Podcast | Real Estate Investing
Stefan Peterson is COO and Co-Founder of Zavvie, the brokerage source for a complete iBuyer strategy. Zavvie curates offers from ibuyers, bridge, renovation, and rental home investor buyers so brokers and agents can present a number of options to clients. In this week's episode, Aaron and Stefan discuss how the ibuyer game has changed, how Covid has changed offers, which markets they operate in and why, the pain points proptech companies are solving, the business models of each proptech segment, and how agents can leverage these offers with clients.
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Show Topics
00:00 The Data Driven Real Estate Podcast Welcomes Stefan Peterson, Co-founder Zavvie
00:06 What is Zavvie and what does it do?
03:00 What is an iBuyer?
14:08 What is a bridge buyer and how does it compare to an ibuyer like Opendoor, Zillow, Offerpad and Redfin?
20:17 What are single-family rental buyers like Cerberus and American Homes 4 Rent?
25:53 What are renovation I buyers like HomeVestors?
29:56 How long does it take to collect all ibuyer offers and present them to sellers?
35:51 How have iBuyer offers changed over the past 12 months? What are the discounts and how do they write their offers?
38:38 Options for brokers and agents without an in-house ibuyer platform
43:23 Advantagaes of the iBuyer hybrid model with major real estate brands like Realogy and Keller Williams
49:42 Can Main Street real estate investors get listed on Zavvie as a qualified buyer?
52:31 Proptech trends and brands to watch in 2021?
Show Transcript
Aaron Norris 0:06
Welcome back to the Data Driven Real Estate podcast the podcast for real estate professionals dedicated to driving business using data. I'm Aaron Norris with PropertyRadar and this is episode 33. With Stefan Peterson of Zavvie. Zavvie provides a complete iBuyer solution for brokerages that may not have it in house. Today we talk about everything from the different sub models of the iBuyer experience, from bridge to single-family rental, to even mainstream real estate investors who's doing what, where and how locals can take part in it. We also find out the discount model, how it's changed especially after COVID iBuyer slowed way down in 2020. But they are back with a vengeance and we'll talk about whether it's going to be a seller's market that and much more on this week's show. Alright, Stefan, thank you so much for joining us. I have been a huge fan of the iBuyer concept for a number of years and think it's here to stay. And so let's start with Zavvie, who and what is Zavvie.
Stefan Peterson 0:59
Yeah, so Zavvie. We provide a white label software platform, you know, an enterprise software platform. And we sell this mainly to large brokerages, a few teams, as well. But we've really focused on large brokerages across the country. You know, we began with brokerages in the markets where the iBuyers were active, you know, talk more about that, I'm sure. But at this point, we're selling really in markets across the country. We have 70 brokerage partners right now with about 50,000 agents using our platform. And that's after about a year. So, I can tell you what the platform does really quickly. It makes it super easy for our brokerages and their agents to connect their clients home sellers with all the new ways of selling your house. And you know those ways our whole range of buyers so that's the retail iBuyers, your Opendoor and Zillow, etc. Some investor-type buyers that are buying properties to hold and rent out these, you know, SFR buyers, and then also a lot of renovation buyers, ranging from you know, bigger companies. Wedgewood, for example, down to small, kinda, you know, Mom and Pop companies that are doing a good job of that too. So, we make it easy for the agents to show all these options to their sellers, and then to connect them with these offers, if they seem to be a potential fit for the seller.
Aaron Norris 2:22
Now, will all these offers necessarily hit the MLS? Or can some of this happen behind the scenes?
Stefan Peterson 2:28
Definitely behind the scenes pre MLS, you know that, that's really the preferred strategy that we help our partners with, is get offers on these properties before you're on the market, you know, the offers are going to be better, I'm sure the audience can can appreciate that. And then as well, you know, you save the seller, a lot of hassle, the seller and the agent don't have to go through the hassle work and expense of getting the house ready for the market. If you're going to sell it to an institutional type buyer.
Aaron Norris 3:00
Let's, let's back up a little bit and talk about the different categories that, that you have access to. So, let's talk first about iBuyer. How would you define iBuyer?
Stefan Peterson 3:11
Yeah, so, the way iBuyer is commonly defined, you know, there's a handful of high technology, really well-capitalized companies that are retail brands and they are trying to go direct to the consumer with a proposition to buy the house. So, those companies you know, they're easy to list. It's Opendoor, Zillow offers, Offerpad and Redfin. Now, those are really, you know, the four iBuyers out there. And you know, the thing about these guys, I think that differentiates them from other most other buyers is what they're focused on is the consumer experience there, they're not targeting distressed sellers or people whose house needs a lot of work. They're just trying to make the selling process faster, more convenient. More certain in terms of the seller gets to pick a closing date and you know, you're going to close on that day. And, and interestingly, you know, during the pandemic safety has been a big one for for the eye buyers. And I think it's funny when you look at the I buyers, how they represent themselves, they've all come up with the same value proposition exactly. The words changed slightly. But that's the value proposition that connects with sellers speed, certainty, convenience and safety.
Aaron Norris 4:28
If you've never sort of seen what offers look like from these iBuyers in the PropertyRadar community, I have digital ads and as a property owner in Florida and California I get hit up by them often. Specifically, Opendoor spends a heck of a lot of money on direct mail. So, I've shared that and I think companies like Opendoor have a huge uphill battle. I mean when you're a Redfin or Zillow Offer, you know you already are top of mind for consumers looking on the internet and you go to look up your zestimate and there's a get your you know, cash offer now button that you can hit. So, they're in the top 15 most visited real estate sites, where Openeddoor, you know, maybe the IPO will put them a little bit more on the map, but it's not top of mind for consumers. So, I see how much money they're having to spend in every market that they operate in. I'm just like, Wow, that's a lot of money.
Stefan Peterson 5:20
Yeah, yeah, definitely customer acquisition for any of the iBuyer, including Zillow. It's just brutal. For sure, Zillow has a massive advantage there. But that's really their challenge is, you know, for Zillow, not so much getting people to the site. But getting offers requested and accepted, you know that, that funnel for the iBuyer, you know, the conversion rate from offer, presented to offer accepted is, is small, kind of like 5%, down to 3%. So, that's a lot they're spending.
