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How OpenDoor became a unicorn (a company valued at over $1B)

(BUSINESS NEWS) Good news for direct home sales and fans of adorable mythical quadrupeds – OpenDoor is a unicorn. What does its billion dollar valuation mean for the modern real estate market?

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Online direct home sales is officially a thing. That was probably inevitable, given increasing automation of sales (robots are coming for your jobs – not that they can do them yet!), an ongoing Disrupt All The Things mentality amongst entrepreneurs, and sellers’ frankly understandable desire for a smoother, easier way to get rid of their people boxes.

Seriously, the Holmes-Rahe Life Stress Index puts selling a home above quitting freaking smoking in terms of medically significant stress. People are understandably interested in making that suck less.

Enter OpenDoor.

The OpenDoor offer is direct online sales. TL;DR – OpenDoor gets information from the customer, then sets a price for the property being sold, sight unseen. On top of that price, OpenDoor charges a risk fee, a flat 6.7 percent on top of the stated value, to guard against depreciation. In exchange, OpenDoor takes over the selling process, spiffs up the house and sells at a profit. As CB Insights says in its excellent analysis of OpenDoor, it’s basically high tech house flipping.

The OpenDoor pitch is that their system benefits both seller and buyer. They’re impressively honest about the math: They say their flat 6.7 percent is pretty much comparable with the costs and fees associated with traditional real estate sales, which is true. The advantage comes in, says OpenDoor, because the property is then out of the seller’s hands, no muss, no fuss.

That spares them from the hassle of home sales, but it’s also easier on the prospective buyer than the usual peer-to-peer approach. No need to balance two mortgages, no deals contingent on the house selling at a certain price. The house has already been sold at a certain price. Pony up and it’s yours.

We could argue pros and cons all day, but that’s not the point. The point is that, on a small but growing scale, the OpenDoor offer is working. OpenDoor currently operates in and around Atlanta, Las Vegas, Orlando, Phoenix, Raleigh-Durham, and my own fair hometown of DFW. OpenDoor focuses on second-tier real estate markets, avoiding the fluctuations and complex variables of Realty Madness as it is to be found in NYC, the Bay Area and so on.

In those cities, since its start as a spindly little startup in 2014, OpenDoor has served better than 10,757 total customers.

Per the CEO, it currently accounts for 3 percent of home sales in Phoenix and Dallas. Chump change that ain’t.

They’re already thinking expansion. San Antonio and Charlotte are the next towns slated for Missy Elliot treatment. For those of you who missed the 90s, Missy Elliot treatment is of course “put the thing down, flip it, and reverse it.” Surprisingly apt! Seriously, OpenDoor’s missing a trick if they don’t license that one.

Catchy but unpronounceable hooks aside, OpenDoor is taking a fair amount of risk along with their more than fair amount of money. In particular, focused as they are on moving up in the world, OpenDoor is carrying a lot of debt. As of fall 2017 they had borrowed on the order of $600 million to fund home purchases.

At their current 7.4 percent average gross margin on home sales, that’s sustainable, but it’s a whole lot of money to gamble on a new thing continuing to work. A housing downturn or even a comparatively minor shift in value could easily throw that balance out of whack, and while OpenDoor executives state that the debt would still be supportable in a downturn with an increase in risk fee, there’s always the possibility of chilling an already shaky market with too big a jump.

To state the obvious, avoiding that kind of risk is literally why there are Realtors, and why the real estate market in general works the way it does.

Distributing the risk between bank and homeowners, rather than having one organization take it all, minimizes the possibility of failure. OpenDoor has decided to take that risk, and is confident its model will be enough to ameliorate it. Whether that’s the case or not is an open question.

Most unicorns are just shiny horses standing under the right branch. But if OpenDoor can sustainably deliver on its core offer, then score one for the mythical horsebeast.

This editorial was originally published January 9, 2018.

