It will be interesting to see if any of this goes anywhere. Real Estate is one of the tougher markets to really disrupt because of the amount of licensing, regulation and the fact that the local MLS is usually controlled by the local real estate group.
You have to pay a fee to join each one. I've heard a lot of tech people clamoring for a central MLS service but the local groups are well aware that controlling the listings protects the entire field.
There's so many hands in the pot from banks to inspectors to attorneys to insurance before you even get into the liability insurance that each one of them (and the realtors) have to carry for these transactions...since there are so many opportunities to get sued.
It's not going to be an easy nut to crack, but it should be fun to watch all this money try.
I just sold a house by myself and the line of people with their hand out is infuriating. Even more frustrating, for providing their automated gesture or nod of a service, they want a PERCENTAGE.
For example, to just do all the paperwork, a realtor might offer a "transaction only" service for "only" 1%. Regardless of property value, it's the same paperwork and usually done by a clerk. I instead went to an honest (!) attorney, flat rate for his time, it was around $1500 to do the same task. He reviewed contracts, attended closing, gave advice. Easy, done.
I think there's so much monetary friction from these parasites that any automation and fair pricing will erase whole professions.
There will be a lot of pushback but it's also really valuable. Just based on my experience in NYC, brokers are taking 6% fees on million dollar homes while most are just pushy and dishonest. The buying process is complicated and heavily regulated, but if I can do my taxes online then buying a house should be easy.
Caveat: I can’t read the article. I’m just riffing based on my knowledge of RE and personal experiences with tech.
As someone who’s researched real estate, I have a hard time seeing how tech can help the RE industry. For starters, RE bubbles have led to the worst economic downturns. If people can buy homes so easily that they can profit on making superficial changes, then prices will go up far above efficient. That pushes actual “householders” out of the market. Also, look at the dumpster fire that is Silicon Valley RE.
If I’m thinking of ways tech may help RE:
-Actually providing previously unavailable or unobservable information to buyers. Knowing a home will require expensive repairs soon would, in aggregate, help correct valuations. Alerting people of a home being in a flood plain, hurricane path, etc would help.
-Helping potential buyers with otherwise good credit but lacking some of the traditional requirements could help. But again that would probably also make flipping so easy and profitable to really screw up the market.
-Disrupting the contractor/developer industry could flush some seriously awful bad actors out.
-Making rent and RE cheaper would boost the long term wealth of the country - by diminishing the portion of household income devoted to RE. Particularly, rent. Rent shouldn’t be anywhere near comparable to mortgages. You never get to see rent money again. (Here’s an idea: make a “shitty apartment” insurance. People pay an upfront insurance cost on moving into a new apartment. In return, if at any time during the residence they want to break the lease for a “qualified reason” the insurance helps them negotiate the process and ponies exit costs. Eventually a complex’s insurance premium would be enough to signal to potential renters about a place.)
> Alerting people of a home being in a flood plain, hurricane path, etc would help.
I would pay for a service that gives me a reasonable 10-50 year estimate of climate change impacts on a given real estate area. I haven't been able to find this so far. Presumably very large RE investors have access to such information, but for the average consumer...?
> Rent shouldn’t be anywhere near comparable to mortgages?
why not? rent probably should not be egregiously larger than the mortgage payment, but rent needs to at least price in the risks related to owning a property long term.
>Rent shouldn’t be anywhere near comparable to mortgages.
How am I supposed to rent you a house if the rent you pay is less than the mortgage I have on the house? How do I build a pool of money to use for repairing the things that inevitably break?
I bought my home through Redfin and I was pretty happy with it. I can also definitely see the appeal of OpenDeal's model of buying your house and then reselling it; it's like the house version of a dealership trade-in. You may not be getting the best deal but you're skipping the hassle.
I agree with your last point, but what is tech supposed to help about it? That's a systemic problem of jobs continually concentrating in dense urban cores where land is simply more scarce.
Hard to tell whether this is a news article or an ad for the featured company.
