National real estate companies known as iBuyers present local real estate agents with competition in a crowded market
By Brandee Gruener | Photography by Jessica Berkowitz
Kimberly V. Williams, owner of Right Time Realty and a Realtor for 20 years, gets calls that she couldn’t have imagined when she first started selling real estate. “Why should I hire you,” her prospective clients ask, “when I can just sell to somebody online without even showing my house?”
National real estate companies known as iBuyers – like Opendoor, Mark Spain Real Estate and Offerpad – appeal to sellers by touting quick and easy cash payments, the convenience of avoiding repairs and showings, and a slightly lower commission fee. And this appeal works for homeowners who want to sell quickly. They might need to raise cash for a down payment, move a parent to a retirement home or leave the state for a new job.
On the other hand, iBuyers typically deduct the cost of repairs from their cash offers and don’t pay top dollar in what is a very hot market.
“It really depends on if you’re OK with missing out on that opportunity to make some additional income,” Williams said. “What makes more sense to you, the convenience of someone writing you a check, or the opportunity to maximize the amount of money that you can make from the sale of your home? With me, with a few tweaks and a weekend of showing, I may be able to attract a bidding war.”
Houses sell fast and bidding wars have become a norm in today’s market. Despite that, iBuyers have had “a tremendous impact on our business,” Williams said. “Basically they are our competition.”
Jon Enberg, the Carolinas general manager at Opendoor, noted the company works with independent agents who “present Opendoor as an option alongside listing on the open market.”
“We think consumers, regardless of their circumstances, want a more certain, hassle-free way to buy and sell their homes,” he said. “Our goals are aligned with agents – we want people to feel empowered to move when they are ready; not just when they have to. Agents provide tremendous expertise and knowledge when our customers want that support.”
According to Opendoor, most real estate transactions take place the traditional way, with fewer than 1% conducted online.
That figure can vary from market to market. So, how much market share have iBuyers grabbed in Durham? In a recent search of Opendoor homes, the company had 17 listings in Durham. Mark Spain Real Estate, which also provides traditional real estate services and did not appear to own most of the homes it listed, advertised 25 properties. Offerpad had four listings, and Redfin, which also provides both iBuying and traditional brokerage services, had two. Together, these iBuyers represented about 9% of properties for sale in Durham.
Zillow, of course, abandoned the iBuying business in Durham and elsewhere, eliminating some competition in the housing market. And other local real estate firms we spoke to were not impacted by iBuyers, perhaps because they don’t compete in the same price range or neighborhoods. For instance, Mark Spain’s website guarantees an offer on homes that are not bank-owned and that were built after 1960. Opendoor buys homes in good condition that are not bank-owned and generally built after 1930, and has focused on a narrow price range in Durham that tends to appeal to first-time homebuyers. Recent listings ranged from $229,000 to $450,000.
That could change, though. Enberg said that Opendoor has expanded into additional zip codes in Durham and Raleigh with plans to purchase homes valued up to $650,000.
Low Inventory a Challenge
The ultimate challenge for all real estate agents is a serious lack of housing inventory for people who want to buy. Buyers get rejected on offer after offer. Many listings result in a bidding war with five, 10 or even 20 buyers competing. In its January report, Triangle MLS indicated there was only a two-week supply of housing inventory available in Durham, with 11.4% fewer new listings than a year prior. Six months of supply is considered a healthy market.
The median sales price in Durham simultaneously leapt to $374,950, a 28.8% increase from January 2021. Agents don’t foresee price increases slowing down in the near future, especially with companies like Google, Apple and Nike hiring in the area, and more companies flocking here to follow them.
On the lower end of the market, a $300,000 home can go for $35,000 over asking price. At the higher end, buyers have been known to beat the competition by offering $100,000 or even more over asking. And bidding wars can include someone from California or the Northeast – folks who see our housing prices as a bargain.
“Now the list price is like the opening bid on the house,” said Susan Peak, partner at Peak Swirles & Cavallito Properties. “People have to say, ‘I’m going to buy this house no matter what.’”
Adrian Brown, qualifying broker and partner at Inhabit Real Estate, added that he has missed out on showing homes listed as “coming soon” that came off the market before agents were even allowed to walk through.
“You have to assume that the people bought them sight unseen,” Brown said. “They just saw the pictures. I think it’s just that people really know they want to be here.”
While not all local firms have lost business to iBuyers, most said their clients face fierce competition from investors who are purchasing inexpensive homes – sometimes from iBuyers – to hold as rentals. Rental homes are an appealing investment now that so many families are waiting for a better opportunity to purchase a home. Redfin reported that investors bought 18.4% of U.S. homes in the fourth quarter of 2021, with low-priced homes being the most popular.
“In terms of the future of real estate, the bigger issue that I’m concerned about is institutional investors taking masses of homes off the market,” said Courtney James, broker and owner of Urban Durham Realty. “This makes the general resale market much more intense (there’s already such a lack of inventory), but these companies are also taking over the rental market with a high-priced and disconnected ‘landlord’ model.”
Agents Promote the Personal Touch
Local real estate agents, on the other hand, tout their ties to the community and their close and personal involvement with clients as reasons to stick with them. Agents believe they can help buyers strategize a winning bid in this competitive market. Ann Cavallito, broker-in-charge of Peak Swirles & Cavallito, said there will always be a place for the hometown real estate agent when it comes to shopping for a house.
“Real estate is still about the people connection, no matter how much technology enters into the picture,” she said.
Agents also said iBuyer technology can make home buying impersonal or even difficult. They talked about struggling to get past door locks with an app, negotiating offers by email or online portal, and dealing with unusual repairs (carpet in a bathroom, for instance). Agents said iBuyers can be difficult to reach with questions.
“When any of our agents are helping a buyer purchase a home owned by an iBuyer, it’s been especially challenging because the listing agent is, at best, not engaged, and at worst, impossible to reach,” James said. She has had a different experience with Mark Spain, which has “a local agent, which from our perspective, is a huge difference.”
Mark Spain advertises its agents as “local, experienced, highly trained and working full time,” and says, “our agents lead with a servant’s heart and put your needs ahead of their own.”
From what James has seen, Opendoor is attempting to engage more local agents to provide their guaranteed offers as an option. Firms like hers, meanwhile, work to set themselves apart.
“We’re continuing [to] remind people that we are locally owned, invested in our community, provide a high level of service and have consistently produced better results than many of the iBuyer companies (that, at the end of the day, often charge just as much),” James said.
Brown said his agents at Inhabit pride themselves on building a relationship that lasts long after a home is bought or sold. He often recommends contractors and repair services to former clients. The strategy seems to pay off when they or their friends and family come back to Inhabit years later. In fact, the company saw a 63% increase in total sales last year.
Not only that, but “92% of what we generate in revenue stays in the Triangle, which we’re really proud of,” he said.
As for Williams, she said Right Time Realty has always persevered in challenging times.
“I think there are people that still like that human touch,” she said. “We’ve been under lots of threats since I’ve been in this industry. This is just one of those that I do not feel is going to be long term.
“I think that at some point that is going to be a trend where we start to see more people follow Zillow and get out of the business.”
That remains to be seen, at least according to Opendoor. “We are in the midst of a generational shift toward fully digital experiences, with a large, unmet need for a seamless process in real estate,” Enberg said.
In the meantime, your local real estate agent is happy to help you buy or sell a home the conventional way.