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Matt Salter is a writer and former fundraising and communications officer for nonprofit organizations, including Volunteers of America and PICO National Network. He’s excited to put his knowledge of fundraising, marketing, and all things digital to work for your reading enjoyment. When not writing about himself in the third person, Matt enjoys horror movies and tabletop gaming, and can usually be found somewhere in the DFW Metroplex with WiFi and a good all-day breakfast.

Real Estate Technology

Your home or office needs this $20 smart camera

(TECHNOLOGY) Whether for your office, home, home office, or listing, this $20 smart cam is a great secret weapon!

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Home security cameras are becoming standard equipment in many homes and offices these days, but some of the more popular ones still come with a hefty price tag. That’s where the Wyze Cam comes to the rescue. This simply designed device hit the market for $19.99 in 2017, and now the company offers an upgraded option for $29.99. (You can still buy the lower-cost version.)

Does this relatively cheap security camera hold up to pricier security options like Nest, Ring, and Amazon’s Cloud Cam? Tech experts seem to think so. Cnet appreciated features such as timelapse, the ability to turn off alerts, and its built-in carbon monoxide and smoke alarms. TechCrunch gave a thumbs up to its easy installation, software, and video quality.

So, if you’re a real estate agent, should you consider installing these affordable security tools in properties you’re trying to sell, especially empty homes that could be easy targets for vandals and burglars? The simple answer is yes: Wyze Cams are a low-cost way to protect these properties when no one is around. The longer answer is yes, but make sure you’re following the law in your state.

In Texas, for example, the so-called “one-party rule” requires at least one party to consent to recording conversations. In the case of a home listing, the person most likely consenting would be the seller. However in many states, including Texas, if the seller is not participating in the conversation being recorded, they cannot record the audio, only video. And they cannot install cameras in areas where the potential buyers would expect privacy, like the bathroom.

To protect yourself, buyers, and sellers, NAR advises that listing agents ask sellers if they’re using any kind of cameras or other surveillance equipment. If so, they should tell the buyer’s agent or include a notice in the listing so everyone is aware before entering the home. If you want to take it a step further, you can require sellers to inform you of any surveillance equipment in the home as part of their contracts.

A good rule of thumb if you’re a buyer’s agent: Assume you and your clients are being recorded anytime you tour a home. Some buyer’s agents are even directing clients to keep any opinions — good or bad — to themselves until safely out of any cameras’ reach so sellers don’t get the upper hand in negotiations (just make sure it’s done legally).

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Real Estate Technology

This tool tells you if it’s worth installing solar panels on a specific property

(TECH NEWS) Solar panels can improve the value of some homes, but Realtors should be equipped to know that not all properties can even get the appropriate amount of sunlight.

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As a Realtor, you are tasked with both creating a positive customer service experience AND continuing to be innovative. While one aspect relies on continuity, the other is adaptation-based; therefore, balancing the two can be a steep challenge. Staying ahead of the competition requires you to develop revolutionary techniques and pitches in both fields. For this reason, you should consider adding potential for sustainability in the form of solar panels to your repertoire.

Google Maps instated a service called Project Sunroof that allows you to see exactly which houses, neighborhoods, and general properties are solar panel compatible. Additionally, the function lets you see approximately how many hours of useable sunlight you will have per year, as well as how many square feet are available for customization.

Quick video demo of Project Sunroof:

Solar panels still belong to a medium of sustainable energy that is shrouded in mystery (if not shadow). Terrestrial use is tentative, at best; however, a combination of increased awareness regarding climate change and a common desire to save money makes the notion of domestic solar panels an easy pitch for the right realtor.

There is a definitive market for sustainable living, but it tends to be cliquish and exclusive. Energy snobs can end up settling for the ideal home in a less-than-ideal location, simply because these dwellings are relatively few and far between. Solar panel installation could be the olive branch that bridges the gap between clean energy and optimal living.

In the interest of catering to clientele, you might use Google Maps’ solar panel feature to persuade them of the aforementioned gap. Showing them the possibilities for customization could be a huge benefit to you and your client alike; your properties see growth, and your clients are satisfied.

