Mike DelPrete, a resident scholar at the University of Colorado Boulder who specializes in the iBuying market, recently talked with InmanNews about his current view of the housing industry. DelPrete believes, “iBuying represents the holy grail of real estate tech…it’s big…it’s impactful and it fundamentally does have the ability to change the way people buy and sell houses.”
In terms of where the industry goes from here over the next 12-24 months, DelPrete said, “Incumbents, wake up!”
DelPrete is a consultant to many international real estate companies and “…all of those companies, companies and investors in Europe, South America, Asia…everybody is looking at the US and specifically at Opendoor and Zillow.”
Just as Amazon is consumer-centric, DelPrete believes that in no more than five years, real estate companies and investors will be as consumer-centric in order to expedite consumer choices. Whether Opendoor has agents or Zillow works with only its “best” Premium Agents who spend “…tens of thousands of dollars a month to be the one broker per market…” iBuying companies will do whatever it takes to get market share.
However Zillow partners with its best of the best Premiere Agents, the partnership will be “…either Zillow’s way or the highway. It has the power, the eyeballs, the buyer leads and now it has the seller leads and agents must play by Zillow’s rules.”
With its more than active iBuying business now in full throttle, Zillow’s operating mode is different than what it was two years ago when the Premiere Agents advertising model was front and center. Now its mode is “…Let’s just work with the best because that’s all we really need to execute our strategy.”
DelPrete’s thoughts on commission compression? DelPrete sees no push whatsoever to reduce commissions when buyers/sellers choose to go with a traditional sale. “Consumers are willing to pay because they are willing to pay for a service.”
With an iBuyer sale, however, iBuyers are going to scale back on commissions….” because those commissions are the biggest cost to iBuyers…basically it’ 4.5% on every transaction.”
Zillow’s iBuying operations have already reduced its commissions. Instead of 3% to list a house, agents now get a commission of 1.5%. The behemoth has also reduced its total commission rate from 5%-6% to 4.5%.
DelPrete’s message seems fairly clear…buckle up, everyone.