New Real Estate Business Models and their Impact on Relocation

Real Estate business models

Consumers have more choices than ever before when it comes to selling their homes. They can sell by owner, or they can go the more traditional route of working with a reputable real estate brokerage firm and utilizing a listing agent to sell their property. Alternatively, they can opt to use one of the emerging new real estate business models that are rapidly gaining traction and attracting large numbers of home sellers.

The iBuyer is one of the most visible new business models, and it claims to be modernizing the real estate process. iBuyer companies are active in markets throughout the U.S., and have been marketing directly to consumers through the major media outlets. As such, they have become disruptors in the marketplace, challenging the established way in which real estate has been transacted for decades. This disruption is having a significant impact on the real estate industry, which is in turn impacting the relocation industry.

So, here’s what you need to know about iBuyer programs, and what they have to offer that is luring consumers (including those who are relocating) to their websites.

What is the iBuyer Business Model?

According to Opendoor, one of the leading iBuyer companies, an iBuyer is a company that uses technology to make an instant offer on a person’s home. They say that they offer consumers a “revolutionary way to buy and sell homes.” In other words, they claim to be the way of the future.

An iBuyer program is also offered by real estate giant Zillow, which defines an iBuyer as a real estate investor that uses an automated valuation model (AVM) and other technology to make cash offers on homes. iBuyers rely on the data of comparable home sales, and often purchase homes sight unseen directly from the sellers.

Convenient, Fast Home Sales

It’s easy to understand why iBuyers would be appealing to home sellers. There is no need to interview real estate agents and take the time to prepare the home for going on the market. Instead, consumers can literally get an offer on their property at the click of a button. No hassle. No arduous real estate transaction process. Just fast and easy!

iBuyer companies offer convenience, a fast home sale, and a streamlined real estate transaction process. As such, relocating employees might be especially attracted to iBuyers. Afterall, they are usually working within a pretty tight timeframe for getting their homes sold. But, there is much more to consider besides convenience and speed.

The Bottom Line

What about the bottom line when working with an iBuyer? Does all of this come at a cost for the home seller? Could they be trading a higher sales price on their homes for a faster sale?

A recent MarketWatch article says that selling a home to an iBuyer could end up costing the seller thousands of dollars. MarketWatch conducted an investigation of multiple transaction involving iBuyers, which showed that their offers would net their customers, on average, 11 percent less than they might receive by selling their homes on the open market. When factoring in fees and other costs, this translates into tens of thousands of lost dollars for the sellers.

Impact on Relocation Management Companies (RMCs)

So, how does all of this impact Relocation Management Companies (RMCs), and their trusted, valued, and vetted real estate partners? As consumers become increasingly more attracted to the idea of being able to instantly sell their properties, they might resist or reject the relocation home sale programs being provided by their employers, opting instead for the ease and expediency of technology.

iBuyers might seem like an attractive option for relocation sellers who are either receiving a lump sum for their move, or for those employees who might not be eligible for home sale benefits, or those that might work for a company that doesn’t provide such benefits.

Relocating home sellers might even jump the gun and engage in an iBuyer program, before they even realize what they have done, and the impact that it will have on their relocation benefits.

This presents significant challenges for an RMC that is in trying to manage the relocation process for their clients and their transferring employees.

Additionally, these iBuyers operate as technology platforms as opposed to being a real estate brokerage firms. They don’t have Relocation Departments with Relocation Directors who manage the real estate transaction in conjunction with the RMC, and that maintain vital roles and responsibilities throughout the entire relocation process.

Furthermore, companies like Opendoor and Zillow aren’t committed to or invested in the relocation industry. They aren’t members of Worldwide ERC, and they don’t attend relocation industry conferences. So, although they operate outside of our space, they are still crashing the party, so to speak.

There is an important value that comes with listing a home in the traditional way, where relocation home sellers are guaranteed representation by working with a reputable, local market expert. It provides a vital layer of protection for the home seller’s best interests that includes critical accountability and appropriate points of contact.

Final Thoughts

While being able to sell a home at the click of a mouse might appear to be somewhat seamless, it’s important for relocating employees to understand that it might be a fast solution, but it’s not necessarily the best or most cost-effective solution for them or their organization. It is also devoid of personal attention, which is one of the fundamental principles for the relationship that RMCs foster with their clients and their relocating employees.

Transferees today might prefer the ease of technology and have a belief in the intrinsic value of algorithms, but those things are no replacement for the local market knowledge and experience that comes from working with a real estate professional who is well-versed in the relocation process.

At VERSA, we value the relationships that we have built with Realtors and real estate brokerage firms. As our trusted partners, we count on them for their local market expertise, and the commitment that they have for providing the excellent client experience that we expect for all of our clients.

Change is always going to be constant. And there will always be disruption in all areas of business and life. But, it’s our job to work closely with our clients to stay ahead of emerging trends, and provide the guidance and relocation management services that best help them to successfully execute their relocation programs.

Do you have questions about the real estate relocation process and how we work with our partners? If so, please contact us anytime.


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