In recent years, there has been significant movement and interest around alternative real estate transaction models. iBuying is one of the most talked-about models because it represents one of the larger changes to the market structure in the past 10 years. While adoption of iBuying is still relatively small (around 0.5% nationally), signs indicate that iBuying will continue to grow. The model offers a compelling value proposition to consumers who are often looking for simpler, more convenient options over traditional home sale models.
At the NS3 conference held virtually last week, Qualia CEO, Nate Baker, joined Head of Cash Close at HomeLight, Vanessa Famulener, to discuss HomeLight’s Cash Close program and how it differs from traditional iBuyer models. The pair also discussed how other transaction stakeholders such as title & escrow agents, mortgage lenders, and real estate agents can prepare themselves for new transaction types.
A spectrum of iBuying models: how HomeLight differs from Zillow and Opendoor
You may be familiar with iBuyer names like Zillow and Opendoor. These companies are direct-to-consumer models that provide home sellers with an all-cash offer on their property for a fee of up to 10% of the home’s value. These instant buyers maintain centralized control over the transaction experience by functioning as an all-in-one real estate agent, financier, insurer, repairman, and title & escrow agent.
HomeLight is a venture-backed technology startup in the real estate industry. “Our mission is to empower people to make more simple and certain decisions around real estate transactions,” Famulener said. The company started with a technology product that matched consumers with top real estate agents in their area. Now, HomeLight has expanded into new lines of business including programs called Simple Sale and Cash Close.
HomeLight’s Simple Sale allows an individual to view a network of iBuyer options across the country. The home seller can compare offers from instant buyers spanning Zillow, Opendoor, Offerpad, and more. The system also presents a price the home seller could expect to receive if they listed with one of the area’s top agents.
HomeLight’s Cash Close Trade-In program is akin to an iBuyer model. “The major difference is that we purchase a home at a competitive, guaranteed price and list it on the market with a top agent in the area,” Famulener said. “When a home sells on the open market [the consumer] receives all the upside of a market sell transaction minus a flat fee.”
Why iBuying can’t be ignored
Famulener noted that it’s a “slow and steady” effort to educate the market on new transaction types like HomeLight Trade-In; however, transaction participants are quick to get on board after they experience its benefits.
“When there’s a change in how you do a real estate transaction, it’s hard to get everyone to adopt that,” she said. “So we’re really training agents on how to do it and how it works for them. As soon as they complete a few transactions they are hooked.”
While the transition is slow, the benefits are sticky for businesses and consumers alike. Famulener’s belief is that whichever model enables the client to retain full equity of their home while benefiting from the ease and convenience of an iBuyer transaction has the ability to gain 100% market share in the future. For HomeLight, this means engaging with expert local real estate agents to ensure the seller receives the benefit of a knowledgeable professional who can market their home for the best price.
How to prepare your business for new transaction types
iBuying and similar models are a different way to transact real estate. The iBuyer often takes on multiple roles. As a result, a traditional mortgage lender, real estate agent, or even a title or escrow agent may not be involved.
Famulener noted that businesses should ask themselves “what does this process mean to me? When this type of deal comes across my desk, how will I make sure I am ready?” She encouraged business leaders to learn the different models and to talk to different real estate agents about the different products they are seeing on the market.
“It’s just a matter of time before [iBuying] is a good chunk of the deals you’re working on,” she said.