Aaron Norris 5:53
And I know, we'll cover all the different categories on the website, I definitely want to chat a little bit about what these categories, how you identify them are, what they're doing and what they're not doing. So, I'd love to chat with you about what I've been experiencing what they're doing here in California, and maybe confirm or deny my suspicions. So, it's definitely changed like Offerpad in California has completely disappeared. And I really saw what they were doing several years ago, they were one of the first ones in my market. And they weren't afraid of going after the heavy rehabs. And they did a beautiful job and went all the way to staging even in markets like the Inland Empire, which are considered like a lower dollar amount. They disappeared. And as we progressed into 2019, it was very clear, I make fun, sort of on a play that we buy ugly houses brand, the HomeVestors brand, I say they've really turned more into the We Buy easy houses where it's not unusual for me to see them take on a house and be in and out in a couple of months whenever possible. And you're lucky to get new paint and carpet and forget about painting the outside. And on the inside. If you get a new brush nickel poll, it's that's a rehab for them. Am I seeing it wrong?
Stefan Peterson 7:04
So, I don't think you are, you know, I should say, you know, where we're coming from with this is I less focus on the rehab properties more focused on what consumers in general are asking for? But I definitely agree. You know, Offerpad specifically has sort of retrenched with some of the markets they're working in so a little less than California, a little more in some other markets. All of the iBuyers by the way, last year bought a lot fewer houses than they did in 2019. They were down for the full year about 60%. Year over... so if it feels to you, like the iBuyers kind of went away, uh, well they did because they, they, they kind of went on pause. Really part of COVID but they're coming back pretty quickly now.
Aaron Norris 7:52
Yeah, I've seen that they've really ramped up, I have a chart in front of me of the data. And they're ramping up to their close to where they were, you know, in let's see, August of last year, finally. 2019. So, they are slowly starting to pick up.
Stefan Peterson 8:07
Yeah, but I didn't want to make one other point about that, in terms of, you know, you mentioned HomeVestors, like we buy easy houses, you know, one thing we do see is, you know, many of the renovation type operators, and definitely the bigger ones, like, you know, like HomeVestors you know, they, they have, I would say, adjusted their marketing to be a little more similar to the iBuyers. You know, they're not emphasizing so much, get a cash offer or close really fast, you know, need cash, call us, it's more, hey, we can, we can make this easier and a better experience for you. And I think, I think, I think that's working. That's my take on it.
Aaron Norris 8:49
And it's important to know from you know, both Realtor and real estate investors what they are and are not. What they aren't doing because as an example, they're not going after projects with people problems or super heavy repairs. I have real estate investors that are actively wholesaling to iBuyer solving those problems on the background. So, probate, hoarder homes, you know, get them, D junk them and sell them or real estate investors who are trying to time very complex 1031 exchanges and come in with a rental portfolio that's in decent shape doesn't need a lot of work, being able to sell them to an iBuyer and then go elsewhere. And it's all about a timing thing. So, both on the retail and the investor side I have them leveraging iBuyers. So, it's just good to know how people are doing it. And but what they aren't doing, in LA for an example, a couple months ago, I saw them doing a million-dollar condo deal. That's not what they're doing 45 minutes inland here in California. It's interesting and then I was researching Phoenix and seeing, you know, statistically over the last several years 10% of those were going to institutional buy and hold investors. So, like the Cerberus of the..
Stefan Peterson 9:55
Yes.
Aaron Norris 9:56
So, I, I see that picking up they just raised billions of dollars. So, it's going to be, it's already a tight market. I think iBuyer are here to stay. The one other point I want to make is that Zillow has already admitted they've, they're losing on average, I think it was $7,000 in 2019. They admitted where every iBuyer transaction, but they also have mortgage, they have closing via Dotloop. And now they have the buy-sell side on the brokerage side. And they make a lot of money with their advertising. So, they've created this entire ecosystem. So, they're making a lot of money in a lot of different places. So, they don't have to make a killing on the buy-sell side, which is what real estate investors stressed out about, like, I can't operate on those margins.
Stefan Peterson 10:38
Right.
Aaron Norris 10:39
So, you have to know what they're doing in your local market, it's very specific to each city. So, you just have to find out what they're doing and what they want.
Stefan Peterson 10:47
Yeah, I mean, a few, a few points I'd make there. So, one in terms of what kind of properties are iBuyer, buying, you know, forget about what's on their website, or what they say they're doing. The fact is, and you know, we see this in our business, we facilitate 1000s of offer requests a month to all the iBuyer and a bunch of other institutional buyers as well. And, and the fact is, they adjust their "buy box" for the market and even for the individual specific opportunity. So, we see seven figure iBuyer offers in Southern California all the time condos and other types of properties. We see offers on older homes, for example, like older inner-city center properties in Denver, you know, they, they claim and they're not going to buy that house. But if they think they got a good deal, a good opportunity, they're going to take it.
Aaron Norris 11:37
I really like coming from a power position, especially if you're a Realtor, if you have that information of what they're doing and not doing be able to say, you know, I'm more than happy to help you have submit those kind of offers. But upfront, this is what I see them doing. Just having the data at hand is very powerful.
Stefan Peterson 11:53
Yeah, I mean, we tell our partners, you know, and their agents go out and request offers literally on, on anything, I mean, we can pretty easily tell you if it's way outside of a buy box. But sometimes you just never know you can be surprised. And you know, there there is a dynamic, I think this is interesting for you. We hear this from our partners, where they're realizing, hey, things are different now, there's a lot of institutions, companies that will buy properties. It's actually my fiduciary responsibility as an agent, if I know these off- these offers are out there, I should go get them. And if they say, you know, thanks, but we won't make an offer on your house. Okay, great. You know, I did my job, I tried to procure an offer for my seller. But there is this sense of, hey, as a realtor, part of what you need to be doing now is bringing all available offers to the table and checking on those.
