I.W.D.W.Y.D.J.A.L.B.B. Does it take billions to become an auto-dealer? Nope.
During a panel session at Unite about iBuying, Lane Hornung of 8z answered the question How much capital do you actually need to get started? “Enough to buy one house”. Lane who is also the co-founder of Zavvie makes an excellent point. Billions in VC money will most definitely grease the wheels, but it doesn’t make solving the problems iBuyers do exclusive to Silicon Valley. (If you’re looking for a great example of what evolving to compete looks like click on the link to Zavvie)
Consumers need mobility, and are cash poor. That’s the reality. Innovations in financing are trying to solve these problems. Most shop first, and finance later (backwards) anyway so who better to offer these solutions than a real estate agent?
(i’m clearly glancing over a lot of fine print about co-marketing agreements, but I’m far from qualified enough to speak on those)
Same Trend New Headline
iBuying is without a doubt gaining some traction, and the dollars to influence consumer opinions are being spent. The real estate business that’s constantly evolving, and asking W.I.W.D.W.Y.D.J.A.L.B.B. shouldn’t be scared of a new model. Models are easily replicated. Scale however isn’t.
Consolidation is the real agent killer. It has been for years. Teams, call centers, salaried employees, and service extras (free moving trucks etc) have been, and will continue to be the thing that’s putting the real pressure on the traditional agent. It doesn’t matter what the model looks like, or if it involves the purchase of a home. The grand opportunity that the disrupters of this space are really circling around are the profits, and the inefficiency. These two things create the space for people to ponder W.I.W.D.W.Y.D.J.A.L.B.B.
TL;DR
- Consumers want access to their equity. iBuying is making this happen.
- Auto Dealers sell inventory, and credit. Consumers still hate them. Experience matters.
- You don’t need to be first, second, or third. Just consistently good.
- Don’t be scared. Be excited. There is no Google of iBuying or real estate. This is the wild west. An opportunity.
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