Disrupting real estate: guarantee a quick & easy home sale
How do you disrupt an industry? You try to make the process faster and easier for consumers through automation and optimization.
USA Companies like OpenDoor, Knock and OfferPad now makes it possible to sell your home when you want. Why wait months for the right buyer, and go through the inconvenience of home viewings & negotiations to get the right buyer and price, when you can get a quick instant sale? Is this going to disrupt the real estate industry?
OpenDoor
OpenDoor (who recently raised $210 million in VC funding) says it can provide you with a quote in minutes (using some complex proprietary algorithms) if you decide to sell. They buy the home directly from you, the seller, and then resell it back into the market using the same convenient process (after going through their repair and renovations plan). A 6% commission fee is charged. Not happy with that home? No problem, OpenDoor’s 30-day money back guarantee covers you!
Knock
Knock also offers a guaranteed sale, although with a 6-week timeline, taking all the uncertainty on when your home will sell out of the equation. They offer sellers a full market price in writing, up front.
“Sell your home in 6 weeks or less. Or we’ll buy it from you for full market value”
OfferPad
OfferPad cleverly markets itself as:
“Your instant buyer”
The company provides an offer within 24 hours and promises sellers that they can move out up to 3 days after closing. You choose your sold date and don’t have to wait the average 76 days it takes to sell through an estate agent. They also charge a 6% commission which comes off the purchase price.
The next Uber or AirBNB of real estate?
There is a wave of new companies making the real estate processes more transparent, offering lower commissions and providing fixed fee models for services rendered. In the case of OpenDoor, Knock and OfferPad, making the sale guaranteed, faster, easier and streamlining the whole process online.
Will we see a typical hype cycle for these companies? Are one of these companies the next Uber or AirBNB of real estate? Instant home buying and selling at the click of a button.
We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run ~ Roy Amara
Let’s play devil’s advocate
Little has changed in the home buying/selling process through the years, except for incremental optimization of current marketing and sales processes: Wider and faster exposure through the internet, easier communication, more streamlined sales process flows and easier access to data for everyone.
What if these ‘instant buy/sell’ real estate models get traction and disrupt the traditional real estate industry? How would it look in 20 years time, or maybe sooner, looking at the impact companies like AirBNB and Uber achieved in a small time frame? Is it safe for current real estate agents to just carry on and hope nothing will change?
OpenDoor received $210 million in VC funding. That’s a lot of money to buy homes ‘instantly’, and I’m sure not the last round of funds they will receive. More investors will soon realize the massive opportunity in this new model. As soon as OpenDoor can start turning a profit, it could very well be the tipping point and open the door for more clone companies.
Dominate an area by purchasing a suburb
Theoretically, with enough funding, and enough willing sellers, a company with enough capital behind them can purchase up all available stock in an entire or part of a popular suburb over time. They could effectively dominate areas and set their own asking prices for listing stock, and decide how many listings they release into the market.
Why sell at all, if you can get higher rental returns?
What if they team up with AirBNB, and use AirBNB occupancy rates to determine the best buy-to-rent holiday investments in an area?
Buy the home instantly, get their renovations team out to give it a revamp and place it on AirBNB … in a few weeks or shorter.
Popular suburbs can effectively be ‘owned’ by these companies and if the ROI on your AirBNB rental (or long term rental) is good enough, why sell at all? You now cover:
- Agent commissions: check.
- Rental/Holiday commissions: check.
- Home loan provider excluded: check.
- ROI: perfect!
Countries are already seeing the effect of AirBNB on popular cities where it is driving up rental prices, because investors can recoup their money faster. Agents report an increase in enquiries for investors looking for holiday lets. In Cape Town’s popular Sea Point area, an agency reports 50% of enquiries are specifically for holiday lets as a result of the favorable returns of AirBNB. I believe we have just seen the start of this. Some cities are however taking action:
Would governments or local municipalities step in and prevent companies from buying up entire suburbs? Or would owning a home become a thing of the past in many areas, with everyone OK with just renting (on demand)?
It seems far fetched that one (or a few) companies could in effect become the Amazon of homes, but the craziest ideas are usually the ones that work best and can disrupt an industry.
