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Op/Ed

Damning evidence that many PropTech firms are anti-consumer (today, the disruptors get disrupted)

(EDITORIAL) We dig deep into the top PropTech firms’ claims to unveil their anti-consumer traits, and assert that Realtors are the wheat, PropTech is the chaff.

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proptech firms selling snake oil

PropTech has flooded the real estate space over the last few years, claiming to provide a superior way to transact. Moreover, many of these firms have an unseemly arrogance and demean traditional real estate professionals while often misleading consumers.

I suggest reading the Terms of Service (TOS) for each PropTech firm. You may discover that most consumer-facing home page representations are completely offset, and the TOS limits consumers’ dispute remedies. 

If a firm claims it will “list/sell your home for $3,500” and offsets these representations via liability or indemnification obligations in the TOS, the organization, in my view, cannot be trusted. 

Language often includes:
IN NO EVENT WILL “Dumpster fire Real Estate Inc,” ITS OFFICERS, SHAREHOLDERS, EMPLOYEES, AGENTS, DIRECTORS, SUBSIDIARIES, AFFILIATES, SUCCESSORS, ASSIGNS, SERVICE PROVIDERS, OR LICENSORS BE LIABLE FOR (1) ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, EXEMPLARY, OR CONSEQUENTIAL DAMAGES; (2) ANY LOSS OF USE, DATA, BUSINESS, OR PROFITS (WHETHER DIRECT OR INDIRECT), IN ALL CASES ARISING OUT OF THE USE OF OR INABILITY TO USE THE PLATFORM, SERVICES, OR CONTENT, REGARDLESS OF LEGAL THEORY, WITHOUT REGARD TO WHETHER “Dumpster fire Real Estate Inc,” HAS BEEN WARNED OF THE POSSIBILITY OF THOSE DAMAGES, AND EVEN IF A REMEDY FAILS OF ITS ESSENTIAL PURPOSE. IN NO EVENT WILL “Dumpster fire Real Estate Inc,” TOTAL LIABILITY FOR ANY CLAIMS ARISING OUT OF OR IN CONNECTION WITH THESE T&CS OR FROM THE USE OF OR INABILITY TO USE THE PLATFORM, SERVICES, OR CONTENT EXCEED THE AMOUNTS USER HAS PAID TO “Dumpster fire Real Estate Inc,” FOR USE OF THE PLATFORM, SERVICES, OR CONTENT IN THE THREE (3) MONTH PERIOD IMMEDIATELY PRECEDING THE EVENTS GIVING RISE TO THE APPLICABLE CLAIM. THIS SECTION APPLIES TO THE FULLEST EXTENT PERMITTED BY LAW.

Also, if a Company displays numerous five-star reviews yet denies the ability to leave a review on their website, this may suggest online review manipulation. 

Let us explore the key former and current PropTech companies:

In what follows, stock prices depicted are from the prior 12-months as of publication.

1. PurpleBricks

Crickey, did you retreat to Australia? Did your flat fee ~$3,500 listing service fail? Did you tell Homie? Regardless, nice knowing you. 

2. Zillow (NASDAQ -55.05%)

The iBuying program, meant to simplify the selling process, failed spectacularly. Zillow’s reputation with Agents is diminished. Lawsuits are prevalent. Premier Agent/Lender reviews are suspiciously high.

Moreover, Zillow’s Rental Manager Program displays a small fraction of available rentals as it appears that Zillow only shows rental properties listed by owners or property managers who pay Zillow a weekly fee. The fee is excessive, and in my view, disproportionally impacts lower-priced homes.

Compounding this act, Zillow fails to disclose this limited display deficiency to consumers and steers them to apartment complex ads.

It might be time to revisit NAR CODE 12.8.

