- iBuyers like Opendoor, ZillowOffers, OfferPad and RedfinNow retracting signed purchase contracts
- Redfin furloughing 41% of its agents
- – EXp reducing 15% of staff but keep expanding agent count
Financial impacts from the COVID-19 pandemic are hitting all businesses including real estate firms. Most if not all iBuyers have rescinded purchase contracts and many real estate firms are reducing their staffs.
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Most recently, Redfin announced that it is furloughing 41% (nearly 600 agents based on a 2018 agent count) of its real estate agents and some of its support staff until September 1. A total of 7% of Redfin’s staff is being laid off, according to a US Securities and Exchange Commission filing.
Glenn Kelman, Redfin CEO, said, “The great majority )of the staff) will go on furlough until September 1, with a transition bonus and health care benefits through the summer.” The pre-tax charge for one-time termination benefits and severance is likely to cost the company approximately $2.9M-$3.3M.
Employees involved with building tech programs for Redfin are being retained with a temporary salary cut of 10-15% and cancellation of bonuses for the year. The company is honoring its previous commitment of giving remaining Redfin agents a higher base salary.
Kelman admitted that “…short term prospects (for Redfin) are glum. But our long-term competitive position is strong. Housing isn’t a fad…demand for a basic need like shelter can only be deferred, and only for so long.”
EXp Realty recently announced that it too is reducing its staff headcount by approximately 15%. There, however, is a difference in eXp’s reductions and Redfin’s. Because of eXp’s unique business model, agent count is growing rather than shrinking as eXp agents operate without having to absorb costs associated with brick and mortar space.
EXp is reducing its overall expenses by eliminating all business travel for staff, reducing its contractors, putting a hold on non-essential, open positions and doing 50% salary reductions for executive staff including CEO Jason Gesing and Founder Glenn Sanford.
Meanwhile, Zillow, Opendoor, Realogy, Redfin and Offerpad are among the iBuers that have suspended their home purchase programs. Social distancing and shelter-in-place quarantines don’t really work for Instant Buying Real Estate Programs. Plus, with the huge financial disruptions caused by the COVID-19 pandemic, it is next to impossible to estimate fair market values on homes in markets hit hard by spiked unemployment numbers and business closures.
Many sellers who had signed purchase contracts with iBuyers are now left holding the bag as well as mortgages on new homes they’d purchased under the assumption they’d sold their former houses plus the mortgages on former homes they’d thought had been sold.
What the iBuying landscape will look like once the coronavirus pandemic and its financial impacts have passed is anyone’s guess. And, now that iBuyers have reneged on purchase contracts, will sellers and/or buyers ever render this business model trustworthy or credible again?
Thanks to InmanNews and Forbes.