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Monday, June 12, 2017

3 Internet Companies That Are Interrupting the Market

Property acquisition companies have been around for a long time in our market, but we are just now starting to see more online-only companies. Today, I’ve listed three of the most popular.

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Today I wanted to talk to you about three companies based solely online that are interrupting our real estate market in the Phoenix metro area.

1. Open Door has been around for the last couple of years, and it’s a pretty fascinating company to say the least. I can tell you that they aren’t going away anytime soon. They have an extraordinary management team and are valued at $550 million. They have $110 million in cash equity to buy properties, and have in total $180 million to acquire properties and run this platform. 

I’m currently representing a buyer who is looking to purchase a home through this site and it’s been an interesting experience. As far as I know, Phoenix was one of their first test markets, and they seem to be successful so far.

2. OfferPad is an online application that helps you sell your home quickly and efficiently. It was started by a local Realtor and a gentleman from Blackstone in 2005, and they have $260 million in debt acquisition money and $30 million in equity. 

Due to one of the founder’s developed business models, this company is expanding to multiple cities at a faster rate than Open Door. They’ve captured a 2% market share in the Phoenix metro area.

3. Zillow is a well-known company that has seen a lot of controversy over their Zestimate feature. They also have an Instant Offer Program that is being tested in Las Vegas and Orlando. It’s set up for big investor pools to directly buy homes from homeowners.

These companies have been around for a long time.

There’s been some play to keep the agent involved in these transactions, but I’m sure that at some point those parties will work to find a way around paying a commission to the agent.

Both Open Door and OfferPad are buying houses and advertising their ease of use. They claim to take the pain out of selling your home, and their popularity speaks for itself. What’s interesting is that both those apps also charge a commission for acquisitions that sits between 6% and 10%, depending on the risk factor.

These types of companies have been around for a long time in the direct investor-to-homeowner market. We’ve seen their yellow signs at street lights that say “I’ll buy your house for cash,” or something similar. We’re just now seeing the online model move forward.

I’d love to have your opinion about these online real estate companies. Do you think they’re going to “Uber-ize” the market? Will there be less need for agents? Shoot me an email or leave a comment below with your thoughts.

If you have any other questions about this or any other real estate topics, give me a call. I’d be happy to help!