Aaron Norris 12:48
Absolutely. And I think that's what I really like. And we'll keep trekking forward on the different kinds of buyers. And you've got this great verified buyer map on the Zavvie website. And I'll put a link to that where these different buyers that we're talking about are on there.
Stefan Peterson 13:02
Yeah, one other thing was I made a little note, you know, you said SFR buyers, you know that they're gonna buy a property and lease it for a period of time. Yeah, I agree. You know, we we talked to, I think all of the big SFR players around the country. And what I'm hearing is, you know, that the economics for the rentals right now are really good. And they're planning to buy a lot of houses direct from consumers this year. I think that'll be something you see in many marketplaces, you will feel that activity.
Aaron Norris 13:36
Yeah, I've actually been watching. So, you've got Tricon, Progress, American home 4 Rent, Cerberus. I definitely see their activity picking up as of last year, they had already raised the money and started buying so I, I get the sense that you're going to be busier this year as well. And perhaps with through you, they won't have to buy through the iBuyer, you know, they can list. You know, I don't know how you say that seller direct through, through you. They won't have to go through the intermediary.
Stefan Peterson 14:06
Yeah, I think that's a possibility.
Aaron Norris 14:08
Okay. Well, let's talk about bridge buyer because Knock is one of those that you categorize as bridge buyer and I actually have listed as an iBuyer, let's talk a bit about bridge buyer and what that means.
Stefan Peterson 14:18
Yeah, so the Knock program, let's say up front, it's a little bit complicated. In fact, in the earlier days, I would say it was confusing, but they really retooled it in the last I don't know maybe nine months and it really is sort of a bridge program. So, the way it works is as as a seller, you go to Knock you know you're gonna buy a house but first you got to sell your house. It's a huge problem for sellers especially in tight inventory market. So, what Knock will do is if you qualify the our house you want to buy qualifies with them. They will buy that house for you, you will move into that house, then Knock is going to sell your old house on the Open Market so far that you'll pay a, you know, a small service fee and I don't know exactly what it is for knock, but it's, you know, kinda like one to 2% and, and then you're going to pay your Realtor. So, this keeps the Realtor involved. You're going to pay the Realtor when you buy your new house. And when you list and sell your old house, you know, you're going to get market price on your resale Knock throws in some, some allowance to renovate, you know, preparing for, preps and repairs for your old house. And then you pay that out of the closing. You know, I think you know, Knock just based on what consumers and our partners tell us the new the newer program is working really well. And I think you know, bridge programs. Others are similar to Knock. I don't know who I'm talking about EasyKnock, which is in a lawsuit with Knock just for fun. But you know that these programs are all pretty similar in what they aim to do. They let somebody you know, buy before they sell. They're all getting incredible traction right now and I think they're a fixture in the in this landscape to stay.
Aaron Norris 16:09
Yeah, I agree. I was confused as well on EasyKnock. I could understand while there why there is a lawsuit there.
Stefan Peterson 16:17
Yeah.
Aaron Norris 16:19
Easy knock is gonna be easier, right?
Stefan Peterson 16:23
Yeah. Waiting for Hard Knocks, looking for Hard Knocks to launch but hasn't happened yet.
Aaron Norris 16:29
Exactly. Well, it's good to know. And I know Compass and there's other real estate brands Realogy just announced their version of iBuyer. I forget which way they decided to go. And we're working on them. Getting on the show. Keller Williams have been threatening? Do you have any insights into those major brands and how they plan to approach this model?
Stefan Peterson 16:49
Well, so. So, with, with Realogy it's, it's a real sure. And that's in collaboration with Home Partners of America. You know, I think that, that program has also changed a lot. I think they, they may have done sort of a soft launch got some feedback from the market and then they've, they've retooled it as much more of a bridge-type program seems like overall a very smart and strong offering with for, what, to me and you know, we don't have it on any of our partners platforms yet for our Realogy partners, we're really looking forward to that. So, yeah, I'll definitely listen to your podcast when you have them on. The other ones you mentioned, you know, I'm not aware of what Compass is doing with iBuyerS if you know something about it...
Aaron Norris 17:39
Compas have done sort of the bridge financing where they gave you an allowance to repair and what's interesting, basically market you might not even have to do that much in repairs. So, there's isn't an iBuyer model there's more of a renovation assist.
Stefan Peterson 17:53
Gotcha. So, in in Zavvie world we you know, categorize all those programs as, as concierge s,o Compass is definitely an innovator there and you know, like Zoom Casa, Curbio is another, I think, along with the bridge financing solution, which is you know, it's, it's not a loan, we got to be clear, these are not bridge loans. This is a FinTech solution where they buy a house, you know, they but the concierge of these renovation allowance deals are also getting a lot of attraction in the marketplace. We have a partner, big company out in Boston, Jack Conway just launched their Zavvie platform yesterday, featuring their in house concierge program. And you know, they're getting a lot of conversion on that it's helping them win listings. And just you know, do more business it's, it's, it's a driver, you know, a lot of these for, I think for brokerages, I think keep in mind is collaborating with iBuyer using bridge programs, concierge programs, it's really a catalyst that you may not convert somebody on to those programs every time. But if you don't convert them, say for your bridge program, you still want a listing, and you're still going to sell a house,
Aaron Norris 19:10
Right. It's just being able to offer whatever best suits their needs, you have something to offer them whether it's speed, or just yeah, just important to know.
Stefan Peterson 19:20
Big, big point to pull it back a level, you know, you know, we say this all the time and Zavvie consumers, you know what they want, they want optionality, they want to know all of everything that's available, right? So, this is you know, what the Internet has done to people, you want to go to one web, website and see every hotel and every, you know, every flight you can take. So, they want to see all their options, and they have no patience for somebody who's not going to bring them all options because it's a waste of time. So, optionality is one and secondly, they really want one button to so to speak, right? You got one button on your phone will do anything that phone can do you start it, it's always the same, you push one button and away you go. People want more one button to access all their options. So, you know, we definitely, you know, keep that idea central at Zavvie because that's what we do we're one place one process to get every option from iBuyers to bridge to, you know, a whole range of other renovation SFR type buyers as well.