Also, tech has been in real estate for a very long time. Zillow, Trulia, Redfin, etc were supposedly "disrupting and revolutionizing" real estate before smartphones got popular. I remember reading about this more than a decade ago. My god time flies.
From 2007.
Redfin On 60 Minutes Tonight – Real Estate Market Disruption.
Don't sell short what those companies did for buyers: they freed them from the gatekeeper of a broker. No disrespect to brokers - they're great for sellers and I happily used one - but the analytics and search and sheer awareness of what was on the market they offered to the home buyer was revolutionary IMHO.
So, they are using housing data without taking the bubble into account. They will make money for a while until the market turns then they will lose money when their holdings are 20-40% underwater then it will take 5-10 years before their investment is above water. And the rental market will tank at the same time so, good luck with cashflow. Now let's add maintenance, upkeep etc.
Who's "they"? This article seems to mostly be about OpenDoor offering to buy homes not in need of major repair and turn around and sell them in 90 days, all while collecting smaller-percentage fees that traditional sellers would. I'm not sure this model is as crazy as you're making it sound.
> “The vast majority of investors who hear about it initially think it’s a bad idea,” said Stephen Kim, an analyst at Evercore ISI, a market research company. But the skepticism often fades as they realize Opendoor makes money by providing a service to home sellers, rather than on price appreciation, Mr. Kim said. Even if the company breaks even on a sale, the transaction fees are a meaningful business.
The fees to the buyer on the sale of a $1.1m house are about $60,000 including broker fees of 5%, transfer, title, and many other fees. Fix that, attract buyers, and charge the seller $20k and you've got a heck of a good business.
My recent experience in selling a property is that no buyers could find the property and contact me until I hired an agent. Listing it FSBO resulted in calls from agents, not buyers. Every agent had a horse in their stable that they wouldn't share with me unless I paid them a commission.
Figure out how to make it emotionally and legally safe for buyers to acquire property without an agent and I think that would help. All to often we think we need representation, which is expensive, when we actually don't.
Real estate has always been a stable asset. The problem with it is that people are used to buying or selling a house a certain way, and they often do it only once or twice in their lifetime. The offer stage is very untransparent and manipulative. The closing process looks so hard that everyone thinks that we should pay 6% to agents and thousands of dollars to title companies. Tech can make the process to be transparent. Propy is doing it with smart contracts.
The question is raised whether there are more efficient or straightforward methods of doing transactions of real estate. Why shouldn’t buying properties globally be as simple, as buying a laptop from an online store in a different country?
Some of the benefits of being able to purchase real estate globally easily:
-You’d able to invest low amounts for a stable return
-The real estate market would gain liquidity
-You’d have access to multiple markets
Blockchain technology is one way this can be done, and we’ve already had successful global real estate transactions on our platform using it.
brightball|7 years ago
You have to pay a fee to join each one. I've heard a lot of tech people clamoring for a central MLS service but the local groups are well aware that controlling the listings protects the entire field.
There's so many hands in the pot from banks to inspectors to attorneys to insurance before you even get into the liability insurance that each one of them (and the realtors) have to carry for these transactions...since there are so many opportunities to get sued.
It's not going to be an easy nut to crack, but it should be fun to watch all this money try.
imglorp|7 years ago
For example, to just do all the paperwork, a realtor might offer a "transaction only" service for "only" 1%. Regardless of property value, it's the same paperwork and usually done by a clerk. I instead went to an honest (!) attorney, flat rate for his time, it was around $1500 to do the same task. He reviewed contracts, attended closing, gave advice. Easy, done.
I think there's so much monetary friction from these parasites that any automation and fair pricing will erase whole professions.
tootie|7 years ago
crispyambulance|7 years ago
Or maybe they'll use "UBER" as a verb: "Let's 'UBER' the real estate market!"
ianai|7 years ago
As someone who’s researched real estate, I have a hard time seeing how tech can help the RE industry. For starters, RE bubbles have led to the worst economic downturns. If people can buy homes so easily that they can profit on making superficial changes, then prices will go up far above efficient. That pushes actual “householders” out of the market. Also, look at the dumpster fire that is Silicon Valley RE.