Moreover, Zillow’s 8k disclosure discusses legal proceedings and in relevant part: Certain of the plaintiffs also allege, among other things, violations of Section 14(a) of the Securities Exchange Act of 1934 and waste of corporate assets. On February 5, 2018, the United States District Court for the Western District of Washington consolidated the two federal shareholder derivative lawsuits pending in that court. On February 16, 2018, the Superior Court of the State of Washington, King County, consolidated the two shareholder derivative lawsuits pending in that court. All four of the shareholder derivative lawsuits were stayed until our motion to dismiss the second consolidated amended complaint in the securities class action lawsuit discussed above was denied in April 2019. On July 8, 2019, the plaintiffs in the consolidated federal derivative lawsuit filed a consolidated shareholder derivative complaint, which we moved to dismiss on August 22, 2019. On February 28, 2020, our motion to dismiss the consolidated federal shareholder derivative complaint was denied. On May 18, 2020, we filed an answer in the consolidated federal derivative lawsuit. On August 24, 2020, we filed an answer in the consolidated state derivative matter. We do not believe that there is a reasonable possibility that a material loss will be incurred related to this lawsuit.”

In my view, Zillow is not a nominal defendant, and the “derivative” claim fails to disclose the gravity of this case.

The lawsuit alleges that Zillow operated an unlawful, RESPA violating co-marketing scheme.

RESPA is a license revoking act.

A regulatory storm will be imposed. Good riddance Zillow, it has NOT been a pleasure. 

3. Redfin.com (NASDAQ -42.91% YTD)

In my view, Redfin is the most honest PropTech firm in the real estate industry.

Redfin’s inability to consistently profit despite being founded in 2004 may have brought humility. 

4. OpenDoor (NASDAQ -37.51% YTD)

Opendoor disclosed: “On December 23, 2020, the FTC notified us that they intend to recommend that the agency pursue an enforcement action against us and certain of our officers, if we are unable to reach a negotiated settlement acceptable to all parties. The FTC has indicated that they believe certain of our advertising claims relating to the amount of our offers, the repair costs charged to home sellers, and the amount of net proceeds a seller may receive from selling to us versus selling in the traditional manner were inaccurate and/or inadequately substantiated. We are engaged in settlement negotiations with the FTC.” 

Further: “We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or fail to maintain an effective system of internal control over financial reporting, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.”

Opendoor now reveals the following on their pricing page: “* Beginning on September 30, 2020, for new offers, Opendoor’s service charge will be no more than 5%. Service charge is subject to change, and has historically been as high as 14%.”

If OpenDoor cannot consistently achieve profitability in an appreciating market when fees have “historically been as high as 14%,” how is capping fees at 5% viable going forward?

Moreover, help me to understand this claim… Opendoor’s first paragraph appears to frown against transacting via traditional methods as “they might request a credit equal to their expected costs of making the repairs.” The third paragraph admits Opendoor will ask for a credit and deduct it from the offer price.

5. Offerpad (NYSE -37.69% YTD)

It appears that Offerpad has adjusted its services to provide iBuying and Agent aided transactions. Offerpad matched OpenDoor’s 5% cap and added a 6% listing fee if a Consumer wants to list with maximum value and guidance from real estate experts.”

PropTech’s prior inferences are that agents are unnecessary and archaic. Furthermore, PropTech companies continue to assert that the 6% commission fee directly results from NAR’s price-fixing “cartel,” they claim.

The average MLS listing commission in 2021 was 4.94%, below Offerpad’s non-agent fee.

Did Offerpad join the NAR cartel and engage in price-fixing, or did they discover that market forces, NOT supra-competitive fees, determine 5-6% fees?

6. REX Homes

Who? I heard that REX Homes entered into the press release business. 


Now, let’s move on to mortgage PropTech firms:

7. Better.com

Better’s website states: “When you work with Better Real Estate, you have a partner at every step.”

Is this claim still valid after CEO Vishal Garg laid off 900 employees, about 9% of the company’s workforce, in a three-minute Zoom call? 

Question: If Better.com can fire you via Zoom, can an applicant gain employment via Zoom? Asking for a friend. 

8. Rocket Homes

Good luck with the CFPB investigation. 