Aaron Norris 20:17
Yeah, let's keep walking down this map, I'm literally referencing your verified buyer map page. And so, the next category, we've covered the standard iBuyer, the bridge buyer, and now let's cover single-family rental buyers and what that is, and some of the key players in the space.
Stefan Peterson 20:33
Yeah. So, well key players in the space. I mean, you recounted many of the, you know, the big ones. You know, there are others. And I think I don't want to mention names because I'm under NDA with a few of them.
Aaron Norris 20:49
Oh, Okay.
Stefan Peterson 20:50
So, I'm just going to say, there's a bunch of SFR buyers out there that are, you know, they're, they're, they're big, professional, well-capitalized companies. And, you know, there may be a way that they can, can work with Zavvie, you know, I'd say a few that we have on the platform, now, you know, Roofstock is on the platform at this time, for example. But a swift, Swift Home is another based in Chicago. You know, the way we really see it is whether you're an SFR buyer, or you're a retail iBuyer, from the consumers point of view, you're another option to buy their house, their buy boxes are a little different, which by the way, is cool for consumers, because not everybody, there's always, in many markets, you got a buyer for every type of property at this point. But, you know, they they're making strong offers their economics are different because they they buy on yield. And you know, that, that actually makes them super competitive relative to the iBuyer, and even the open market in some cases.
Aaron Norris 21:58
Truly really interesting about that concept is that, you know, legislation recently here in California used Wall Street institutional, as reasons we need to change our foreclosure laws. And they used really bad data to start SB 1079, for those in California who were paying attention. So, they introduced the 45 day redemption period, but specifically called out I think it was waypoint homes as a reason why it was necessary. And they're buying all these foreclosures. And what's funny is that they ignored that when those entities came into California at the time in the market, if they would have not come in, we would have lingered a lot more in REO's because they took them off the market and we're still driven. In today's market. What's interesting is that prices have in some markets quadrupled. What do they were buying? So, the economics of it, yes, interest rates have gone down, but it's really fascinating. The fact that they raised all this money, I know part of it, they thought that they were gonna buy distress. And now that it's clear, it doesn't matter what party you're associated with. It doesn't look like the government is thinking a big wave of foreclosures a good idea, right? Eviction. moratoriums are really getting pushed out even further. The economics of that, I mean, it's just really surprising that this is where they're going. Any insight there?
Stefan Peterson 23:13
I mean, sure. Rents are generally high.
Aaron Norris 23:15
Yeah.
Stefan Peterson 23:15
And there are a lot of people, a lot of consumers who don't have the downpayment or the ability to buy a house. You know, there's definitely some challenges in the housing market right now. You know, on the one hand, we had a spectacular year, last year, especially if you're a real estate broker, you probably had a really successful year. But it's tough for a lot of consumers. Inventory is tight, prices are high, it's, it's squeezing buyers, especially first time buyers, so, they're looking for a rental. And you know, the rent, the rents are high, and for institutional buyers who can come in and provide rentals. That's what's happening. Whether you like it or not that, that's the way the market is working right now.
Aaron Norris 23:58
Okay. And if you've never heard of some of these brands that we're talking about today, a place that I like to go is rentalhomecouncil.org. So, American Homes 4 Rent, Innovation Homes, Progressive, Tricon, Front Yard Residential, there's quite a few and there's more that have sort of popped up over the years, and there's been a lot of merger and acquisitions in the space. So, as I'm trying to track these, that's part of the issue, at least for me and public records is it's just really messy. One of them in particular has been the bane of my existence because of all the M&A work that's happened. And they're like associated with 200 entities. It's insane and...
Stefan Peterson 24:32
Well, I mean, my opinion on that is a lot of those buyers, they, they, they want to, you know, obfuscate a little bit their, their purchase activity, so they're not completely transparent by putting their own names in the public records. You know, I think it's also important to note that, you know, outside of the institutional buyers, there's lots of private investors who are snapping up, you know, single-family homes to lease them out. And now it's having I don't have numbers on this, but I'm guessing a bigger impact than all the institutional buyers.
Aaron Norris 25:08
Well, and where were these institutional buyers like to buy? I have a feeling that it's going to be a little bit uncomfortable to share in the political realm because of affordable housing.
Stefan Peterson 25:18
Yeah.
Aaron Norris 25:18
Even in very business friendly states like Arizona, it feels like the conversation keeps creeping in about affordable housing. And especially, especially with the eviction moratoriums, it's interesting to watch the language at the national and state level. They seem a little bit more focused on Main Street than Wall Street. So, something to keep an eye on. But it doesn't didn't stop them from raising a lot of money.
Stefan Peterson 25:45
I totally agree that's an area to keep an eye on. I just it's not going away that issue.
Aaron Norris 25:53
The last category you have on the website is renovation iBuyer. And that I think that's what a lot of Main Street real estate investors would consider themselves but let's talk about the category and the and the companies that you follow.
Stefan Peterson 26:06
Yeah. So, I'd say that first of all, you know, a big reason we, we put that verified buyer map on our website was to honestly invite interest from for more renovation buyers, really any buyers to you know, we want to put all this all the options in one place, right? That's the all the optionality one button that Zavvie. So if, if anybody is interested in in being on one of our broker partners' platforms, being on our map, by all means, you know, click over to that website, and there's a short form to fill out and we'll follow up with you about that. But, you know, renovation buyers, we saw, we're filling a niche and consumer demand just like the retail iBuyer were, they for sure solve a problem. Um, you know, we're a Realtor centric company, you know, we grew out of a real estate brokerage. And, you know, for a lot of sellers there, they're stuck because they want to move but they can't afford the repairs they need to make to sell their house. So, that's where renovation iBuyer can can be, you know, a godsend in many situations. So, we work with a number of local investors. And then some bigger companies I mentioned, you know, Wedgewood is one HomeGo, Sunday, Homelove. Those are some others. We, we have an arrangement with. With HomeVestors. So, we we send them a lot of properties as well. But you know, we recognize there are professional operators in almost every market, who can really help sellers. And we want to include them on our on our platform. And on the website map.
