The New Real Estate Landscape: Changes, Challenges, and Choices
July 30, 2018
Creative Strategist, Ninety-Nine Hats
With both home prices and demand increasing, the future looks bright for Arizona’s real estate agents. But this seller’s market is also taking place during a time of great upheaval in the industry and, indeed, the world. Considering the current climate of low inventory and high demand, many real estate agents are looking for new strategies. Here’s a look at a few of the changes, challenges, and choices that lie ahead.
Named Inman’s 2017 Person of the Year, an iBuyer isn’t actually a single human being. This marriage of institutional investing and technology makes it possible to sell your home minus most of the traditional front-end work. Using an online platform, such as Opendoor, sellers enter information about their home and receive a guaranteed quote, sight unseen.
Closing is faster (as little as 72 hours), the seller has more control over the process, and it removes the inconvenience of showings and repairs. On the flip side, choosing an iBuyer means a seller will likely sell their home for less than they would with a traditional real estate agent.
However, when Zillow announced Instant Offers, enabling iBuyers to make offers alongside comparative market analyses from Premier Agents, iBuyers became more than an interesting idea. And while this method of selling isn’t for everyone, it changes the business model, further eroding the real estate agent’s ability to secure listings and demonstrate value.
Property Investment Corporations
According to the Phoenix Business Journal, a 2016 analysis by ATTOM Data Solutions revealed that “Maricopa County has the most investor-owned homes in the country and the most single-family homes owned by out-of-state investors in the entire U.S.” With demand high and inventory low, property investment corporations made it even tougher by buying up houses then renting or selling at a profit. And when these same investment corporations act as iBuyers, it represents a double whammy: lower inventory and fewer traditional listings.
Unlike flippers, who make short-term investments, property investment corporations invest for the long term, within a portfolio of other investments. The corporation takes on the details, such as property selection, paperwork, and management. The investor benefits from diverse property holdings and predictable earnings. Meet your new real estate agent: Wall Street.
Single-Family Home Rentals
The market is still recovering from the Great Recession, and a number of Arizona home sellers are discovering that their mortgage is still upside down.
“We still have hundreds of thousands of people who cannot sell their house and get out all the money they have into it,” says Jeff Sibbach of Realty One Group’s Sibbach Team. “I’ve had 1,500 listing appointments over the last seven years, and when I tell people their home is not worth what they paid for it, they hold it. If they can rent it for more than the mortgage or they don’t have a mortgage, they can hold it for a long time, and that’s what we’re seeing.”
MLS-like sites, such as Zillow and Redfin, have redefined the real estate agent’s role. Because the search process itself is now computerized, buyers come to agents with a predefined set of expectations. This makes it harder to sell homes that don’t meet those wants and needs, says Sibbach, because the emotion of the home-buying process used to outweigh the negatives.
Part of the answer, Sibbach says, is to make sure you’re really embracing new technology. It’s more than aggregator sites, lawn signs, and calls to neighbors. Sibbach suggests making sure your business has embraced all that new technology can offer, such as targeted Facebook ads, Twitter, Instagram, and robust websites with a mobile-friendly interface.
“A real estate agent is an entrepreneur,” he says. “We need to take classes on technology to stay relevant, or our business goes away.”
“(Agents) need to offer more value to win,” says Sibbach. “It’s a hot market and there’s an evolving trend of low-service, low-fee brokerages expected to challenge agents on their referral business. We need to think differently about how we present our services.”