
The Hot Property That’s Next on Tech’s Agenda: Real Estate - ryanj20021
https://www.nytimes.com/2018/09/27/technology/next-techs-agenda-real-estate-opendoor.html
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brightball
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.

~~~
imglorp
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.

~~~
arkades
You don't need an "honest" attorney to get that number. It's normal for RE
attorneys to get a flat-ish fee, and RE agents to pull a percentage.

And RE attorneys usually make <2k/deal, with a lot of that being add-ons from
things like owning their own title company. You paid market rate, as best as I
can tell.

And all paperwork and contracts are ultimately done by the lawyer. I have
honest to goodness no idea why you involved a realtor at all if you were
selling it by yourself. Their only job is to attract prospective buyers (read
as: list your house on the MLS).

~~~
emodendroket
> And all paperwork and contracts are ultimately done by the lawyer. I have
> honest to goodness no idea why you involved a realtor at all if you were
> selling it by yourself. Their only job is to attract prospective buyers
> (read as: list your house on the MLS).

Also handle things like showings, no?

~~~
arkades
True. And showings.

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ianai
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.)

~~~
r_smart
>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?

~~~
newacctjhro
You're building equity with the difference between rent (plus repairs etc) and
the mortgage. The renter isn't.

~~~
saiya-jin
Yes, and you are exposed to myriads of risks that tenant isn't either -
property market crash, tons of possible environmental disasters, issues with
plumbings, fires, damage done to property, gradual degradation of, well
everything.

Another thing is the amount of time and energy invested into acquiring,
renovation, maintenance and improvement of the property.

Financially any of those, especially market crash can ruin you for life - how
do you want to price this massive risk in rental price?

Ever tried to buy a property? For mortals getting mortgage, its such a
stressful experience even for simplest type - obtaining already existing and
equipped flat, that it easily breaks relationships and marriages.

I understand the tenant point of view to try to pay as little as possible and
have as big choice as possible, I am also in that camp, but there is other
side (and I don't mean some super rich or people inheriting big properties by
being lucky with birth).

~~~
michaelscott
_Yes, and you are exposed to myriads of risks that tenant isn 't either -
property market crash, tons of possible environmental disasters, issues with
plumbings, fires, damage done to property, gradual degradation of, well
everything._

A property investment, like any investment asset, is a bundle of risks as well
as rewards. Yes, you as the owner take on the risk of things like market
crashes, insurance and repairs but you also own an expensive asset which you
can sell at any time (a renter cannot). You need to deal with the risks and
rewards of a property like you would any other asset.

~~~
r_smart
Right, and you price the rent based on that risk profile. A price that is
absolutely going to be higher than the mortgage, unless as another commenter
pointed out, there are incentives & tax breaks that cover the cost you would
otherwise bear.

~~~
michaelscott
The risk profile is carried by the asset owner, not the person making use of
the asset. I buy equities, fixed income assets and bonds based on _my_ risk
profile, not someone else's.

~~~
r_smart
Riiiigggghhhhtttt....and at a selling price determined how?

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qubax
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.

[https://techcrunch.com/2007/05/13/redfin-on-60-minutes-
tonig...](https://techcrunch.com/2007/05/13/redfin-on-60-minutes-tonight/)

Zillow has created a real estate revolution.

[http://archive.fortune.com/magazines/fortune/fortune_archive...](http://archive.fortune.com/magazines/fortune/fortune_archive/2007/02/19/8400262/index.htm)

~~~
lr4444lr
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.

~~~
alistairSH
Agreed. While Redfin, Realtor.com, etc didn't cut a realtor out of my RE
transactions (1 purchase a decade ago, then 1 sale + 1 purchase last year),
they did do a good job showing me what was on the market. And not just at a
single point in time (when I was actively shopping), but over years, so I
could see neighborhoods that were smaller or had less turnover. While actively
searching, the often gave me a heads up as to what was coming on the market in
the upcoming week - I wasn't at the mercy of the RE agent calling me with new
listings.

Unfortunately, agents in my area still take a pretty standard % of any
transaction, so those tech sites haven't made a dent in the cost of the
transaction.

~~~
shostack
How did you go about assessing the evolution of a neighborhood over time? Do
any of them have visualization tools specifically for that?

~~~
alistairSH
No specific tools, but many home listings stay online for years. And any
single home’s sale history is online too. Between the two, you can see how
much a lake view is worth relative to the house one row away, or how quickly a
neighborhood recovered from 2008, or the high and low sales over the last few
years, etc.

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sharemywin
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.

~~~
emodendroket
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.

~~~
JoeAltmaier
Gotta deal with the lemon issue though. You make one mistake buying, and you
have a quarter-million-dollar problem. Takes a lot of transaction fees to
recover from that?

~~~
emodendroket
Sure, but how is this different from the problem faced by, like, CarMax? If
your volume is large enough it doesn't matter.

~~~
JoeAltmaier
All about the rate of mistakes - even a negligible error rate means millions
lost a year.

~~~
emodendroket
It's likely that they'll make money just on flipping the houses in many cases
and even in the lemon case it will not be a total loss. Even in the very worst
case, where the house absolutely cannot be salvaged, the lot is worth
something (I think the lot is around half the value of my property, for
instance). If the house just needs more extensive repair than expected that's
a smaller loss.

From the perspective you're talking about, the risk to an individual buyer of
missing some serious issue in an inspection is far greater than it would be to
a company buying up homes left and right, and they've minimized this risk by
focusing on a relatively specific slice of the market (newish houses with no
serious known issues and with a value of $250-500k).

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dano
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.

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propyinc
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.

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paulddraper
One start up I'm rather excited about is Homie. (I do not work there, but I do
live in their home state of Utah.)

It's software-enabled realty for home sellers. Costs like $1.5k instead of 3%.

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walrus01
Most of the huge datacenter builders (digital realty trust, etc) are REITs.