Next up, property management firms

9. Home 365

Home365 claims they are “The Best Property Management Company.” They state, “Traditional property managers are offering little to negative value with owners’ and managers’ interests completely misaligned. Their old school methods lead landlords to lack predictable ROIs and trust issues. Landlords are often required to stay involved in every aspect of management making the entire experience annoying and costly. In fact, landlords compromise their investment by letting the “old world” manage their assets. We believe that your rental property is your money, your future, and your retirement. You deserve better and guaranteed returns.”

Your TOS is garbage, Home 365. They appear to list a meager 19 properties in Las Vegas. Furthermore, it seems that Home365 fails to display rentals on the MLS, which is the greatest marketing tool in real estate. Even us illiterate “old school” Realtors know this. 

My firm is “old school” by your definition, and if we were to compare; Home365 is a swap meet, and LRA is Nordstrom. 

10. MYND

In my opinion, MYND may be the preeminent propagandist (now that REX is almost silent.) This is an amazing achievement. MYND displayed the following comparison to using “other property managers.”

These grossly exaggerated “other property manager” fees failed to include a widely imposed “document delivery by carrier pigeon fee,” which averages $12,000 per document.

There is also an AOL dial-up internet reimbursement fee. 

Furthermore, MYND’s Oakland BBB page displays 107 Customer reviews averaging 2.9 of 5 stars and 127 complaints over three years.

When reviewing reviews, how did MYND achieve four amazingly generic five-star reviews on 11/8/2021? Also, why is there a lack of reviews since 12/10/2021? 


 

Lastly, agent referral services

The majority of these firms are garbage.

These companies often claim they will find consumers the “best real estate agents” and “show local agents-it is free!” and Dave Ramsey’s referral company that asserts that “Your Values Are Their Values Too. You’re not getting suckered into a deal you don’t want.”

11. Ramsey Solutions

Ramsey’s ASSumption that other agents sucker clients into a deal they don’t want must be proven by peer-reviewed studies or deleted. Ramsey may sucker consumers, Realtors do not. 

Moreover, participating in or being enriched via a real estate transaction often requires a license in each state. Is Ramsey licensed?

These assertions are amusingly misleading.

Further, let’s look at how are RamseyTrusted ELP agents are selected to be in the program:

  • “Our agents go through a rigorous vetting process.After applying, potential pros go through a multi-step interview process. First, we make sure they meet these minimum qualifications: 
  • They’re in the top 10% of their market or close at least 35 homes per year.  
  • They have been in the industry for more than four years. 
  • They work with both buyers and sellers in all types of markets. 
  • They’re full-time, full-service—in other words, this isn’t some side gig.  
  • Next, we verify that applicants share Ramsey values—meaning they are on a mission to serve you, have the heart of a teacher, and agree to work with you according to our financial principles called the 7 Baby Steps. Keep in mind that only about 3% of new agents who applied to the program last year ended up making it in, so this isn’t a cakewalk.  
  • To stay in the program, agents must ace our Ramsey Pro Training Course and receive ongoing one-on-one and group coaching from our dedicated team. In addition, agents are scored by their coaches three times per year according to how well they served you. That way, there is a system of checks and balances in place to ensure that only quality agents get to stay in the program. “

Does Ramsey also evaluate whether an agent can afford to pay a ~30% kickback fee?

If we review Ramsey Solutions, the agent information section states:

And…

Correct me if I am wrong: Representations of “free” apply specifically to the consumer, however an agent must allegedly pay excessive fees to become an “Endorsed Local Provider (ELP) real estate agent?” 

This fee structure appears to exceed Zillow’s flex program.

Moreover, the “no warranty” claim that Ramsey Solutions hereby expressly disclaims any and all warranties, including without limitation: any warranties as to the availability, accuracy, or content of information, products, or services; any warranties of merchantability or fitness for a particular purpose,” is perplexing. 

Why does Ramsey exist? 

I am a top Agent and would never consider third-rate referral services.

