How Realtors Can Compete with Companies like Open Door
Hang out with real estate agents and you will hear predictions of doom and gloom because of competition from upstarts in the industry like Open Door and Offerpad.. But these kinds of innovations have not threatened the real estate profession. They rely on cost-cutting techniques that do not support the level of client service that you can offer to your buyers and sellers. To compete with them you need to understand how they work, so you can differentiate yourself from them. Then include that in your brand and marketing messages to your existing or potential clients.
Cutting Corners on Customer Service
Here is a direct quote from a publication affiliated with Slate Magazine and Arizona State University, that looked into the trend of online cost-cutting real estate websites: “Why hasn’t the internet cut out the agent, even as houses sell to internet companies with the click of a button? In part because consumers aren’t really trying to inject any startup pizzazz into the largest (and most complex) transaction of their lives. Local knowledge remains invaluable customer service.”
If you do some research you’ll find many complaints on the internet about low-ball offers, a lack of response to questions or problems, and frustrating transactions. To compete with these new companies, stick to doing what has always worked in this industry. Provide great customer service that is knowledgeable, responsive, fair, and delivers consistent results.
Convenience versus Price
What these companies are using as their business model isn’t exactly new and innovative. For decades professional investors using private funds instead of traditional mortgages have been buying homes and promising lower fees and faster closings. You seen signs everywhere for these pros, with messages such as “We Buy Ugly Homes.” They typically offer a very low price, a 30 day closing, an all-cash transaction, and they buy properties “as-is” with no required repairs. Companies like Open Door are simply expanding the model, with enormous capital supplied by Wall Street hedge funds or institutional banks.
When it Makes Sense
Doing a deal with a professional investor – whether it’s a local individual who flips houses or an online tech company with hedge fund backing – is a good solution for some buyers and sellers. If you’re getting foreclosed, need to raise money in a hurry to pay medical bills, or inherited a property and want to quickly turn it into hard cash, a professional investor can make that happen. That helps explain why even in the cities where they are most successful, companies like Open Door handle only about five percent of the sales. They appeal to the same small slice of the market that responds to offers from other professional investors.
Why Realtors are Vital
The bottom line is that by using a good real estate agent you have a greater chance of getting a higher price for your home. You will also likely walk away with more profit in your pocket. But selling to one of these tech companies may leave you too cash poor to make a down payment on your next home. If you are making a living as a Realtor today, it’s proof of this concept. Virtually all of your clients are familiar with companies like Zillow, and they use them as buying and selling resources. But they still hire you to represent them as their Realtor, and for good reason.
Embrace the Change
Technological innovations can create challenges. They can force you out of your comfort zone, and they can necessitate learning how to adapt and compete at the next level. But that kind of disruption of the status quo is healthy and spurs growth. That was true decades ago in the industry and it will be true decades from now. Embrace the change and use it to distinguish your unique value proposition. Then promote that value to your clients, and crunch the numbers to prove your point. While those who cannot keep up with the times may fall behind, you’ll move forward as a more capable Realtor and competitor.