Technology companies are entering the real estate industry. And Realtors across the country should be up in arms.
eBuyer companies such as Zillow, Offerpad, Open Door, and iBuyer offer to purchase your home, site unseen, right now. No need to interview real estate agents. No need to market the house. No inconvenience of having strangers walking through your house and looking in your closets.
Backed by hundreds of millions of dollars in capital, the business model for these tech companies is to locate thousands of houses throughout the country and make lowball offers to these homeowners. To help ensure their lowball offer is accepted, these tech companies will send the seller a market analysis based upon public data. Since no real estate professional is viewing your home to verify condition, upgrades, curb appeal, and other intangible data which would affect the market value, it’s very possible the eBuyer report will reflect a value much lower than what the house is truly worth!
Real estate companies and Realtors traditionally charge homeowners between four and six percent commissions to market and sell their home. These technology companies boast that they don’t charge ANY commission! They simply charge a “Service Fee” to make it all happen. However, the service fees they charge are often between seven and ten percent of the sale price!
These tech companies will close within days. They then turn the house around and relist the house for a tremendous profit. While there’s currently nothing illegal to this practice (although in my opinion, it comes close to equity-stripping), in many cases, home sellers are walking away with far less than their fair share of profits from the sale of their house.
Since these tech companies are NOT licensed real estate companies nor licensed agents, they are NOT subject to the laws and regulations Realtors are subject to. They are NOT beholden to the best interests of the seller. They are free to steal the equity of homeowners by purchasing homes below market value and by charging outrageous service fees for the “convenience.”
While these large tech companies operate across the country with the sole purpose of increasing corporate profits, there are local and legitimate investors in every market who purchase run down homes from sellers with the intention of refurbishing and flipping for a profit. These local investors provide a needed service to sellers and to the neighborhoods in which these houses are located. This is very different than national technology companies making offers from afar with the sole intention of stealing equity from homeowners.
What do you think? Please share your opinions below.
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