Aaron Norris 27:54
It's a great segue into you know, the market and where some of them are working in some aren't. So, I think you would probably have a lot better luck with maybe local mainstream investors in some markets where the iBuyer just haven't reached yet. Is there a formula to where a lot of these Wall Street companies and these proptech companies are focusing their attention and expanding this year?
Stefan Peterson 28:19
Yeah, I think for this year, the iBuyer are mostly going to stay in the markets where they're currently operating like the retail guys. And the same I think goes for SFR buyers, you know, you, you're not going to see those guys up in the northeast, for example, or in, you know, the middle of the rust belt. At the same time, if I were to pick one market area, one state where we see the most demand for our platform, you know, bringing people institutional buyer options, including renovation buyers, it's the state of Ohio, and you know, that iBuyer are really not doing much there, especially in rural Ohio. And I say that just as you know, to illustrate that we actually have demand from across the country. You know, we have broker partners in 40 states, all of them are looking for new solutions for their sellers. And I know everybody's everybody's got a different buy box different kind of property they're looking for. Often those will fit well with the listings that our partners are taking. So, no, I don't I don't see anything super new in terms of those locations. But I think what is new and everybody should be aware of is there's just a lot of consumer demand for these new ways of selling.
Aaron Norris 29:37
Interesting Okay.
Stefan Peterson 29:38
Yeah, and I shouldn't say new because you guys have been doing this forever, but for the consumer different ways of selling. And I you know, I think there's a lot of evidence that consumer acceptance of selling your house to company rather than on the open market that consumer acceptance is increasing a lot.
Aaron Norris 29:56
Walk me through what how a broker, it's great because you, you basically, even if somebody doesn't have an eye buyer program, you're pulling all the different kinds of offers available in one spot, and a broker is able to present it to their client, which is awesome. Walk me through what that looks like in the turnaround time that you're experiencing with COVID. So, a broker uses you, they've got a client, they want to present, how long does it take?
Stefan Peterson 30:21
Yeah, so, you know, our whole process from the beginning, you know, part of our software shows, the agent and their clients estimates of all the different selling programs, kind of what the fees are, what the expected net is on a transaction. So, sellers sees that they kind of know what they're getting into. And the second thing our platform does is it makes it really easy for the seller to provide all the information that the buyers need to make a good accurate offer really quickly. So, we combine all the publicly available data, you know, we buy that from a vendor, and then we've got a questionnaire that the seller fills out. So they say, you know, what, what are the countertops made of, you know, what kind of shape is the floor in or is there, you know, is there a solar are there, their solar lease, solar panel lease, and all that. And so we send in photos as well, so we sent a very complete file to to the buyer. So, the buyers then are typically able to turn around with with a solid offer in about 24 hours, sometimes 48 hours, occasionally a bit longer. But you know, 24 hours is really the benchmark, that offer goes back to the agent, you know, all of our sellers are represented by the way that's important. Having the agent is a big plus for the buyers, because you get pulled through with an agent, the agent is doing the work ,keeping things going, you know, they want to earn a commission. So, that deal happens and if it's going to be a good fit for the seller, the agent is going to make sure that it all comes together so they so they earn a commission, which by the way is paid by the seller, not by not by the buyer that the seller is going to pay.
Aaron Norris 32:03
Oh, okay.
Stefan Peterson 32:07
Yeah, that's the surprise to a lot of people. Why would a seller pay that? Why don't they go direct to the buyer and you know, cut the agent out? Yeah, they could if they weren't under a listing agreement, but even without it, they just don't because honestly, sellers appreciate the work the Realtor does. They, they ,they understand the value and they compensate agents for it. That's what we've seen at Zavvie. So, anyway, those offers from the buyer go direct to the listing agent, the listing agent can then you know, have a conversation with the seller about what's the best option to choose. And you know, then from there it's a regular transaction and honestly we kind of move to the background because we've you know, we we kind of fill the top of the funnel we get this process started but then you know, we we don't need to be involved in the deal itself.
Aaron Norris 32:58
You're getting to see a lot of really interesting data from all these different buyers can you share a little bit of the discount that maybe these different categories are looking at and the kind of inventory that they're interested in?
Stefan Peterson 33:10
Yeah, so yeah, a couple things I can definitely share there you know, one and this is this is about the iBuyer really right? I should be upfront This is about ibuyers not so much the renovation guys. Those economics are way harder for us to peel back and...
Aaron Norris 33:28
Right.
Stefan Peterson 33:29
But I think what we see from the iBuyer is actually relevant for everybody here because over the last year I kind of say even midn-, mid 2019 through the end of 2020 The ibuyer offers were progressively becoming less competitive. And so, in 2019 give me this is a good stat for you if you didn't know iBuyer were buying it almost 99% of the market price and on average right so obviously some offers were low, some were even above market but on average iBuyer were paying 99% and I do my analysis on that Mike DelPrete if you follow him he does his analysis we both got almost the same number. So, I think you know you can hang your hat on that. Then you know starting in last year those those numbers really started to decrease and they wound up more like 95% which might still sound like a good offer but that's a lot of money you know you think four 4% or so. So, it was becoming more expensive to sell to an iBuyer basically, yet the incidents you know the conversion rate of a seller accepting an offer from an iBuyer has been going up and up and up. So, offer is getting worse acceptance going up. You know why would that happen? And especially why would that happen in a strong seller's market when you can put your house you know on the on the open market and sell it really fast and you know for a top dollar. The answer is people are just looking for the iBuyer benefits, speed, convenience, certainty, all of that they are looking for a better experience. That's why people are doing it. And I, it's you know, you also see for example, with iBuyer offers the prep and repairs charges have been steadily increasing over the last year from about 3% on average, up to more like 4% last year. So, that, you know, 25% gain over the course of that.. sellers don't seem to care.
Aaron Norris 35:30
Let's talk about that. Because I don't think what you see in public records on the MLS, the sales price is what was paid for the home. But there's credits right on the buyer side. So, you're saying a 5% discount, sort of like a fee for them to take it on. And then an additional three to 4% as you know, a prep repair fee to get the house ready.
