UPDATE 08.22.2020: On 15 August, the CEO of Zillow began saying the same thing your humble real estate professional said months ago: telecommuting and de-urbanization are here to stay. With the passage of time and high-powered individuals echoing what you and I have known for months, we can now officially accept this "Great Reshuffling," as he put it, as canon.
On May 4, 2020, Bloomberg.com published an article entitled “Home-Flipping Giant Opendoor Says It’s Time to Resume Buying.” I will be honest, as I always have been: just as I was pleased when iBuyers shut down their operations, I was equally dismayed reading this article. Putting aside the frantic attempt to maintain a strong corporate image, I realized that these businesses beginning their buying efforts again is going to do more harm than good in the long run.
iBuyers such as Opendoor are, unfortunately, reaching the end of their financial cushion by the time of this announcement, if it hadn’t run out already. Unlike many Americans, Opendoor was able to raise “$1.3 billion in equity capital from investors including SoftBank Group Corp.’s Vision Fund.” When you combine the need to keep the lights on with the overwhelming pressure to maintain investor’s comfort, it becomes clear why Opendoor is starting to resume its buying practices. The company needs money, and cannot raise sufficient amounts - even from fundraising efforts - unless it’s in operation.
While I appreciate Opendoor’s hiatus on the claim of public safety, if they really were concerned about public health, they’d still be closed now. Resuming business while the country is staring down the barrel of a second wave of COVID-19 infections shows that the motivating force behind this resumption of activity is fiscally motivated. News touching on the strong potential of a second wave were published as early as May 2, if not sooner.
Why Should We Trust Them?
If it wasn’t obvious enough, I do not believe we should trust the longevity of these iBuyers. As soon as they shut down over public health concerns , they lost the right to ask for the public’s trust in either their business model or their safety procedures.
Individual real estate agents and their offices immediately turned to an online platform for conducting business, utilizing industry applications like DocuSign, ZipForms, Dotloop, RealScout, Bombbomb,, etc., with ferocity in order to keep their clients’ experience moving as seamlessly as possible. When times got tough, we got going. Demand for virtual tours has skyrocketed in my office, and we are all helping each other figure out the tech tools for video production & sharing so we can still keep home buyers and sellers doing what they do best: buying and selling from each other. What did the iBuyers do?
When Will They Leave Again?
If a second wave of coronavirus does hit as predicted, there’s no reason to expect that iBuyers won’t leave the desperate folks working with them hung out to dry. Just as in the first round of activity cessation, the family trying to sell their home in a busy downtown area will be left hanging with no follow-through or accountability from the large, “trustworthy” company who claimed they would offer a certain price for the home and make the closing process quick & painless. Suddenly this family can no longer move their young children to a more suburban area where social distancing is easier. What happens then?
The draw of iBuyers is also their greatest weakness: instant pricing and rapid closing. A company that can turn around a real estate sale in 2 weeks or less can also pull out of that transaction at the drop of a hat. Remember that $1.3 billion in capital that Opendoor raised from investors? Your $300,000 home is a drop in that bucket. All the risk they talk about being willing to accept is your family’s ability to move. They are willing to risk leaving you and your loved ones high and dry in the name of profitability.
While the everyday person hit the pavement and hustled to keep their families afloat during COVID-19, these large corporations ran to their rich benefactors begging for a bailout. These rescue funds raised are a shortsighted “solution” to an ongoing problem. 50% of businesses currently shut due to COVID-19 will never reopen. This virus is not going anywhere. There is no way to know how long it will be until corporations like OpenDoor permanently go under as well.
The Human Touch
It is very difficult to find an individual real estate agent, or even a team, who has access to $1.3 billion in seed capital. According to careerexplorer.com, the average annual income for a real estate agent in North Carolina is around $59,920 per year. Rather than fleeing under the wing of wealthy donors, NC real estate agents improvised, adapted, and overcame to keep us all safe while maintaining business operations as normally as possible.
The father with two children to put through college on this income is going to fight for your transaction to close on time. The husband-and-wife team who make a comfortable, if simple, living on their annual earnings are going to do their darndest to get you the very best price as you sell the home you raised your family in, because they understand the complicated feelings that come along with selling something with so many memories inside it. They do it all on a commission less than what Opendoor will charge.
When COVID-19 strips away all sense of normalcy and security, a local agent will (from at least 6 feet away) hold your hand through every aspect of your purchase or sale. We know what it feels like to have our livelihood threatened by this virus, so we are doing our best to help our clients avoid uncertainty surrounding one of the largest transactions of their lives.
Resuming operations with no guarantee of longevity will only serve those at the upper echelons of corporations like OpenDoor. They will profit as long as they can before “normal operations” become untenable again, at which point they’ll drop everything and retreat once again. With a predicted economic constriction of 32-25% in the third quarter of 2020, iBuyers won’t have a chance of maintaining the high liquidity required for their business models, and we will lose them once again.
It’s not a question of if iBuyers will cease real estate activity again, it’s a question of when they will. At some point, the recession we are nose-diving into will come back to bite them and they will have to reduce activities, if not shut down completely. I wouldn’t want to be on the receiving end of that “sorry, but you aren’t important enough to us” letter.
Jessica Mohr is a licensed real estate broker working in her hometown of Raleigh, North Carolina.