Hey HN, I'm a founder at Open Listings and did a lot of the engineering of this project. We got a lot of inquiries from tech workers who really cared about their commute times, so we used Googles Distance Matrix API [0] to sort listings by commute time.
I'll be on here with my cofounders today to answer any questions you might have.
I clicked on my last company (Factual in LA) and the first listing was for a $18M penthouse. It also said that the buyer would get a $225k+ refund from Open Listings for buying through them - how does that work?
But seriously, it is a very neat tool, thanks for making it.
Thanks! We'd love to get you into that penthouse...
When you buy a home, your agent is paid a 2.5% commission to represent you in the transaction. As a real estate brokerage, Open Listings replaces your agent and facilitates the transaction on your behalf. At close, we refund you half of the commission we receive, usually crediting the refund against your closing costs.
I've heard from multiple agents about how redfin agents don't know what they are doing. Of course, that is just one side of the story, but I'm curious about how receptive listing agents are towards working with you guys in hot markets like SF Bay area. Anything you can share?
It's not just Redfin agents: a surprising number of licensed agents have trouble with basic tasks like communicating via email and filling out contracts. Since we work as a team, we've built a vast amount of institutional knowledge over the past 5 months and there are no individual, inexperienced agents representing our buyers. We're also automating most of the offer submission process. This means that we're more responsive, more articulate and more accurate than the majority of agents. We also have the privilege of working with smart, serious buyers. We can honestly say that most agents have been happy to work with us and treat us like any other brokerage.
The most important thing to understand is the seller decides which offer to accept and that decision comes down to price & terms. The best offer always wins. 100% of the time we've submitted the highest offer, it has been accepted. Our offers are clean and our buyers are able to pay more knowing they'll get a significant refund. So far, so good.
Redfinnian here. To add a bit of context to this claim, our agents do four times as many transactions as the most productive traditional agents. This is primarily because we don't have to prospect for leads; our site and mobile apps are great at connecting our agents with prospective buyers and sellers. That's the big advantage of any end-to-end product, and the extra time that our agents have to serve real customers instead of searching for them reveals itself in our higher win rates and customer reviews. Proof's in the outcomes, after all, not in empty words.
And a quick response to the Open Listings folks: Redfin agents actually do work on teams, consisting of Support Agents, Listing and Tour Coordinators, field agents who can help customers homes tour on demand, and deal-writing agents who handle the toughest bits -- negotiations, offer-writing, and general guidance to the customer. Just wanted to set the record straight here.
That said, I love what you guys are doing. This is a big enough market for everyone :) and we're excited to see so many folks adopting alternative transaction models.
As an Australian I have always been amazed with that in the USA you have to use a buyers agent. Here you visit the properties yourself and deal directly with the selling agent. Only the buyer pays the agent.
We do have very high stamp duty (basically a sales tax on real estate) which is 5% of the property price which the buyer has to pay.
I think you mean that only the _seller_ pays the agent. But yes, I agree the American system is a bit odd. For one thing the listings are WAAAAYYY old by Australian standards - here you list your house with an auction or "sale by" date usually six weeks in the future, and ... it sells (usually). It looks to me like the American system has longer listings because there are fewer open-house inspections - your buyers agent arranges a time to inspect on your behalf, or something like that?
You don't need to use a buyer's agent, but it's usually a good idea to have someone at less theoretically looking out for your interest. If you use the seller's agent, that one agent has a big conflict of interest. If you have a real estate attorney (which isn't very common in california, but may be in Australia), then I wouldn't see needing an agent as well.
Yes in Australia as a buyer you will have your own lawyer looking over the details once you buy. The problem with buyers agents is their interests are rarely aligned with your own.
Haha - not really! Was saying that most of the criticisms directed towards Redfin agents could be applied to more generally to many real estate agents currently working in the industry.
To date, Redfin has built the best home search tools available. But they continue to reduce their refund amounts and hire agents on salary who work individually in a traditional manner. As a competing entrant, we're trying a different approach. Buyers win because they have more choices.
I see that you are only targeting the big companies. This is really smart, since those companies tend to pay better and their employees will have a bunch more cash to throw at their house, leading to a bigger commission.
What are your plans for adding new companies? Are you going to branch out into firms that might not pay as well? Stick with the "top 1%" companies but in different cities?
Real estate service that focuses on tech people seems lucrative. Good idea all around.
It's tough! As a company we're trying to make it cheaper by refunding half of our commission back to the buyer [0]. If you're doing an FHA loan, that can be almost 50% of the down payment. We can also help with the purchase of low income housing if you qualify [1]. We're actually thinking about building some tools to make this inventory more accessible. You might also try checking out our cheekily named list of fixer-uppers, Shitty Listings [2]. As you'll notice, a "fixer-upper" near the California coast can still be pretty pricy but I think there's just a fundamental supply constraint. Incidentally, that's most likely why real estate has been a lasting and valuable asset class.