Stefan Peterson 35:51
I, the way I break it down like this, you know, you're right now on average, the iBuyerat about a 5% discount to the market. They are charging a service fee of you know, 5% for Opendoor kind of 7% for Offerpad and Zillow. And then a prep and repairs, which the seller is not going to know about until after they've accepted an initial offer and are a little bit down the road. And that is averaging about 4% right now. On on the open market prep and repairs is averaging, you know, one to one and a half percent. So, you are going to probably spend more and with if you on prep and repairs, if you sell your house to an iBuyer than you would on the open market. Again, though sellers do not seem to mind they are accepting more and more iBuyerr offers. And then you know, I gotta say this, it's it's the staff that cannot be ignored, should not be ignored. Sellers who go to an iBuyer and complete a deal. They love it. Customer satisfaction for ibuyers, which we measure we've been doing that for a year and a half has increased steadily from them, I think 8.7 out of 10 to the last quarter, they broke through nine out of 10. And anecdotally, we see a lot of comments. Oh, it was an expensive transaction. I wish it was a little cheaper. But it was great. I love it. 9, 10 out of 10.
Aaron Norris 37:18
Yeah, I mean, getting rid of the repairs themselves with the costs of everything going up getting skilled labor. I mean, the builders have been complaining for years that skilled labor is an issue. And the last time I did a major rehab here in California, I was calling in favors and it was hard. So, it's more time, it's more expense, you know, I can understand wanting to get rid of that the whole sales process is stressful. And if you're going into another transaction trying to move, you know, there's a lot of emotional data to look at why people would be considering to do this. But this is the used car model, just unreal estate, I really don't see this going away. This is not going away. And it's only going to get better. We had, in December, we had Dotloop. So, Zillow's Dotloop their closing platform. And a couple weeks before that I was on the webinar for Notarize, the remote online notary. So, where we're going with the transaction, I mean, this is just the future and the expectation of a consumer, especially the digital first generation. Our industry just has some catch up to do shame on us for. So, I'm excited that your platform comes along and allows brokers and agents to have access to this, even if their in house team doesn't have their own proprietary model. So, I think that's really important. So, you must be getting great feedback from locals.
Stefan Peterson 38:38
Yeah, I mean, yes, I mean, we've been successful. We've been working on Zavvie for a while now. And you know, the reason we're finding some success now is because there is increasing consumer demand for these new ways of selling, you know, have a company buyer house, easier all the stuff we've talked about, that's being translated through real estate agents and brokerages. You know, sellers are saying, 'Hey, I heard you know, and in Phoenix, you can sell your house all these companies cannot. Can I do that here in Columbus, Ohio?' And they're saying well, kind of sorta bu,t and then they're calling us Zavvie saying, What can you guys do for us? We've heard your platform brings all these options. So, you know, I'd say you know, the iBuyer are right, there's a lot of demand for this. You know, the bridge people are taking a very different tack, which has some advantages. I think what you're going to see in the coming year, I'll make a really bold prediction, it's probably going to be a seller's market the same way it is now in which case, you're going to have a few sellers are going to want to work with an iBuyer because they're just going into cash and they feel like they need to sell quickly with certainty so they can go and buy a new house. Or they're going to work with bridge so they can sell before they buy or buy before they sell, excuse me. So, yeah, seller's market, that's what's gonna happen. But in case it's a buyers market, people are going to love the iBuyer because now I have a guaranteed way to sell my house, it's, it's really a heads, I win tails, you lose situation for the iBuyer and other solutions, and I think they're only going to get stronger. You know, a fun fact is in 2019 or not sorry, 2020 they, you know, they sold about 60% fewer houses than they did the year before. And yet their enterprise value. So, this is, you know, what Wall Street thinks they're doing their enterprise values went up 153%. So, 60% down, not a good year, if you're in real estate, on the other hand, 150% up and in your actual money that's in the bank, that's a that's an amazing year, so they're gonna keep doing more of what they've been doing.
Aaron Norris 40:47
I agree, my, my best friend lives in LA and we chatted, he's finally gonna get jump off the fence and buy a home. And they they were so excited. They they saw one that they really liked this weekend only to call the agent Monday, you know, first thing Monday, over 12 offers. So, you're right, it's going to be a scalding hot seller's market again, and I just, I just think this gets rid of those contingencies and the fear of, you know, the laundry list of 30 pages of things that you've got to fix. There's definitely some benefits here.
Stefan Peterson 41:19
So, here's here's a great soundbite from, you know, one of our broker partners, he told his agents, he said, hey, what if you had a magic wand? So, all of your sellers could go ahead and buy their next house now before they've sold their current house? And they'd be a cash buyer contingency free on that purchase? What if you had that magic wand as as an agent? Do you think you'd win more listings and you know, sell more listings and represent more buyers? Well, guess what, you know, that magic wand is a bridge program that you can get through, through our platform, or you just get it on your own too. And, you know, here's another here's another great soundbite since we're on it, different, different brokers said, you know, most agents, they go to a listing appointment, they bring a CMA, you know, Comparative Market Analysis, they bring a CMA. But my agents, they bring offers, they bring cash offers to that listing appointment, and you know, who's gonna win I think that's the future real estate, you know, that's, that's the modern agent, the modern brokerage. I think these are all trends that we see happening, and it's not going to sweep the country 100% overnight, but definitely, the movement is afoot.
Aaron Norris 42:29
You know, what's really great, there's also, a pain point for Realtors, there's nothing worse than meeting with a seller. And they're just like that duck border and amazing, ridiculous tile, I put in my master bathroom, it's worth so much more, where if you're able to come to the table with all these offers, if other people are delivering the bad news. So, you as an agent, come to the table with real offers saying, this is the base price. If I list it, this is what I think I can give you. But you already know you have multiple offers right here that you can take right now. But it beats them up on price, which I really, really like, so.
Stefan Peterson 43:04
And sometimes they get a great offer that they accept, you know, sometimes people people will sell to institutional buyers for all kinds of reasons they get a great offer, they they've got to buy their next house, they need to go move across the country, whatever. These solutions really makes sense for a lot of people.
