SELLING a house can be one of the most time consuming, stressful and daunting processes you can go through.
But a new real estate sales model is mushrooming into existence in the US and it promises to change that by offering a painless “one-click” process to selling your home.
The OpenDoor start-up, which operates in four major US cities, allows homeowners in certain areas to go online and post the address of their home, fill out a few details about the property before the company’s algorithms crunch some data and makes an almost instantoffer on the house.
If the person accepts, the start-up will close the deal within three days.
The idea is the brainchild of longtime Silicon Valley investor Keith Rabois who came up with the concept back in 2003. But it wasn’t until 2014 that OpenDoor launched in the city of Phoenix due to more favourable market conditions at the time.
Since then two other start-ups, Offerpad and Knock, are also getting in on the idea by offering very similar services. This small emerging gang of companies wants to make selling a house as easy as selling a car.
The typical formula for these start-ups is to analyse lots of (readily available) house sales data, come up with an accurate price for the home, charge a considerable convenience fee, and then (after maybe making some upgrades) onsell the house over a longer period of time.
Basically, they’re harnessing the value of online convenience to flip houses on a mass scale.
It removes the pain and uncertainty for home sellers but they’re also very likely to lose money by expediting the experience and paying the convenience fee, which is slightly higher than the cost of a real estate agent.
According to the company, about 30 per cent of people who request an offer decide to take it.
There is a criteria that houses have to meet. For instance, OpenDoor only operates in the middle of the market and doesn’t buy any high-end houses or fixer-uppers.
Research done last year by a pair of real estate analysts in the US found that on average, the company sold a house within 90 days and made an average profit of $US8000 per house, reported The New York Times. At the time the company was only operating in Phoenix. It has since spread to Dallas, Las Vegas and San Francisco.
The company also embraces tech heavy solutions to streamline the sale process. They equip homes with sensors and cameras to allow prospective buyers to inspect houses the company owns at their own leisure.
“Real estate is a $US25 trillion asset class — people spend more on housing than food, transit, health care and education,” chief executive of Opendoor, Eric Wu, told the Times. “We think we can make it work much better than it does now.”
But of course, there is serious danger. A big downturn in property prices and it all becomes a house of cards.
There are online platforms in Australia such as forsalebyowner.com.au that offer homeowners the chance to streamline the sales process and avoid much of the hassle. But they’re not quite the same.
New and innovative players are entering the Australian real estate market but John Cunningham from the Real Estate Institute of New South Wales (REINSW) doesn’t see start-ups like OpenDoor having much impact here.
“I love the promise of these things …” he laughed.
“The reality is a homeowner wants to sell their property for the highest possible price they can achieve, a majority of them are not in a fire sell situation,” he told news.com.au.
The Australian real estate environment is “quite different” to the US, and for one thing most Australian states require you to have a contract prepared by a solicitor before you can sell a property. “So you can’t just go and stick your property online and hope for the best,” Mr Cunningham said.
“I’m sure they’ll come here, I’m sure there’ll be a place for them but a majority of people actually want to have an experienced agent.”
That’s because buying and selling a house is one of the most emotional experiences we go through.
“This OpenDoor one is all about taking the emotion out of selling or buying a property and the reality is the whole experience is 80 per cent emotion based,” he said.
THE TECH REVOLUTION IN REAL ESTATE
Technology is certainly changing how people engage with the real estate market.
Foreign buyers are using virtual reality technology to take virtual tours of homes and apartments in other countries which they dutifully snap up without ever setting foot in them.
Young Australians keen to jump aboard the apparent gravy train that is property investment in this country have turned to platforms such as Brickx, which allow wannabe investors to get a foothold in the property market for as little as $100.
The start-up launched last September and its CEO, Anthony Millet, said it already had 2500 investors and $9 million of Sydney and Melbourne property on its platform. It divides each property into 10,000 “bricks”, so a $700,000 house is divided into $70 bricks that give each investor a share of the property’s growth and income.
But for Mr Cunningham, new technology in the industry is all about facilitating a better experience for both sellers and buyers.
“Technology in the real estate sector is an enabler of better communications and connection between all the parties,” he said.
Speaking to news.com.au after returning from a real estate conference on the Gold Coast recently, he said the message from US brokers who spoke at the conference was largely the same: “Technology is not about replacing people, it’s about enabling a better experience to take place.”