Salaries are higher here for one. Say $190k vs 4x as much, $760k. Assuming magic 10% down appears in your pocket, 0% property tax, ignore the differences in state/local taxes, and assume a spherical chicken in a vacuum.... $3200/mo vs $800/mo.
4 times as much! Wow! That's a lot of money. Right? Except.. it's "only" $29k/yr. Most cost-of-living expenses don't scale with income. Now, of course, your salary has to be more than that to cover taxes, but say 20% overall tax rate, you really only need $36k more per year, which you might see straight up on a single salary, based on cost-of-living pay adjustment alone. If you're married, suddenly you only have to make $18k per person per year more.
If you follow the "1/3 of your salary" rule, it would suggest that you need to make $86,400 per year more, which is why expensive housing sounds so expensive. One would hope that in a low cost-of-housing market, you're not spending 1/3 of your income on your housing, because then you really don't have a lot of money left over for retirement or food or entertainment. Similarly, in a higher cost-of-living market, you might fudge that a bit and pay more than 1/3 of your salary, which still leaves you more money for your 401k and transportation and entertainment, and all those things that really don't scale with cost of living much at all.
You could also look at the high cost of living as a savings plan. As long as you retire before whatever particular housing cycle bubble bursts, you can still retire to Texas (or wherever) -- you can just do so with more money (equity, savings, retirement plan, etc).
Also, some tax and expense treatment of housing is pretty regressive. You're probably not getting a mortgage interest/property tax income tax deduction on a cheap mortgage; on a more expensive one you are, so you're immediately paying a lower effective interest rate and property tax rate (if you want to look at it that way). You're not paying PMI for that sub-20% down payment because it's not federally backed. etc.
This is not to say it's cheap, or easy, or affordable for everyone, or even smart. It's just saying how it's possible, and how it's probably not as bad as it sounds.
Imho, the biggest problem (especially in the Bay Area) is that there's such a ridiculous ratio of cash buyers to available properties that even folks who have a typical 20% down payment are still having a hard time buying starter homes in desirable ("close to work") areas. For example, I have $200k equity in my current home (NC) and if I move to the San Jose area that would still require me to put in another $100-200k of savings to "compete" for a mediocre 1500-2000sqft place near work. At that point, I'd be going from a $2k/mo mortgage to a $4k/mo mortgage, plus a 3x in annual property taxes because the home is so much more expensive. I disagree with your "only" incremental additional income requirement in this case, because if the alternative to buying a "cheap" home is paying $4000+/mo rent (I have two kids and need at least a 2BR apt), that just delays home buying even further while I throw away potential DP/mortgage on rent.
Perhaps I am being unreasonable because I'm coming from a low CoL state, but I think the 1/3 your salary rule is a very good, smart target (unless you can easily get a HELOC or equity loan in case of emergency because you put so much down when you bought the place).
"I have $200k equity in my current home (NC) and if I move to the San Jose area that would still require me to put in another $100-200k of savings to "compete" for a mediocre 1500-2000sqft place near work."
Do you mean you'd need that $400k down to "compete"?
You would have no problem buying a $1MM home on credit with your 20% down. That would buy you a decent place in San Jose. You could also buy the same home with 10% down, though that will require PMI on your mortgage. In either case, I don't believe you would have too much trouble from cash buyers. Yes, cash means a shorter escrow period. But if you offer more than the cash buyer, most sellers will take the higher bid. Your offer would waive your loan contingency (by getting your financing locked-down in a commitment letter).
No PMI on jumbo loans. They just require cash reserves. (which, yes, is more money on top of what you have to put down, but there's no requirement that you not spend it once you close). So take that $200k, put down 100, and keep the rest in the bank.
You bring up a very good point about the rent "alternative" not leaving much space for savings; particularly these days. I was able to rent a 2bdr house in a very desirable location for $2k in 2011, but by 2014 when I bought a house, this was considered at least $1k under market value (even though they never raised the rent). And, of course, 3 years isn't really enough time to save for a down payment!
If 1/3 is $4000, that leaves $8000 to pay taxes (call it 2400 on 12k/mo), which leaves $5600/mo to live off of. I could deal with that.
You rent for a few years longer. I live in Southern California, and rented a 1BR apartment 2 blocks from work for $1000/mo (increased to $1150 by the time I moved out 5 years later). I started at high five-figures salary and was a bachelor, so I had way more than a 20% down-payment by the time I started looking at buying.
One of my coworkers who started at the same time as me lived in a 3BR with two roommates for the same period of time, so he was paying half what I was in rent. He still lives modestly (2BR, working wife, no kids) and probably could retire anytime he wants now.
One reason is that this site only seems to have listings for the "top companies." These companies are very hard to get a job and and tend to pay well, so the home listings are probably skewed to suit buyers that work at the elite companies and have more money to blow than a normal person.
I bet that if and when this site begins targeting the other 99% of companies, the listings for those will trend lower to reflect the average salaries.
