Tracing its etymology back to a 1932 issue of “Atlantic Monthly” magazine in a quote from U.S. Senator James E Watson, the idiom, ‘If you can’t beat ’em, join ’em,” is one of Phoenix-based real estate agent Kenny Klaus’ guiding business principles.
In late 2014, Klaus noticed that he was losing some of his seller leads to a new proptech company that was offering home sellers the ability to receive instant cash offers on their homes without the hassle of preparing the homes for sale or hosting open houses.
“Originally I felt like they were coming in to take the agent out of the equation all together, and that might have been the plan at first, but I think over time, they realized that the agent is still a significant part of the transaction, helping guide people through the different options they have in selling their home and building those personal connections with clients,” the Keller Williams agent said. “I started getting feedback from some clients at listing appointments saying they had already gotten instant offers from Opendoor in the mail, but they were wondering how that compared to what they might get on the open market. So I started going into listing meetings with what an instant offer would be versus what market value was based on the comps, and clients really liked the transparency of that.”
Instead of bemoaning the new-found listing competition, Klaus decided to make the new technology work for him.
“The Phoenix market seems to be where a lot of this technology launches, so we have a choice here: you either try to ignore it, or you run at it and learn how to use it,” Klaus said. “My idea was before I become a tool in their toolbox, how about I make them a tool in my toolbox.”
Proptech firms have rapidly proliferated over the last decade. You have iBuyers like Opendoor and Offerpad. There are also so-called ‘power buyers’ like Ribbon, Homeward, Orchard, Knock and Flyhomes. And, there are firms that cater to investors, such as Sundae.
I started going into listing meetings with what an instant offer would be versus what market value was based on the comps, and clients really liked the transparency of that.Kenny Klaus, a Phoenix-based Keller Williams agent
“Anything that is out there, we always look at and investigate it first and reach out to see if they are willing to work with local agents — and see how we can potentially grow a partnership,” Klaus said.
With the National Association of Realtors (NAR) predicting 4.78 million existing homes to sell in 2023, a far cry from the pandemic peak of 6.1 million homes sold in 2021, and well below the pre-pandemic existing home sales pace, agents are looking for ways to diversify their lead generation streams and help their clients have a successful home selling or buying experience.
“It kind of sounds a little cheesy to say, but I think it makes me look like a true professional,” Shelley Cooley, a Houston-based eXp Realty agent who has partnered with Sundae on transactions, said. “I am showing up to listing appointments being able to bring different solutions to a seller versus just the standard option of listing on the open market. I think it really legitimizes me as a forward-thinking agent, and it increases the likelihood that my clients will use me again in the future and refer me to their friends and family.”
But while agents have faced their own share of challenges thanks to the rapidly shifting housing market, many proptech companies have had an even worse go of it.
As of February 2023, Offerpad had cut roughly 50% of its workforce from its peak in August 2022, while Opendoor announced in November 2022 that it had laid off 550 employees. Knock laid off 46% of its staff last March, Ribbon cut its staff by 85% in late November, and Sundae laid off 15% of its staff in June 2022.
Opendoor and Offerpad, the two publicly traded firms, lost $1.4 billion and $148.6 million, respectively in 2022.
In addition, the venture capital money that some of these smaller firms have relied on to get off the ground is drying up as the stock market contracts, forcing proptech firms to make further cuts to costs.
According to the agents who spoke to RealTrends, these layoffs have impacted how smoothly the transactions with the proptech firms run.
“We are seeing delays across the board,” Dan Walters, the CEO of The Robert Slack Group, said. “Everybody is taking a large hit, and they are trying to figure out how to navigate 2023 and beyond.”
To avoid some of these delays while still cutting costs, Offerpad, which formerly employed real estate agents, has moved to an independent contractor, allowing agents to hang their license with Offerpad’s brokerage while conducting transactions for Offerpad — in addition to their own traditional home selling and buying business.
“A call would come into our call center, and the call center was immediately sending them to an agent, who would have a conversation to understand what the customer was looking for and what the best solution for them would be. And then they might be handed off again to someone who could best help them with the solution they chose,” Stefanie Layton, Offerpad’s vice president of investor relations, said. “There were just too many handoffs.”
I am showing up to listing appointments being able to bring different solutions to a seller versus just the standard option of listing on the open market.Shelley Cooley, a Houston-based eXp agent
According to Layton, having agents as independent contractors instead of employees reduces the number of handoffs and enables agents to continue helping a client — even if they decide one of the firm’s solutions is not the right fit for their transaction.
Offerpad switched to this model in mid-February, and while Layton says it is still too early to tell what the overall impact is, she said so far, agents are happy with the change.
Like Offerpad’s agents, Cooley is happy working with her proptech firm of choice, Sundae. She said she prefers working with Sundae as properties still have the opportunity to obtain multiple offers without the hassle of going on the open market, but she said she is open to working with other proptech firms
“I’ve been burned by other iBuyer companies saying that they would buy the home, and then at the last minute they backed out because they had shifted their buy box due to a market shift,” Cooley added.
Teresa Mutakabbir, a Charlotte, North Carolina-based Berkshire Hathaway Home Services agent, has also had challenging experiences with iBuyers.
“I did a deal where I represented a buyer purchasing a home from Opendoor, and in my experience, they didn’t really seem to want to do any repairs,” Mutakabbir said. “They stalled until the very end of the due diligence period to get back to me on the buyer’s requests. I am in a Facebook group with other local Realtors and it seems that that has been the experience for many agents with them.”
Despite what she deemed a “frustrating experience,” Mutakabbir said this would not dissuade her from working with Opendoor in the future.
“Inventories are still extremely low here in Charlotte, and as an agent, you can’t just not show a client a particular home because you don’t like who it is listed with because it might the right fit for the client,” Mutakabbir said. “But I do tell them about what the process might be like based on my experience.”
Everybody is taking a large hit, and they are trying to figure out how to navigate 2023 and beyond.Dan Walters, CEO of The Robert Slack Group
As technology begins to play a larger and larger role in the home buying and selling process, agents believe firms like Knock, Sundae, Opendoor and Offerpad are here to stay.
“We are working with five or six different proptech companies right now,” Walters said. “That is totally different than it was 18 months ago when there wasn’t a strong need for partnerships or additional services because the market was just going. But we made an effort last February, when we started seeing the slow down coming, to start partnering more and more with the Opendoors, Homelights, Divvys and others in our market. In today’s market it is challenging, and I think the more things you bring to the table and bring to the conversation with the potential buyer or seller, the better chance you have at being part of that transaction.”