It’s a zero-sum economy, right? The success of iBuyers is the failure of real estate agents. After all, iBuying companies Opendoor, Redfin and formerly Zillow are predicated on home sellers eschewing a listing agent and selling their home to the company.
But the iBuyer-agent relationship is shifting, as iBuying company Offerpad – the only iBuyer of the above group to ever turn a profit – is now quietly employing roughly 200 real estate agents, which the company calls “Solutions Experts.”
These agents comprise 15-20% of Offerpad’s count of over 1,000 employees, said Jennifer Dohm, vice-president of communications at Offerpad in a written statement in response to questions from HousingWire.
“Offerpad’s solution experts receive the same full pay benefits available to other fulltime Offerpad employees and most of their pay comes from commission,” Dohm added. These benefits include medical, dental and vision coverage and a 401(k) match program.
In classifying agents as employees and not independent contractors, Offerpad joins a tiny sandbox of American companies that most prominently includes Redfin.
Offerpad did not make executives available for this story. Dohm did write: “The best way for us to deliver the Offerpad experience is to have our agents fully devoted to our mission and core values as employees. In fact, their title at Offerpad is Solutions Expert because they are committed to offering Offerpad’s full suite of real estate solutions.”
In a prior interview with HousingWire, Offerpad CEO Brian Bair described the need to align agent’s incentives with Offerpad’s.
“We don’t want any decisions to be made from a commission perspective,” Bair said in September.
Though both Redfin and Offerpad feature iBuying and real estate agents, the business models are different. Redfin’s agent division is separate from its iBuying arm, Redfin Now, and prospective sellers tend to first choose one service, or the other.
But Offerpad’s agents are supposed to give sellers the option of either an instant home sale or putting their home on the market. Additionally, Offerpad’s agents help buyers, and, according to a Securities and Exchange Commission filing from earlier this month, give buyers early access to inventory instantly bought by Offerpad.
The growing employment of agents is another twist in a seven-year-old, Chandler, Arizona-based company that continues to surprise.
Offerpad went public through a special purpose acquisition company in August that was spearheaded by former Zillow CEO Spencer Rascoff.
The company debuted with a $2.7 billion market capitalization, but its Wall Street value quickly sunk below $1 billion. The valuation, though, has inched past the $1 billion mark after Offerpad announced $6.5 million in net income for 2021. A positive net income is far cry from everything in the nascent history of iBuying, including Opendoor, which posted a $662 million net income loss in 2021.
Offerpad operates on a much smaller scale than Opendoor, reselling 6,373 of the homes it bought in 2021, compared to 21,725 for Opendoor. Still, Offerpad’s sales increased 49% compared to 2020, and the company was in 21 markets at the end of 2021, compared to 14 one year earlier.
So far, Offerpad’s agents have played a bit role in the company’s growth.
Offerpad puts its work with home sellers into two different categories. There is “Express,” where the home is instantly bought with cash, and “Flex,” where the seller retains the choice of an Offerpad cash buy but markets their home on the local multiple listings service.
“Our ‘Flex’ offering generates higher margins than our ‘Express’ offering,” according to the company’s annual report filed with the SEC. “But accounted for less than 1% of our total revenue in both 2020 and 2021, although we intend to drive greater roll-out of the ‘Flex’ offering across our platform.”
The filing also warns of obstacles the company might face in employing agents.
“Real estate agents considering working for us may not understand our compensation model or may not perceive it be more attractive than the independent-contractor commission-driven compensation model used by most traditional brokerages,” the filing reads.
Offerpad also anticipates the same problem that Redfin has experienced – employing the correct number of agents to meet the market’s demand.
Expenses like employee salary and benefits “may result in us being unable to adjust as rapidly as some of our competitors, the report states. “Conversely, in times of rapidly rising demand we may face a shortfall of real estate agents.”
As with Redfin, Offerpad employee agents were reluctant to speak without the company’s permission. Offerpad did not make agents available for this story.
A cursory search of Offerpad agents show a mix of background’s similar to those at Redfin. Some agents are coming from other jobs like personal trainer and resort spa sales executive, while others joined Offerpad after stints at established brokerages including HomeSmart and Allen Tate.
A common refrain from real estate agents and brokers is that being classified as employees can both limit their ambition and flexibility.
The employee model “disincentivizes hard work, and caps earning potential,” said Courtney Poulos, CEO of ACME Real Estate in Los Angeles and Orlando. “With independent contractors, there’s no ceiling.”
However, an iBuyer investing any level of resources in its own agents is a new wrinkle. Previously, agents in markets like Atlanta and Phoenix have had an uneasy but sometimes functional relationship with iBuyers, who themselves have walked a thin line.
In 2019, for example, Opendoor CEO Eric Wu told journalist Kara Swisher agents are often “a friend of a friend or a brother-in-law” that the seller feels obligated to bring in. Wu did say that other agents can “help you through a process that is confusing and causing you stress.”