Aaron Norris 43:22
I'm most excited about that. The, the excuse me, the hybrid model. I'm waiting for Keller Williams and the Realogy brands to really launch because I just think that local boots on the ground over and over again, it seems like no matter the demographic, they really want somebody to walk them through. So, I think the agent just has to sort of really work on their value proposition. And I'm just really excited about them launching in the market. Do you see them having any advantage disadvantages that you guys have talked about?
Stefan Peterson 43:54
I think they potentially have advantages. I think that's a really smart model, kind of the hybrid brokerage, you know, where you've got agents and you've got the something like a bridge program or an iBuyer program built into your brokerage. I can say that, that definitely has potential because we see some of our partners doing exactly that. And then you know, they didn't start off with, oh, we're going to be a hybrid brokerage, we've got a new idea. They said, Hey, you know, we run a successful real estate brokerage. We've already got mortgage in house. Maybe we should buy a few of these houses. We can you know, Zillow can buy a house, we can buy a house, we can bring offers to the listing appointment too, so they're doing that and then they're realizing, gosh, it's not that much of a leap to go from, you know, providing a mortgage to providing a bridge program. So, I think that we're in the earliest days of this and it's probably too early to call it a trend, but we do see brokerages, established brokerages reverse engineering their way to become hybrid brokerages. And my guess is, you know, in a lot of ways, those companies, they have an edge over the upstarts because, you know, they've been doing it, they've got experienced agents who've got huge clients fears. They're known and trusted in their markets. You know, I, I've often thought and actually I've seen this in Denver, you know, I'm based in Boulder and we have a lot of contacts around, around Boulder Denver. But you know, agents reaching out like Kevin sort of a partnership with with a renovation company, to help pull these deals together, where the agent would say, or the brokerage would say, hey, we've got a lot of properties, some of them, you know, they're gonna want offers, and how about we send those to you and we get in sync so we can deliver great customer experience. I think that's an opportunity for kind of your main street investors is keeping in mind you, you can work with real estate brokerages and agents to do more business.
Aaron Norris 46:00
The what's funny is that all this iBuyer stuff, when I teach the different Realtor associations, I'm like, why aren't you a real estate investor, you've always had access to caches, as is offers, you just have poo pooed their their offers. Now, the mainstream real estate investor that has to do heavy repairs is not going to operate on a 5% margin, that's just not realistic. Would you like this investor to list with you after they're done? And then of course, the answer is, Yes. Okay, well, then, if they're going to sell with you, how much commission are they going to have to pay? They're gonna be like, 'Oh, yeah, 6%, that doesn't work, Yep'. So, the numbers are going to be different for Main Street investors taking on the risk of a major rehab. This in and out of the iBuyer going after really easy ones, you know, is a totally different model. So, I'm, I'm excited because I think there's some opportunity to get the Realtors in the main street investors on the same page. And that hyperlocal nuance of, I think agents are going to be focusing a lot more on selling a lifestyle, not just a home. So, you'll have a millennial investor come up to you as a buyer and saying, hey, I want walkable community, I want to be close to downtown great schools, they're going to park it for 12 years, that local investors, sorry, realtor is going to be a very different experience than, you know, a Zillow Offer. It's just an AI driven process in the background. So, that's why I think I'm most excited about the hybrid model and having those boots on the ground in the local markets as they just got a lot of different Intel and a lot of qualitative information that these big tech companies just won't have.
Stefan Peterson 47:31
Exactly. So, the local operators have, you know, a huge advantage regardless of you know, the condition of the property or the you know, the buy box, because you, you, you know the market well enough, you can make decisions about properties that are just too risky for, you know, people who aren't local experts to make offers and you'll be able to make stronger offers. So, we see this all the time in Denver and with our other partners in different markets, too.
Aaron Norris 47:59
It is interesting to hear you say that they're focused on not losing as much money so their offers aren't as aggressive. So, they're not banking on the market continuing to go up. So, maybe a little bit more careful on the buy-side and the repairs, they're giving themselves a little bit more room.
Stefan Peterson 48:16
Yeah, they've built a little bit of risk into their model. I, you know, I can't say exactly why they're doing that. But I, you know, I think they are being cautious. And, you know, it's paying off for them. I mean, they're, you know, they're, they're, they're buying more houses, again, they've been selling houses successfully. I'm making a little margin on that. And, you know, let's keep in mind, they iBuyer specifically survived market conditions that a lot of people said, this is going to be the end of the iBuyer there's no way they can survive the seller's market Who would ever sell their house to an iBuyer, right now? Well, guess what, you know, it's still working out great for for those guys. And, you know, I'll go back and say it again, consumers love it. They're doing a great job for consumers.
Aaron Norris 49:00
I laugh Purplebricks went out a few years ago, and their model was a discounted brokerage model. But they got trash talked a lot on the streets for the kind of service that they're providing. So, these PropTech companies are really focused on the consumer experience. It's just not a discounted, yeah, we'll take pictures and put it on the MLS. They're solving a way different problem than those discount brokerages.
Stefan Peterson 49:24
Yeah, for sure. And I think that often is ignored. People like to theorize about whether the iBuyer strategy or their technology or whatever, blah, blah, but the fact is, if you're nine out of 10, consumers are are giving you like a perfect score. You're you're onto something.
Aaron Norris 49:42
Can you share a little bit more if we have Mainstreet real estate investors who would like to be listed on on Zavvie as a resource? Is there a threshold that you're looking at and how Zavvie makes money and who pays for it?
