Disruption is good but only if it results in an improvement for the end consumer. Many technological advancements in the financial services industry are geared toward efficiency on the origination side of the transaction with only an indirect benefit to the consumer. Granted, yes improved technology is good if helps industry professionals become more efficient, but if it doesn’t ultimately result in a better lending experience for the borrower, what have we gained? For that reason, Thrive Mortgage is very intentional with every technological solution we adopt and if there is no discernable improvement for the consumer, we’re not interested.
In light of that, let’s talk about iBuyers. If you haven’t heard of this trend, here’s a basic explanation. Got a house to sell? They’ll buy it through their online platform. That’s pretty much the gist. There are a growing number of companies popping up in this space (Zillow, OpenDoor, OfferPad, just to name a few). They have varying ways of doing business but their marketing is all very similar. They market to consumers based on a combination of usually three distinct advantages:
- Greater convenience,
- Lower costs, and
Based on their advertising, the convenience results from not using a Realtor to list your home. That means no showings, no staging, no contract hassles, no worrying about how long it’s going to be on market. They make you a cash offer and you either accept or reject it. Sounds simple enough, right? Well, let’s keep going for a minute.
Let’s talk about costs. This is being written for industry professionals, so if that’s you, I’m assuming you know the typical costs associated with a real estate transaction. If you don’t, see below for a more complete explanation about it first then come back to this article. Anyway, costs the seller incurs are typically 6% commission, covering title costs, paying for repairs, and of course the costs involved in staging, cleaning, and prepping the home for being on market. All costs are not necessarily monetary. There are costs associated with time.
I CONSUMER DISCLAIMER: If you know anything about residential real estate transactions you probably know that the typical commission paid to a Realtor is 3%. This is customary in most states and generally goes unquestioned by the seller or buyer. The commission comes out of the sellers proceeds (hence why the buyer doesn’t worry about it). Sellers typically don’t question this either because more than likely it was covered by the seller when they first purchased the home as well. But did you know that Realtor commission is 100% negotiable? Just because the standard is 3% per side, doesn’t mean that’s what the seller has to agree to. They can have their listing agent make it whatever they feel is justified. If they want to incentivize buyers agents to recommend their home to a client of
James Duncan is the Director of Education & Engagement for Thrive Mortgage and has contributed to numerous published works and industry discussion panels. As a former high school teacher, mentoring and coaching is his biggest passion. Whether it is leading the Marketing Department at Thrive or working individually with clients to help them make better educated decisions, James has a tremendous passion for moving the industry forward.