You can also look at potential ways to collaborate with the companies providing the panel services, thereby opening up ways to monetize the experience. Be sure to point out that the initial cost, while large (around $20,000 for installation), is generally offset by the end result: huge savings in energy expenses.

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Real Estate Technology

Using text message marketing? This class action lawsuit may change your mind

(MARKETING NEWS) A new class action lawsuit may have your team reconsidering whether or not text message marketing is worth the risk.

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Imagine sitting on the sofa with your family and your phone vibrates. It’s a text message! You’re expecting your brother to let you know if he’ll make it to dinner tomorrow.

But it’s a text from a real estate brokerage, loudly proclaiming an “OPEN HOUSE THIS WEEKEND” in all caps, with a link to the listing.

How did they get your number? Why are they yelling at you? Why doesn’t the link have a brokerage name in the URL? Why would I click that link? Why am I being bothered during family time? Why, why, why?

Most people would block the number and move on, or text “stop,” in hopes that the future barrage of unsolicited texts would stop. We all get them from every direction, nearly every day now.

But not Floridian Steve Grossberg, who took a screenshot of a text message from a Coldwell Banker agent, and hired an attorney. A class action lawsuit has since been filed in the Southern District of Florida, and a court date is set for this Friday, April 12, for Judge Federico A. Moreno to review the case.

The lawsuit claims the text messages were sent without written permission from the recipients (required by the Federal Communications Commission (FCC) since 2012), causing the Defendants “injuries, including invasion of their privacy, aggravation, annoyance, intrusion on seclusion, trespass, and conversion.”

Class action status is being sought for this case – Grossberg’s attorneys claim individual cases for all those impacted would overwhelm the court system and be too financially cumbersome for potential individual plaintiffs.

They’re seeking up to $1,500 in damages for each violation, which they say exceeds the $5,000,000 threshold for federal court jurisdiction under the Class Action Fairness Act (CAFA). The “Class” would include anyone in the past four years that have texted by Coldwell Banker or anyone on their behalf, using automated equipment (or an automatic telephone dialing system (ATDS)). Interestingly, in the “Class” description, the attorneys don’t include permission status at all, just “anyone” that has been auto-texted by the brokerage.

Court documents outline in detail the technologies used that allegedly violate federal statues, and Grossberg isn’t just suing the local agent or brokerage, but the international company, Coldwell Banker Residential Real Estate, claiming the text messages sent violate the Telephone Consumer Protection Act (TCPA).

The lawsuit does not outline in such detail, the chain of permission that was or was not given.

Real estate professionals that hire a marketing firm or a tech startup that promises to modernize their marketing, have an expectation that their money is being spent on something that is in compliance with all laws, be they local, state, or federal. Especially if that is what the company being hired specializes in.

Laying it at the feet of the end user (brokerages) is unfair, and it is curious that no service provider is named as the Defendant. Perhaps Coldwell Banker’s pockets seem deeper.

Additionally, the topic of permission is convoluted, as website visitors will often fill out their information when viewing homes, and the IDX provider will use that contact information to send even more information, thus written permission to contact.

Lumping the above activity in with telemarketing spam would be inaccurate. If a brokerage bought a list of phone numbers to cold text without consumers’ permission, that would, however be illegal.

Regardless, in the text message showcased in the lawsuit, the URL provided (ishomenow.com) forwards to listingstoleads.com – Listings-to-Leads (L2L) which says it is a “leading inbound marketing platform with a lead generation system.”

It appears to us that the lead generation company is the originator of the text message, not a specific Coldwell Banker agent or broker.

This Friday will determine next steps in this case, but for now, it is worth investigating your own text message marketing efforts (whether done yourself or through a third party) to make sure proper permissions have been obtained, and that all use is within current federal guidelines, because a potential $1,500 per text message sent in violation of the law would hurt any brokerage.

Be sure to read the lawsuit in its entirety as it outlines the specific behaviors in question, and review this potentially helpful compliance checklist in the meantime.

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