Stefan Peterson 49:55
Yeah, sure. So, first hold we're looking at just to be clear on that It's basically 10 purchases a year. You know, we have some flexibility there that's a guideline. You know, we have buyers who are buying 1000s of houses a year, what we're really looking for is a demonstrated, you know, proven reliability in terms of, if you make an offer to buy a house, are you going to follow through on that offer? And you know, not just, you know, let the deal fall through. You know, it's it's about the consumer experience, are you going to deliver a good consumers experience and reliability is part of that. In terms of, you know, how savvy makes money, the main way we make money is the brokerages that license our software, pay us a fee for that. And, you know, that's been our starting point. We do however, in many cases, and you know, increasingly, we are getting a referral fee from from some of the buyers on our site, you know, that fee ranges from 75 to 150 basis points. We don't require this. But we do think it's, it's a win win win win, when we get that lined up, because really it it results in we share I should say we share that fee with the brokerage. So, the brokerages have now has an incentive to promote, you know, the buyer, it could be you as the buyer. So, the brokerage has little upside, navigates little upside, and you're still getting, you know, a cost of acquisition that works for you. So ,that, that is that is a possibility. And we find we're getting more deal flow when we have those arrangements in place. But there's To be clear, there is no cost to sign up. There's no cost to get started. What we want when really makes the gears turn in Zavvie is deal flow that's what makes us valuable to our partners.
Aaron Norris 51:58
So you're actively looking, you're not necessarily only operating in markets where the iBuyer are active, you're you're willing to consider secondary and tertiary markets.
Stefan Peterson 52:07
Yeah, absolutely. In fact, that's, that's really where we have more need. I mean, if you're a, you know, high performing Mainstreet buyer up in, in, say, Maine, for example, or anywhere in Ohio, Chicago, you know, jump on our website right now and sign up, we'd love to talk to you because we are looking for, for more options in those markets.
Aaron Norris 52:31
Excellent. Well, I, is there anything else that we should be watching out for in 2021?
Stefan Peterson 52:37
You know, it's gonna be another big year for for real estate generally. So I think, hopefully, it's a little smoother experience than last year, but it's going to be a busy year. You know, I think there's opportunity, if you keep in mind that consumers increasingly want to sell their house to a company not on the open market, they're looking for those options, they have more confidence in those options. Agents are bringing them those options. And, you know, I think I'd say for the main street community, the number one thing I see is, if you can, the more consumer friendly, you can make yourself in terms of your marketing and the experience you provide, I think the more successful you're going to be, rather than just as a pure like, you know, you you've got a problem, your house got a problem, I can solve it kind of fix her, I think the consumer experience is going to become more and more important.
Aaron Norris 53:37
Yeah, I'm looking at some of the Biden administration's thoughts on potential programs like the $15,000 first time program or forgiving college debt. I'm like, Oh, no, we've got fuel being added to the fire that we don't need on the demand side, right. So..
Stefan Peterson 53:52
When we really need it.
Aaron Norris 53:54
Yeah. Like, I don't know how we're gonna keep up this demand. And then you've got all these institutional buyers that have raised all this money that they want to buy. I'm like, oh, boy, here we go. So, I'm, I'm gonna fall in your report, I think it's gonna definitely be a seller's market in 2021, I will make sure to... go ahead.
Stefan Peterson 54:11
I was going to say the last thing is, you know, people have been talking about technology, changing real estate for a long time. And it kinda has been happening. You know, I've been doing this real estate in tech for 20 years. But now it's really happening. It's, it's gone all the way down to the listing. And there's just so much money coming in that the industry is really changing and embrace tech. I mean, whatever it is, whether it's Zavvie or something else, you know, maybe it's something we haven't seen yet, but it's gonna change the business more than it already has.
Aaron Norris 54:41
Is there any other technology in the real estate space or adjacent arenas that you're watching and pretty excited about?
Stefan Peterson 54:48
Oh, boy. Uh, you know, blockchain, generally speaking, I think is actually a really big deal. But do I stay up late at night thinking about it? No, I mean, we definitely have our Are hands full with all the new selling options? You know, there's a few models out there kind of like fractional ownership, like buy a part of a house sell a part of your house. I think those are really interesting. I think the least own programs are going to continue to get traction. So, that's like, you know, Home Partners of America among many others. I think Yeah, you know, if I was to mention one area, I think stuff on the buy-side, Zavvie has been very focused on sellers. But there's a lot of innovation coming that is going to help address that imbalance of, it's hard to it's really hard for many people to buy, I think there's going to be some cool solutions coming out to to help those buyers.
Aaron Norris 55:39
Is there any specific companies you can mention that you've got your eye on?
Stefan Peterson 55:43
Well, let's see. Divi is one, Unison is another. There's there's a few besides those, but those are two that come to mind.
Aaron Norris 55:53
I haven't I know of Divi. So apparently, I need to plug in a little bit more on that because I agree. I see my friends trying to buy a home right now. And they're like, how do I stay? How do I get my offer accepted? I'm like, you have to get your ducks in a row. And it might be time to work with a Realtor that specializes in off-market and going after inventory that nobody else knows about right now. Because it's...
Stefan Peterson 56:14
A Realtor, a Realtor who's familiar with all these tools and options. And that's, that's what modern agents do. Most agents are not keeping up with this stuff.
Aaron Norris 56:23
You know what, speaking of, do you have a list of agents on anywhere that people can call if they're looking for an agent that has access to Zavvie?
Stefan Peterson 56:33
Yeah, definitely, I can send you that.
Aaron Norris 56:35
Okay. Is there a link on the website to that I can direct people to,
Stefan Peterson 56:39
If you go to the website, there is on the homepage, you know, a list of many of our partners, but I don't think it's complete.
Aaron Norris 56:48
Okay.
Stefan Peterson 56:48
I'll just send you a list of all our partners, that's probably the best way to do it.
Aaron Norris 56:52
Perfect. All right, I will make sure to optimize all the links on all the shows when this goes up. And I just really appreciate your time. I love this stuff.
Stefan Peterson 57:00
Yeah, this is fun.And great talking with you. Good. Good to meet you, too. I think we'll we'll be in touch. As we go forward. I think you know, we probably got some cool info to share.
Aaron Norris 57:12
Deal. Thank you for listening to the Data Driven Real Estate Podcast, you can find show notes and links to some of the resources mentioned in the show at datadrivenrealestate.com. Click that join the community, and you'll be forwarded to the PropertyRadar community where you can ask questions about the current show and even see upcoming guests and ask questions there. We'd love to engage with you in the community. So check it out. Please don't forget to like, favorite, subscribe and share on your favorite platform where you're listening to the show. It helps us out a great deal. Thanks for listening, and we'll see you next week.
Transcribed by https://otter.ai
