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18 minutes in - Opendoor already has 10% of the market.
19 minutes in - they might charge a 1% commission.
You keep your head in the sand. Lol.
Generalizations and widely subjective and inaccurate comparisons aside (right off the bat suggesting that selling a house is a miserable experience because every agent is clueless, only sells a few houses a year, and purses routinely get stolen out of the closet...lol ok).
Nothing I said above disputes the numbers quoted in sections you cherry-picked. In fact they very much align.
Opendoor is growing their market share substantially right now.
They "might" lower their commissions to 1%.
So thus I ask.... if they continue to eat up market share of the RE market and lower their commissions....how do you expect them to be sustainable long term? Either by buying their homes at a discount form the sellers, or selling them at a premium to buyers, or more likely (as they currently do)...a combination of both; and/or raising their commissions again once they have an even greater market share.
And again I also ask... how is that better for the consumer? If your default RE transaction is selling your current house to a company for less than market value, and then buying one from that same company at higher than market value......does the money you theoretically save in commissions make any difference? You'd rather save 4% in commission than get 10-20% more for the sale of your house or pay 10-20% less on the purchase of your next one?
The cab driver vs uber/lift driver at the beginning is also a hilariously ironic comparison...
Lyft/uber drivers are independent contractors who are tied to a branded company but work on their own schedule, are selected or rejected by the consumer, and have enough independence that they either offer a better than average or worse than average experience to their passengers and gain or lose business correspondingly. You personally contact an uber/lyft driver that is in close proximity to you and offers the service that best fits your needs (size of vehicle, sharing options, etc).
A taxi company is one centralized business that you call to schedule a ride and whom they dispatch to you. You do not have any information about the driver or vehicle before it arrives to pick you up and you don't get to accept or reject them beforehand. They get assigned to you and similarly don't get so select or reject their clients.....the taxi company does.
You tell me...which of these models more closely aligns with traditional agency and which aligns with wholesaler RE companies?
I am not sure if the consumer will benefit, said that before.
You seem to be focused on what is happening today with these companies rather than their long term business plan. These companies raise hundreds of millions in VC and can burn money for a long long time before they are profitable especially since the end game is to go public and sell out down the line.
Uber/Lyft are planning to own all the cars and they will be driverless. What is happening now is just the initial phase of their business plan. That is his point actually, the company will own all the cars AND will zero out the need for a driver eventually. They will then ideally become insanely profitable at some point. That is the story they are selling at least. Whether you believe it or not I'm pretty sure a taxi medallion in NYC went from being worth a million to worthless in a short time because of their scale and user adoption.
These companies have so much money they can buy houses and just sit on them. Pretty well documented this is exactly what huge investment banks did during 2008. Now Blackrock took that fund of 1000s of homes they owned public or were planning to at least. It's a win for them no matter.
Don't shoot the messenger. I'm just sharing info on what is being planned and funded out there. Jeez.
Automation automation automation. We're all being automated out of jobs, including real estate agents. What happens when nobody works anymore? That could get interesting.
Automation automation automation. We're all being automated out of jobs, including real estate agents. What happens when nobody works anymore? That could get interesting.
Just looked at my beanie baby investments last weekend
Automation automation automation. We're all being automated out of jobs, including real estate agents. What happens when nobody works anymore? That could get interesting.
At least we will be driven around in Uber built cars to our Opendoor built homes. Furnished by Amazon who will also sell us all the food.
This is a common misconception... you cannot draw these parallels in relation to the 2008 "mess". Predatory lending to the buyers who should have never "owned" a home, was, at the very core, the issue. Those people fell victim to "home values only go up very rapidly" when they signed - but, the vast majority of those folks weren't "buying" as a financial investment or to "make money". They were sold the dream of "home ownership" - that's what they were buying. The derivative shell game, the tranches, the outright Wall St fraud... you can't correlate that to a buyer today who is looking for investment value in a purchase.
In fact, if we had more buyers OBSESSED with the thought of the quality of their housing investment, we probably would never had to bailout the crooked bankers.
Quote:
Originally Posted by MikeyKid
For the purposes of this discussion I'm not even attempting to make a distinction... because net net it didn't matter. Whether a minority or "wealthier investor" used a No Doc loan, it's still a risky credit profile because they didn't really know if the borrower was able to make good on the note. Those loans should have never made above the lowest tranches of the mortgage derivatives - yet they did.
The bolded part was what I was responding to. Subprime minorities (read between the lines: black) made the news getting large no doc mortgages with interest only balloons but the data shows they were in fact the least likely to default during that time period.
You realize Opendoor charges commissions often equal to or greater than a great many traditional RE brokerages right?
If Opendoor or another wholesaler model "takes over"......I am curious as to how you think that would save the typical home-seller money when they charge the same amount?
They start around the same. But eveything is negotiable.
A point of contention, if I will pay the same to Opendoor as I would to a Realtor, I'm going with Opendoor every time. No need to schedule showings, leave my house, keep it spotless, drop everything on a dime for a showing, etc. Wow what a breath of fresh air for sellers.
I don't know how they will do it. Do believe with automation and scale they can drive prices down. We paid 4% when we sold our home, so I know commissions are already dropping with traditional realtors.
Supermarkets have something like a 2% profit margin and there is no shortage of those around here, probably too many!
To add on to this, it's apparently more like 1-2% margin when I do a search. Given that, Amazon has spent, what, hundreds of millions already to attack this industry with Amazon Go. They are squeezing out efficiency in an industry that already has very small profit margins. I totally get why tech will now focus on an industry that has enjoyed 6% commissions, there is going to be some serious money to be made by the big fish.
A 6% margin is rather low. Look up some tech company margins. Or banks. My bank enjoys a 30% margin between income and profit. It's quite high. I think what attracts tech to RE is not the margin % but the amount of money changing hands. If Opendoor can control the purchase and the sale, their 4% mostly stays in their pocket. They can employ on staff agents who do high volume work for a salary rather than commission. Once it scales it's a pretty good plan.
This is a common misconception... you cannot draw these parallels in relation to the 2008 "mess".
Housing demand is still very strong, and housing supply is muted. The number of new homes built per new household is at recession-era levels nationally. Prices are not insane multiples of rents (which track market fundamentals more closely).
Also, bubbles don't strike twice in a row in the exact same sectors. Lots of regulatory changes have been made to the mortgage industry since 2008 to prevent a reprise of that particular crisis. There are definitely elevated asset prices, but IMO not in the broader housing market.
They start around the same. But eveything is negotiable.
A point of contention, if I will pay the same to Opendoor as I would to a Realtor, I'm going with Opendoor every time. No need to schedule showings, leave my house, keep it spotless, drop everything on a dime for a showing, etc. Wow what a breath of fresh air for sellers.
I would miss all the grief that many sellers impose on themselves.
Buy the next house.
Move.
Primp and sell the old house for all the money the market would deliver.
When I convince clients to do this, they generally are delighted.
When I fail to convince them, they often regret in hindsight.
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