Last Updated on May 2, 2018
We’re covering real estate TRENDS in this week’s article- check out the Swanepoel Trends Report for 2018 (CLICK HERE) for much more in-depth information and statistics. You’re going to want to know the top 10 things driving the real estate business this year! Today- it’s all about the Direct Buyer model. Plus- you can get 10% off the Trends Report, ONLY here at Agent Inner- use the discount code “discount10” when ordering! (CLICK HERE) to order.
Especially for homeowners or buyers, real estate transactions are slow, uncertain, and tedious. And that’s even though most other aspects of real estate have advanced with the revolutionary changes brought about by technology. Taking advantage of that relative hassle in the industry, there’s a new breed of company that have merged the brokerage and finance models together- and it could change the real estate market forever.
Here come the Direct Buyers!
What’s a Direct Buyer?
Also known as iBuyers, Direct Buyers are working to streamline the real estate transaction process to bring it up to the speed and ease which consumers have begun to expect for any type of purchase (cue Amazon if you’re looking for someone to blame).
Direct buyers are: hybrid firms that buy properties from sellers, fix them up, and sell them- but not like the old distressed-buyer/ “I pay cash for any house” model that’s been around forever. This model stays closer to market rate for properties, but allows sellers to
- Indicate interest
- Receive an offer
- And pick a move date! Just like that- sort of like the CarMax of real estate.
How Direct Buyers work
Direct Buyers focus on specific types of homes:
- No historic homes – relatively new (usually built after 1960)
- Smaller lots (under .5 acres for the most part)
- Estimated value in a specific range (Redfin Now: 150K-550K)
- Vacant or owner-occupied
- Clear title, and in good condition
The ease of the Direct Buyer process is generated by how quickly an offer can be made. Since there’s no traditional mortgage, the uncertain and long timeline is absent in these transactions. Direct Buyers can close within days of a seller expressing interest!
How is an offer generated?
Direct Buyers use an algorithm to generate the offer that calculates things like:
- Estimated cost of repairs needed
- Appraisal, inspection, closing costs
- Staging costs
- Property tax
- Past sales
- Cost of holding this particular inventory
- Estimated time to get home on market
- Estimated final sale price
- Growth rate in the area of the home
Direct Buyers also often offer to perform the repairs needed, collect payments, and select title companies and arrange inspections. Controlling all parts of the transaction can remove all delays.
Big players- what’s driving Direct Buyers
Millions in investor funding has made the Direct Buyer a force to be reckoned with in real estate. The four big players in the US are currently (Check out the table below for info on how agents can fit into their models- click to expand):
- Zillow Group
What does this mean for me as a REALTOR?
Direct Buyers are creating a buzz in the industry. Staying power for this model of brokerage will depend on whether sellers want to opt for convenience and speed over possible better returns with a traditional broker.
Brokerages and agents who focus on quick transactions will likely find themselves in competition with Direct Buyers, not as much brokerages that focus on quality of service and specialized marketing.
Agents are best equipped to talk about Direct Buyers when they understand how the process works and know something about each big player. Leverage Direct Buyerss as all-cash buyers for difficult homes or sellers that need a quick exit/sale. Sometimes, working WITH is better than AGAINST.