Proptech is helping agents close deals
Its etymology can be traced back to a 1932 issue “Atlantic Monthly” magazine. A quote from U.S. Kenny Klaus, a Phoenix-based realty agent, has one of his guiding principles: Senator James E Watson’s idiom “If you can’t beat them, join’em”.
Klaus noticed that he was losing his sellers leads in late 2014. He decided to start a new proptech company to offer home sellers instant cash offers without having to prepare the homes or host open houses.
“Initially, I felt that they were coming in just to take the agent out, and that may have been the plan at the beginning. But, I think over time they realized that the agent is still a significant component of the transaction, helping people navigate through the various options they have in selling a home and building personal connections with clients,” said the Keller Williams agent. “I began to get feedback from clients at listing appointments that they had received instant offers from Opendoor in their mails, but they were curious how this compared to what they might receive on the open market.” I began to go into listing meetings knowing what an instant offer would look like compared to what the market value was based upon the comps. Clients really appreciated the transparency.
Klaus chose to embrace the new listing competition instead of focusing on the negative aspects.
Klaus stated that the Phoenix market seems to be the place where most of this technology launches. Klaus explained that either you ignore it or you take on the challenge and learn how to use it. “My idea was before they made me a tool in their toolbox. How about I make them a part of my toolbox?”
Over the past decade, proptech companies have rapidly exploded. There are iBuyers such as Opendoor and Offerpad. There are also so-called “power buyers” such as Ribbon, Homeward Orchard Knock, Knock, Flyhomes, and Ribbon. Sundae is one example of a firm that caters to investors.
I began listing meetings by asking what an immediate offer would be versus the market value based on comps. Clients really liked that transparency.
Kenny Klaus, Phoenix-based Keller Williams agent
Klaus stated, “Anything that’s out there, we always look and investigate it first and then reach out to them to see if they’re willing to work with local agents — to see how we can possibly grow a partnership.”
The National Association of Realtors (NAR), which predicts 4.78 million homes to sell by 2023, is far from the pandemic peak of 6.11 million homes sold in 2021. It also shows that agents are looking for ways of diversifying their lead generation streams to help their clients have a successful buying or selling experience.
Shelley Cooley, a Houston-based eXp Realty agent, said that although it sounds a bit cheesy, it makes me seem like a true professional. She has partnered Sundae on transactions. “I am showing up for listing appointments to be able to offer different solutions to sellers than just listing on the open market. It makes me a more forward-thinking agent and increases my chances of getting referred to friends and family by my clients.
Agents have had to face their fair share of challenges due to the rapidly changing housing market. However, many proptech companies have had a worse experience.
Offerpad had reduced roughly 50% of its workforce since August 2022 when it reached its peak. Opendoor announced that it had laid off 550 employees in November 2022. Knock laid off 46% last March, Ribbon reduced its staff by 85% in November, and Sundae cut 15% of its staff in June 2022.
Opendoor and Offerpad, two publicly traded companies, lost $1.4 billion in 2022 and $148.6 millions, respectively.
Additionally, as the stock market contracts, some of the venture capital money that these smaller companies have relied upon to get off the ground is dwindling, proptech firms are forced to make further cost cuts.
Agents who spoke with RealTrends said that these layoffs have affected the smoothness of transactions with proptech firms.
“We are seeing delays all over the board,” Dan Walters (CEO of The Robert Slack Group) stated. “Everybody is taking an enormous hit, and they’re trying to figure how to navigate 2023.
Offerpad, which used to employ real estate agents, has now become an independent contractor. Agents can keep their license with Offerpad while they conduct transactions for Offerpad.
“A call would come in to our call center and an agent would immediately send them to them. This would allow them to have a conversation to find out what the customer was looking to do and to recommend the best solution. They might then be passed to someone who can best help them with their solution,” Stefanie Layton from Offerpad, vice president of investor relations said. “There were just too much handoffs.”
I am showing up for listing appointments to be able to offer different solutions to sellers than just listing on the open market.
Shelley Cooley is a Houston-based agent for eXp
According to Layton, agents can be independent contractors and not employees to reduce the number of handoffs. Agents can also continue to help clients even if one of the firm’s solutions is not right for them.
Offerpad switched to the new model in February. While Layton states that it is too early to know the impact of the overall change, she stated that agents are happy so far with the transition.
Cooley, like Offerpad’s agents is happy to work with Sundae, her preferred proptech firm. Sundae is her preferred firm, as properties can still get multiple offers without having to go on the open market. However, she said she is open for work with other proptech companies.
Cooley said that he had been misled by other iBuyer firms who claimed they would purchase the home and then pulled out at the last moment because they had shifted the buy box due to a shift in the market.
Teresa Mutakabbir, a Charlotte-based Berkshire Hathaway Home Services agent has also had difficult experiences with iBuyers.
Mutakabbir stated that he represented a buyer who purchased a home through Opendoor. He said that they didn’t seem to be interested in any repairs. “They stalled up until the very end, and never got back to me about the buyer’s requests.” I am part of a Facebook group that includes other local Realtors. It seems that this has been the experience for many agents.
Mutakabbir stated that despite what she called a “frustrating” experience, this would not stop her from continuing to work with Opendoor.
Mutakabbir stated that “Inventories are still very low here in Charlotte and you as an agent can’t just stop showing a client a home because you don’t like the listing with it because it might be the right fit for them.” “But I do tell them what the process might look like based upon my experience.”
Everyone is feeling the effects of this massive hit and trying to figure out how they can navigate 2023 and beyond.
Dan Walters, CEO at The Robert Slack Group
Agents believe that technology will play a greater role in home buying and selling as agents see firms like Knock and Sundae as well as Opendoor and Offerpad as the future.
Walters stated that “We are currently working with five to six different proptech companies.” This is a completely different market than it was 18 month ago, when there was not a strong need to partner or provide additional services. The market was just starting. We made an effort to partner more with Opendoors, Homelights and Divvys last February when we began to see the slowdown coming. It is difficult to be part of today’s market. I believe the more you bring to the table and have a conversation with potential buyers or sellers, the better your chances of being involved in that transaction.