Real estate market disruption

Castles in the Sand

Is there an algorithm in your future? If you’re planning on buying or selling a house, get ready for the future of real estate.

In a world where technology has remade everything from your morning coffee to tracking your investments, the real estate market has remained very old school. Reams of paperwork are the norm and interaction with local real estate professionals is the custom in most markets around the country. It wasn’t that many years ago when local real estate associations opened up multiple listing access to consumers making practically everyone an informed expert. If the availability of multiple listing properties to everyone was a big step, wait until you see what’s coming down the road.

iBuyer computer platforms have been gradually immersing themselves in the real estate market, offering buyers and sellers practically on-the-spot gratification. An iBuyer is a company that uses technology to make an offer on your home instantly. iBuyers represent a dramatic shift in the way people are buying and selling homes, offering a simpler, more convenient alternative to traditional home sales. Just search iBuyers and you’ll be amazed at the hits you get.

Companies like Knock and Zillow are betting big time on the success of these platforms in a world where everyone is too busy to complete traditional real estate transactions. Knock, for example, helps customers buy a new home, usually an upgraded one, and then stages the old home and gets it on the market right away. There are, of course, fees for this service but for many professional couples, it’s worth it.

Zillow and others buy the property after an appraisal and the sellers move on without the hassle of selling. So far Zillow is moving along with its business plan, buying more than 1,500 homes in the second quarter of the year.

Then we have startups who are offering people with good income but not so good credit a way to get into a home. Divvy Homes buys homes then rents the homes to their clients so they can have a place to live, pay rent and build equity towards eventual ownership. This is an idea that has its roots in the real estate industry known as rent with an option to buy, which was a private contract between two parties. It worked for many buyers and sellers in the pre-tech world, especially for difficult-to-sell properties.

Now Divvy and others like Flyhomes are offering high tech plans to fill a need aimed at first-time buyers who are probably already renters. It’s not uncommon for first-time buyers to be faced with student loan debt and little or no savings while they’re getting their careers up and running.

Divvy’s plan is to charge monthly rent with about 20% of the monthly payment going toward equity to buy the property. The monthly rent is higher than what the going rate for a similar rental would be, but equity is being built. Naturally, Divvy makes most of their money from the rent paid.

Flyhomes offers a full-service brokerage, buys the homes for cash giving their clients an edge and then underwrites the potential mortgage. Naturally, there are fees attached to this as well as traditional real estate brokerage commissions.

Ask five different real estate agents what your home is worth and you’ll get five completely different answers. Ask an algorithm what your home is worth and you’ll at least get one answer which may or may not be correct. No matter how you feel about technology getting involved in real estate, we can all agree that it’s definitely a disruption.

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