If I’m thinking of ways tech may help RE:
-Actually providing previously unavailable or unobservable information to buyers. Knowing a home will require expensive repairs soon would, in aggregate, help correct valuations. Alerting people of a home being in a flood plain, hurricane path, etc would help.
-Helping potential buyers with otherwise good credit but lacking some of the traditional requirements could help. But again that would probably also make flipping so easy and profitable to really screw up the market.
-Disrupting the contractor/developer industry could flush some seriously awful bad actors out.
-Making rent and RE cheaper would boost the long term wealth of the country - by diminishing the portion of household income devoted to RE. Particularly, rent. Rent shouldn’t be anywhere near comparable to mortgages. You never get to see rent money again. (Here’s an idea: make a “shitty apartment” insurance. People pay an upfront insurance cost on moving into a new apartment. In return, if at any time during the residence they want to break the lease for a “qualified reason” the insurance helps them negotiate the process and ponies exit costs. Eventually a complex’s insurance premium would be enough to signal to potential renters about a place.)
arkades|7 years ago
I would pay for a service that gives me a reasonable 10-50 year estimate of climate change impacts on a given real estate area. I haven't been able to find this so far. Presumably very large RE investors have access to such information, but for the average consumer...?
leetcrew|7 years ago
why not? rent probably should not be egregiously larger than the mortgage payment, but rent needs to at least price in the risks related to owning a property long term.
r_smart|7 years ago
How am I supposed to rent you a house if the rent you pay is less than the mortgage I have on the house? How do I build a pool of money to use for repairing the things that inevitably break?
emodendroket|7 years ago
baybal2|7 years ago
If that can amount to help, maybe burning it to the ground will do it?
Google Ziroom and what it did to rental market in China.
Were something similar to appear and get hold USA, expect American RE companies in big cities to burn down within a year.
But I doubt this prospect, I bet rich RE boys will spare no money lobbying to nuke it like they did with Airbnb.
lr4444lr|7 years ago
qubax|7 years ago
Also, tech has been in real estate for a very long time. Zillow, Trulia, Redfin, etc were supposedly "disrupting and revolutionizing" real estate before smartphones got popular. I remember reading about this more than a decade ago. My god time flies.
From 2007.
Redfin On 60 Minutes Tonight – Real Estate Market Disruption.
https://techcrunch.com/2007/05/13/redfin-on-60-minutes-tonig...
Zillow has created a real estate revolution.
http://archive.fortune.com/magazines/fortune/fortune_archive...
lr4444lr|7 years ago
sharemywin|7 years ago
emodendroket|7 years ago
> “The vast majority of investors who hear about it initially think it’s a bad idea,” said Stephen Kim, an analyst at Evercore ISI, a market research company. But the skepticism often fades as they realize Opendoor makes money by providing a service to home sellers, rather than on price appreciation, Mr. Kim said. Even if the company breaks even on a sale, the transaction fees are a meaningful business.
dano|7 years ago
My recent experience in selling a property is that no buyers could find the property and contact me until I hired an agent. Listing it FSBO resulted in calls from agents, not buyers. Every agent had a horse in their stable that they wouldn't share with me unless I paid them a commission.
Figure out how to make it emotionally and legally safe for buyers to acquire property without an agent and I think that would help. All to often we think we need representation, which is expensive, when we actually don't.
propyinc|7 years ago
The question is raised whether there are more efficient or straightforward methods of doing transactions of real estate. Why shouldn’t buying properties globally be as simple, as buying a laptop from an online store in a different country? Some of the benefits of being able to purchase real estate globally easily: -You’d able to invest low amounts for a stable return -The real estate market would gain liquidity -You’d have access to multiple markets
Blockchain technology is one way this can be done, and we’ve already had successful global real estate transactions on our platform using it.
unknown|7 years ago
[deleted]
paulddraper|7 years ago
It's software-enabled realty for home sellers. Costs like $1.5k instead of 3%.
unknown|7 years ago
[deleted]
walrus01|7 years ago