It may be appropriate to revise your Consumer representations to “When buying or selling a house; you want a real estate agent (that agreed to pay Ramsey a kickback) to negotiate the best deal and treats you as their most important client. That’s what you get when you choose one of our Endorsed Local Provider (ELP) real estate agents.” 

Moreover, “Is Hiring an Agent Worth the Cost? Okay, now let’s answer the question you’ve been waiting for: Are real estate agents worth the cost? Well, as we covered earlier, sellers cover the commission for both agents. So, buyers have nothing to lose! But how about you sellers out there? If you’re considering not using an agent or going the “For Sale by Owner” (FSBO) route, first take a look at the stats. The latest data shows the typical FSBO home sold for $217,000 compared to $242,300 when sold by an agent. That’s a $25,300 difference!”

The $25,300 difference equals ~+10% when Realtor fees currently average 4.94%. Thank you for confirming that the benefit of listing with an Agent exceeds any detriment and results in superior net proceeds.

Stick to podcasts.


In summary:

I am aware that most of these websites attempt to bind visitors to contractual obligations merely by visiting their sites, and my analysis and commentary could allegedly violate these hidden TOS. 

It is reasonable to infer that this article will compel a legal review by Ivy League legal teams to assess the merits of bringing a breach of contract claim against me.

Save the fancy letterhead and billables. If a claim is filed, I will not file a motion to dismiss, we can go straight to discovery, and I know precisely which executives and documents to subpoena and depose. Retaliating would be perilous. I have direct connections to Director level government officials, 17-class action firms seeking opportunities, and I spectacularly overreact.

PropTech has denigrated Realtors for years, which now ends.

How about being honest in 2022?

Your friend,
Anthony

Anthony Phillips is the Co-Founder and President of Luxury Real Estate Advisors and non-profit, Luxury Cares. Luxury Real Estate Advisors is the preeminent provider of sales, leasing, property management, home and investor services to the Las Vegas luxury real estate segment.

Op/Ed

5 ways consumer behavior has changed due to the pandemic

(EDITORIAL) The pandemic has changed the way a lot of people look at and act in the new world. These are the biggest 5 changes you should be aware of.

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5 cards showing what people think is most important due to the pandemic.

COVID is still affecting businesses in multiple ways, all dependent on the industry. One thing that affects every business, regardless of industry, is customer behavior. It’s no surprise that customers are changing their behavior to meet the challenges of the pandemic. Near the start of the pandemic, Google released a playbook of information regarding behavior that may help your business. Use this information to help you shift your marketing efforts going forward.

  1. Consumers are using multiple devices more than ever before.
    With kids home trying to do school, parents who are working from, and people who are still searching for their next job opportunity, content is being consumed at record rates. According to Google, Americans are watching 12 hours of media content each day.
  2. Increases in search for critical information.
    Online grocery shopping and cooking videos are top searches these days while more Americans are staying home. Telemedicine is another hot search topic. People are looking for ways to stay to themselves and be protected.
  3. Consumers want to stay connected online.
    Google announced that in April 2020, Google Meet hosted over 3 billion minutes of video meetings. YouTube has seen an increase in “with me” videos. People are filming themselves going about their day to connect with their friends and family. Virtual events have changed how people meet up.
  4. Routines are changing to be “internet-first.”
    Telecommuting is a top search these days as consumers try to find ways to work from home. People are looking for exercise options that can be managed at home. Consumers are using the internet to find options that keep them socially-distanced but connected to their routine.
  5. Self-care is taking a higher priority.
    Meditation videos are being consumed at a higher percentage than before. People are looking for books, games, and puzzles to stay occupied at home.

Consider your business against consumer behavior: COVID restrictions may be easing, but consumer behavior will forever be changed. Your business can use this information to change your marketing to meet consumers at their point of need.

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Op/Ed

Redoing your home office for the new year? Get rid of these 5 things

(EDITORIAL) Since many of us are working entirely from home now, we are probably getting annoyed at our home office, so let’s take a crack at minimalism!

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Home office set up with monitor, keyboard, and mouse.

