The Real Deal: Adventures in Real Estate
July 22, 2020
Rob Lotufo Ozark Properties Group, Fathom Realty
A new kind of transaction
2020 has hurled us headlong into a new kind of business world. In just a few months, we have found ways to interact without actually meeting, we are avoiding physical contact, and have even changed rules and laws regarding personal signings and consultations. I was raised on the "handshake and a smile" school of business. People looked each other in the eye, and decided if they liked the chemistry between themselves right then and there. Many a transaction was cemented by one person giving their word, and another believing that was good enough.
We are now in the days of nearly contactless transactions. I sold a house last week to a man in Alaska who has never been here. I recorded video tours with my phone and posted them online for him to view. He sent his son-in-law down here to preview the home. Within 48 hours of his inquiry, we were under contract. All of the signatures were digital, via computer. I was able to send him the tax report card and comparable listings by email. He wired the money to the closing company down here. He connected me with his mortgage lender, Quicken Loans. They will execute the entire transaction over the internet, without ever meeting the client.
A brave new world
It really is a brave new world out there, and maybe just a little scary. Last year several of the big boys in online real estate introduced programs where they would literally buy your house sight unseen. There is a lot more going on here than meets the eye. From what I have read, they only expect to buy 3 to 5% of those homes. On the ones that they do buy, they expect to lose an average of $4,500 per transaction. Why do it? Well, it's a service that people want. There are some sellers, often the heirs of a deceased owner, who wish to cash out as soon as possible with no hassles. Also in cases of divorce, bankruptcy or any extreme hardship this has become popular. But profit from buying and flipping is not really the end game for these online “ibuyers”.
Side Benefits
Every inquiry into this program is an instant warm contact. That's worth a lot. Even if you don't like their instant price, you may be very likely to ask them for a market evaluation of what they thought your home could bring if it were listed on the market. Conversion to a traditional listing is a nice bonus. If they do decide to buy your house and you decide to take the offer, there are many peripheral benefits. In many cases, everything from the title work and insurance to the mortgage is handled by that agent. The double whammy is when you take the “I buyer” price, and parlay your proceeds into buying another home. It goes without saying that the buyer’s agent is going to volunteer to help you buy that home and have an opportunity to earn commission on that sale as well, giving you the option to throw in mortgage, appraisal, inspection, moving services, etc. if possible. These online buyers are willing to gamble that the benefit of taking an “instant buy” home at a loss can easily be transformed into a profitable enterprise. Not to mention maintaining market share superiority and keeping sales dollar volume up.
Is this Legit?
None of this is illegal or even unethical. It is, however, not always thoroughly explained to the customer. In many cases, it may be the best situation for you to take, especially when you might not live in the area where the house is located or have adequate contacts to make a more personal assessment. I do think it's important to be aware and keep abreast of what all is really going on with your transaction.
Caveat Emptor!
I took a little trip to Branson last week. We went into a very nice restaurant in the Big Cedar Resort area. It had great decor, the menu looked delicious and the service was very efficient. After a nice meal and a couple of beverages, my waitress handed me the tab. The itemized bill showed $35. The credit card bill showed $53. No less than three or four attempts later, I finally flagged over our server and asked her if that was added gratuity or was there something wrong with the total. She kind of shook her head and said “my bad”, went back to the register and re-rang up my bill. I guess this just illustrates that whether somebody does something intentional or not, it's always our responsibility to double-check and make sure we know what is going on. Whether it is an $18 error on your restaurant tab or a $10,000 "unexpected" deduction from your home sale proceeds. It behooves you to find people you can trust to help you with major transactions. I suggest you always check references and an agent’s track records before making a serious real estate commitment. Find someone that you feel confident with. Be careful out there!
A new kind of transaction
2020 has hurled us headlong into a new kind of business world. In just a few months, we have found ways to interact without actually meeting, we are avoiding physical contact, and have even changed rules and laws regarding personal signings and consultations. I was raised on the "handshake and a smile" school of business. People looked each other in the eye, and decided if they liked the chemistry between themselves right then and there. Many a transaction was cemented by one person giving their word, and another believing that was good enough.
We are now in the days of nearly contactless transactions. I sold a house last week to a man in Alaska who has never been here. I recorded video tours with my phone and posted them online for him to view. He sent his son-in-law down here to preview the home. Within 48 hours of his inquiry, we were under contract. All of the signatures were digital, via computer. I was able to send him the tax report card and comparable listings by email. He wired the money to the closing company down here. He connected me with his mortgage lender, Quicken Loans. They will execute the entire transaction over the internet, without ever meeting the client.
A brave new world
It really is a brave new world out there, and maybe just a little scary. Last year several of the big boys in online real estate introduced programs where they would literally buy your house sight unseen. There is a lot more going on here than meets the eye. From what I have read, they only expect to buy 3 to 5% of those homes. On the ones that they do buy, they expect to lose an average of $4,500 per transaction. Why do it? Well, it's a service that people want. There are some sellers, often the heirs of a deceased owner, who wish to cash out as soon as possible with no hassles. Also in cases of divorce, bankruptcy or any extreme hardship this has become popular. But profit from buying and flipping is not really the end game for these online “ibuyers”.
Side Benefits
Every inquiry into this program is an instant warm contact. That's worth a lot. Even if you don't like their instant price, you may be very likely to ask them for a market evaluation of what they thought your home could bring if it were listed on the market. Conversion to a traditional listing is a nice bonus. If they do decide to buy your house and you decide to take the offer, there are many peripheral benefits. In many cases, everything from the title work and insurance to the mortgage is handled by that agent. The double whammy is when you take the “I buyer” price, and parlay your proceeds into buying another home. It goes without saying that the buyer’s agent is going to volunteer to help you buy that home and have an opportunity to earn commission on that sale as well, giving you the option to throw in mortgage, appraisal, inspection, moving services, etc. if possible. These online buyers are willing to gamble that the benefit of taking an “instant buy” home at a loss can easily be transformed into a profitable enterprise. Not to mention maintaining market share superiority and keeping sales dollar volume up.
Is this Legit?
None of this is illegal or even unethical. It is, however, not always thoroughly explained to the customer. In many cases, it may be the best situation for you to take, especially when you might not live in the area where the house is located or have adequate contacts to make a more personal assessment. I do think it's important to be aware and keep abreast of what all is really going on with your transaction.
Caveat Emptor!
I took a little trip to Branson last week. We went into a very nice restaurant in the Big Cedar Resort area. It had great decor, the menu looked delicious and the service was very efficient. After a nice meal and a couple of beverages, my waitress handed me the tab. The itemized bill showed $35. The credit card bill showed $53. No less than three or four attempts later, I finally flagged over our server and asked her if that was added gratuity or was there something wrong with the total. She kind of shook her head and said “my bad”, went back to the register and re-rang up my bill. I guess this just illustrates that whether somebody does something intentional or not, it's always our responsibility to double-check and make sure we know what is going on. Whether it is an $18 error on your restaurant tab or a $10,000 "unexpected" deduction from your home sale proceeds. It behooves you to find people you can trust to help you with major transactions. I suggest you always check references and an agent’s track records before making a serious real estate commitment. Find someone that you feel confident with. Be careful out there!