The average commute in the US is something like 23 min, so the average commute in LA or SF should theoretically be a bit higher. I agree that 10 min seems incredibly low.
Whether 10 minutes is a realistic number depends heavily on your definition of stuck in traffic. You can choose anything from "absolute standstill" to "slower than one would go on an empty road".
For a typical definition, those 23 minutes will not all be spent stuck in traffic.
According to the US census bureau, 11.9 percent of county commuters had a drive of 60 minutes or more, compared with 8.1 percent nationally. The average commute time for Los Angeles County residents in 2011 was 29.4 minutes, above the national average of 25.5 minutes.
There's another solution to this problem: remote work.
It's 2015, and with the plethora of Internet technologies that facilitate online collaboration I'm still dismayed to see so many tech companies behaving like it's 1985. The insistence and focus on physical location baffles me. Some companies seem to get it and have embraced an online/distributed workforce but many seem opposed to that model. I'd really like to hear others thoughts on why geography is still such a huge factor in knowledge-based industries.
I guess remote work is an option, but not quite a total solution at the moment.
1) not all work could be remote
2) self-discipline/communication is tough
Woofoo (about 7 people) did remote, but the founder admit it's tough and challenging even for such a small and motivated company (imagine your workforce > 1000 people), though there are some obvious benefits.
It's not just about tools (slack, skype, etc.) and finding a procedure that works, but more about company culture, motivation, discipline, adaptation to remote environment, family at home, etc. Not every employee could survive a remote environment and continue to be productive :(
Before everyone could work from home, maybe the idea of multiple office location/work-space (rather than centralized) could be explored, yet it will have many pros and cons.
Odd. Just last year I was renting a 2/1 house in Belmont for $2k, until we bought a house. My buddy's renting a 2/1 in San Mateo for $3k. How close is "close"? I'd expect 1bd apartments to be cheaper than entire houses.
Whatever the default was, I believe it was looking for stuff within a 20 minute drive. I'm currently in a studio in San Mateo for $2.3k, but that's only because I stayed in the same unit I was in last year, so they only raised rent by 10%. If I were a new resident, my studio is around $2.7k.
Very interesting. The site looks clean and it's fast.
Where do you get your data? I used to work for one of the industry dinosaurs; our only competitive advantage was that we had agreements with most of the 674 MLSes to rehost their data for our clients, which were RE Agent companies. Zillow is still using Trulia as a pipe to funnel that MLS data from my former employer.
Is that one of the reasons for piloting in CA - fewer MLSes to partner with?
As a California RE brokerage we join each MLS and get a direct feed from their RETS api. It's a dramatically better data feed than any of the aggregators offer and we get listings the minute they come on market (well our polling interval is more like 5 minutes). So far we have 100% coverage in San Francisco, Oakland/East Bay, Silicon Valley, and Los Angeles. We've just joined the San Diego MLS and will have data there soon. And yes, our strategy is to go deep on California, prioritizing data quality over sheer number of listings.
Nice service! What are the vendor fees associated for the MLSs? Did you go to CRMLS and did you run into a requirement where you had to have a brokerage signed on previously?
Running into MLS/vendor issues at my own real estate tech product.
My understanding is that they are working hard to build APIs that will let Retsly power the next zillow, and that there's support for that internally. Time will tell!
Cool, if that's the case I hope the API is available soon. In the meantime our internal implementation makes use of this great open source library from estately: https://github.com/estately/rets
Definitely but I can't give you a date. California is a huge diverse market though and we think it's an amazing place to prove out the model and build our offer/transaction system. So we're trying to go really deep here before expanding out.
For people looking for an apartment, padmapper[1] has a similar option where you can give it an address and it will draw a polygonal boundary around it showing the limits for an x-minute commuting distance for walking, cycling, or driving. I imagine the car commute could be inaccurate if there's bad rush hour traffic in that area, but the others should be relatively consistent.
I'm not affiliated with the site at all, I just thought it's a really cool feature.
Where does this site get its real estate and/or distance/time data? I ended up doing an address search for my employer (which isn't on the list), but got a "No properties were found within 20 minutes of this location." despite Zillow showing dozens of red dots within 20 minutes walking distance from where I work.
Good question. We've done a bunch of transactions, learned more about our customers and built this purpose specific site for our biggest segment (tech workers looking to live closer to the office).
Interesting. One of my short term plans is to display hiking trailheads near homes for sale. Not sure if anything like that exists (also haven't looked...)
That's an awesome idea, pretty sure that doesn't exist. Definitely drop me a link if you end up building it! My brother in law keeps asking me for a Twitter feed of land near good surf spots. I gave him a bunch of mansions he can't afford :) [0].
Doesn't this assume you'll continue working with the same company for a long time? If you work at a company in SF now but 4 years later want to work at place down on MV, or vice-versa, not sure how this helps.
I'll be on here with my cofounders today to answer any questions you might have.
[0]: https://developers.google.com/maps/documentation/distancemat...