The pandemic has changed human behaviors. As more people stay home, they’re seeing (and having to deal with) the clutter in their homes. Many people are turning to minimalism to reduce clutter and find more joy in their own space, including their home office. There are many ways to define minimalism. Some people define it as the number of items you own. Others think of it as only owning items that you actually need.

I prefer to think of minimalism as the intentionality of possessions. I have a couple of dishes that are not practical, nor do I use them very often. But they belonged to my grandma, and out of sentimentality, I keep them. Most minimalists probably wouldn’t.

They say a messy desk is a sign of creativity. Unfortunately, that same messy desk limits productivity. Harvard Business Review reports that cluttered spaces have negative effects on us. Keep your messy desk, but get rid of the clutter. Take a minimalistic approach to your home office. Here are 5 things to clean up:

  1. Old technology – When was the last time you printed something for work? Most of us don’t print much anymore. Get rid of the old printers, computer parts, and other pieces of hardware that are collecting dust.
  2. Papers and documents – Go digital, or just save the documents that absolutely matter. Of course, this may vary by industry, but take a hard look at the paper you’ve saved over the past month or so. Then ask yourself whether you will really ever look at it again.
  3. Filing cabinets – If you’re not saving paper, you don’t need filing cabinets.
  4. Trade magazines and journals – Go digital, and keep your magazines on your Kindle, or pass down the print versions to colleagues who may be interested.
  5. Anything unrelated to work – Ok, save the picture of your family and coffee mug, but clean off your desk of things that aren’t required for work. It’s easy for home and work to get mixed up when you’re working and living in one place. Keep it separate for your own peace of mind and better workflow. If space is tight and you’re sharing a dining room table with work, get a laundry basket or box. At the start of the workday, remove home items and put them in the box. Transfer work items to another box at the end of the day.

This might seem like a little more work, but all these practices will give you some boundaries.

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Op/Ed

Decades in the making, real estate’s innovation propels industry through pandemic, into the future

(EDITORIAL) Our minds are plagued with uncertainty as the pandemic reshapes all sectors, but this unique insight helps us to see the clear path forward.

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Bob Goldberg, CEO at The National Association of Realtors

In unprecedented times, people reflexively become gripped with fear and trepidation, but industry leaders can assess the bigger picture and not only take stock, but forecast what emergence will look like. The following guest column from Bob Goldberg, CEO of the National Association of Realtors® does just that – he takes stock of today’s realities and offers unique insights into changing the status quo.


Commercial real estate, an industry many feared would suffer broad, lasting distress as a result of the pandemic, fared better in 2021 than just about anyone expected.

The multifamily market, in fact, had a historic year, as the National Association of Realtors®’ Commercial Market Insights Report pointed out last month. Vacancy rates hit 35-year lows and median asking rent grew at a record pace amid a recovery in household formation.

Meanwhile, demand for U.S. industrial space continues to significantly outpace supply, and NAR economists expect the demand for commercial real estate to strengthen throughout 2022.

Given where we were less than two years ago, it’s natural for us to ask, how did this happen?

How, when offices were left vacant, urban cores were abandoned, and even more existing business activity turned online, has commercial real estate survived, or, in some cases, thrived?

The reality is that real estate – both commercial and residential – has been evolving alongside a changing market for decades.

Innovations which had been years in the making were perfectly positioned and perfectly timed when the pandemic began. New, cutting-edge technologies allowed families to relocate, transactions to close, and commerce to continue even as much of the nation ground to a halt in early 2020.

Indeed, without the broader market activity that has been catalyzed by our industry – with home sales hitting 15-year highs and demand for multifamily and industrial real estate booming – this period of relative economic prosperity would have been more distant, more elusive. 

As is the case for most things in life, hard work and sacrifice are to thank. But we can also credit a principal that is perpetually in focus at NAR – innovation.

Renowned economist Theodore Levitt once said that creativity is thinking up new things, while innovation is doing new things.

It’s been American real estate’s collective, remarkable ability to continue doing new things that has made this revival possible, a phenomenon which has benefitted consumers everywhere along the way.

