- Growing convergence of iBuyers and traditional brokerages
- Opendoor and Offerpad both launch traditional listing services
- Both firms to offer side-by-side listed homes and instant-offer homes
For the past four years, iBuyers have spent billions of dollars buying homes with an “ instant take it or leave it offer” to the seller, fixing them up and then re-selling the homes as fast as they could. Now, two iBuyers, Opendoor and Offerpad, will also list homes directly (without buying them) as well as continuing their instant-offer businesses side-by-side.
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This action by both Opendoor and Offerpad represents a coming together, almost a merging of the disruptive iBuyer business model and the traditional brokerage business model within the real estate industry.
The advantage of this evolution to Opendoor and Offerpad is that now, both can offer sellers two ways to sell their properties…either via an instant offer or the traditional sale via a listing. Up until now, both of these iBuyers, and every other iBuyer whose businesses are exclusively based upon the iBuying model, only converted a fraction of the “leads” or offers a seller might request from an iBuyer but didn’t sell. Zillow, for example bought 6,500 homes from the 264,000 consumers who requested an instant offer. Do the math yourself…this 6,500 homes of the 264,000 requested offers from sellers actually amounted to sales for Zillow, a scant 2.5%.
Zillow then farms out this scant 2.5% homes or “leads” to its “Premier Agent” network to make the sale; Opendoor uses its “Partner Agents” network to make the sale.
Like every other “best idea,” best ideas are often “adapted” to “fit” existing traditional businesses and that’s exactly what has happened with the disruptive iBuying business model. Companies such as Redfin, Realogy, and Keller Williams have launched their own iBuying sidekicks to their traditional brokerage models.
And now Opendoor and Offerpad have launched their own listing models as sidekicks to their iBuying models so they too can offer consumers, buyers and sellers, all options, all choices (seemingly) so that any homeowner or potential homeowner can decide how they want to sell and buy their homes.
Both Opendoor and Offerpad use salaried employees to list and sell their homes, exactly the way the both have sold thousands of homes purchased directly from consumers over the years. (In some cases, Opendoor will also use “partner agents” as well.)
Using salaried employees makes sense in many ways. Salaried employees tend to offer more consistent services to consumers than do “self employed” agents. Such consistent services offer higher conversion (sales) rates to the business that employs them. Just look at Redfin’s agent/employee productivity rate compared to industry averages…there’s an exponential difference on the plus side for Redfin for using salaried employees.
We’ll know soon enough whether or not this convergence of iBuying and traditional listing brokerages makes sense. In the meantime, Opendoor and Offerpad will no longer have to buy every house they sell…they can both buy instantly or list instantly to sell, as can their sellers both sell instantly or list instantly to sell.
Thanks to Mike DelPrete and InmanNews.