At the beginning of the 2010s, shopping for homes revolved around one person…a realtor. A realtor gave us information about market conditions in the specific location where we were shopping. A realtor gave us a sampling of homes that were available for sale that “matched” our budgets, needs and wants regarding the number of bedrooms and bathrooms, the specific “amenities” we need/want in terms of living rooms, dining rooms, family rooms, laundry rooms, guest rooms, media/game rooms, etc. And, a realtor likely referred us to a mortgage broker and title insurer.
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Now, on the cusp of 2020, we “shop” for homes online via realtor.com, Zillow, Redfin, eXp Realty or some other portal. The realtor you choose, if you choose to have a realtor at all, will most likely have a formal relationship with one of those portals rather than with a standalone real estate brokerage firm. That realtor of your choice will walk you through the transactional process as curated by that portal.
The realtor is now considered to be an advisor, rather than an industry gatekeeper, who will function as a guide to help you navigate all the transactional information now available on that real estate portal.
According to Jonathan Miller, president of the Miller Samuel Appraisal and Consultant Services, said, “There is too much information and a lot of that information is (presented) out of context. The realtor’s role has morphed from ‘Here’s the information’ to ‘Here’s the right information.’ This…is…a big shift. The (role of a realtor) is really as a curator now.”
Even though smartphones and mobile apps have transformed a number of services (Uber, Lyft, Netflix, Amazon, etc.) into on-demand services, the real estate transaction process, after the house shopping online, is still done with paperwork offline and mortgage lenders, appraisers, home insurers, title insurers, etc. all needing the same written information over and over again. And even with all that redundant information, the deal can still fall apart at any time if financing is denied or one side of the transaction simply backs out.
And then, in the last half of the 2010s, venture capital funding poured into real estate technology. Pioneered by Opendoor, this most high profile startup introduced the concept of iBuying. Prospects could now buy a house for an algorithmically determined “fair market price.” And sellers could now get the convenience of cashing out the equity built up in the house they’re selling to pay for their next house AND they could choose their own move-out date
The price of that iBuying convenience is approximately 7.5% of the purchase price of the house instead of the normative 6% of the home’s purchase price when using a traditional real estate transaction.
Now, on the cusp of 2020, iBuyers are working on one-stop home shopping by adding mortgage lending divisions, title insurance, moving services, etc. Glenn Kelman, CEO of Redfin, said, “I just think that the days of the standalone real estate brokerage are over. There’s no way that over the next 18 months there won’t be consolidation in the industry. Every player has a winner-take-all thesis…”
With Zillow recently revealing it makes 0.6% per house flip, can iBuying actually become sustainable? Do consumers really want to make one of the biggest financial decisions of their lives with a few clicks online?
Mike DelPrete, real estate tech advisor and sometimes called the iBuyer Whisperer, said, “(iBuying) is like if you go to a five-star restaurant and order a meal and it comes out of the kitchen instantly. You’re going to have some questions. I think people want (buying or selling a house) to be hard because it should be. (Buying and/or selling a house) is a big transaction. It takes time.”
Thanks to Curbed’s Jeff Andrews for source data.