Through our tech growth program, REACH, and our association’s investment arm, Second Century Ventures (SCV), NAR has been on the cutting edge of innovation in real estate technology for more than a decade.

Some of the more than two dozen companies from the REACH portfolio which were instrumental in the industry overcoming lockdowns and social distancing measures include BoxBrownie.com and Immoviewer, which specialize in 3D 360 tours and floor plan renders; UbiPark, a contact-free smart parking solution; and Loop&Tie, a bespoke gifting platform that helps real estate professionals engage with clients and employees from afar.

Overall, SCV has allowed Realtors® to seed some 160 technology companies that engage in everything from digital title and escrow transfers to virtual staging tools and automated marketing campaigns. E-signature services provider DocuSign and remote notarization platform Notarize are a few of the most recognizable entities, but a host of others have imagined the revolutionary resources which will soon be commonplace in our industry.

Residential markets reaching 15-year highs in the midst of a pandemic without tools like these is simply unimaginable.

In the commercial sector, too, these innovations have proven invaluable. Some of the 30 new technology companies supported by REACH Commercial which have been leading the charge these past two years include Lulafit, Pear Chef, and Cove. Indeed, just months after the pandemic broke, Cove launched new software platforms to help tenants and building owners return to work safely once stay-at-home orders were lifted.

As Bisnow highlighted at the time, these innovative new resources were created to help companies track the occupancy of their spaces, set cleaning schedules and conduct health checks, while their employees could reserve desks, stagger arrival times, and form elevator queues.

Looking ahead, we must retain the aptitude for progress that propelled real estate through COVID in order for our industry to thrive through the seemingly endless string of market transformations.
 
One of the true bright spots in an otherwise tragic circumstance is that this pandemic has made people more aware of the places and spaces we occupy. How all of us live and work in these spaces has changed forever. Naturally, this new mindset has generated a renewed focus on sustainability.

Real estate’s motivation to engage is obvious.

The First Street Foundation, which developed the Flood Factor tool employed on realtor.com® and elsewhere to provide flood risk assessments for hundreds of millions of properties, engaged on a recent study which estimated structural damage from U.S. flooding will exceed $13 billion in 2022.

More severe flooding events and property damage are the most widely known consequence of climate change, but its impacts do not stop there.

CoreLogic’s 2020 Wildfire Risk Report reported more than 1.9 million homes – with an associated reconstruction cost of almost $650 billion – were at elevated risk of wildfire damage. The regions most at risk, perhaps unsurprisingly, are metro areas in California. 

NAR offers grant resources to state and local Realtor® associations in effort to make communities more resilient, encouraging new and unique strategies that foster sustainability and combat the potentially damaging impacts of climate change. In Oregon, for example, the Rogue Valley Association of Realtors® – a region devastated by wildfires in recent years – used a Consumer Advocacy grant from NAR to coordinate a two-day training and certification program for home inspectors conducted by the National Fire Protection Association.

Henry Ford is claimed to have noted that if he had asked his first customers what they wanted, “they would have said faster horses,” rather than the automobile. Whether Ford said this or not is today the subject of some digital disagreement. But that’s irrelevant.

Truth is, we often don’t know what we need until we’re faced with a moment of distress or distraction or despair. A once-in-a century global pandemic, for example.

No one knows the future, and very few know what they will want at any, undetermined point in it. All we know for certain is that the future will be different than today.

And if we’re not changing the status quo, we might just find that we’ve become it.


Bob Goldberg is CEO of the National Association of Realtors®. Since assuming the role in August of 2017, Bob has overseen transformations that have positioned NAR as real estate’s leading figure in the fight for diversity and inclusion; the industry’s primary driver of technological innovation; and as an association lauded for a genuine, unwavering commitment to its members. As part of the responsibility NAR has to more than 1.5 million REALTORS® worldwide, Goldberg has overseen the formation of a number of initiatives which have influenced the market and proven immensely valuable to NAR’s general membership.

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