October 10, 2006 at 11:17 AM #7715
Word on the street is that IPayone is in the process of being sold. Why is this important to you? It is important because it provides yet another example of why discount brokerages and pay as you go models do not work in RE. They were backed by some of the walthiest individuals in SD (Hahn, Lynch, etc.) and were looking to revolutionize the RE industry. Within a year of launching the service all the founders that actually had RE experience left the company because they realized there was no hope. The reality is that their business model never worked and never will work as RE brokerage is not very profitable. The founder is a crook who was not looking to revolutionize anything, he was looking to build something he could sell to a greater fool. It looks like he finally found that great fool.October 10, 2006 at 11:23 AM #37583PeaceParticipant
We need to know what the $$$ deal is.
youtube is selling too for $1.65 BILLION ! Is google the greater fool ?October 10, 2006 at 11:50 AM #37585
Very poor analogy! They will be lucky to sell for the amount of their debts. Hopefully they can payoff the big name investors. One of the founders was trying to buy a place from a colleague of mine and he couldnt afford what is not an expensive property. If they were selling for big money it would not have been a problem.October 10, 2006 at 12:00 PM #37587PeaceParticipant
I didn’t mean it to be an analogy – I am just too lazy to research what the $$$ deal is, and would like to see the numbers before I assume it’s a loser.October 10, 2006 at 12:21 PM #37588PerryChaseParticipant
The tech revolution hasn’t reached real estate or the medical field yet… but it’s only a matter of time. Sooner or later the new generation will demand online services.
My dad is 76yo. Years ago, I bought him a computer and showed him how get online. He takes medication everyday for his prostate problem. I finally convinced him to order his meds online for postal delivery — more convenient and cheaper. Dad’s adjusment has been gradual with consistent progress. He now makes his travel arrangements and reads all his newspapers online. I don’t think that he’d buy a house online, but he would use ziprealty if I showed him.
I can assure you that that the generation that’s growing up with broadband, IM and SMS will be buying houses online. I’m sure that my nieces and newphew, when they grow up, would not use a traditional Realtor. Heck, they don’t even like the sales people at the store. They know what they want and they demand easy access to information. They are unlikely to deal with information gatekeepers.
There’ll be some busts along the way, but tech will affect every aspects of life, including real estate. There is no reason why buying and selling houses cannot be more efficient and less costly than it is today. In a booming market, inefficiencies are masked; but in a downturn the cost cuttings will begin.October 10, 2006 at 12:32 PM #37589sdduuuudeParticipant
I don’t understand how, when a company is purchased, that means its business model does not work. The logic doesn’t follow.October 10, 2006 at 12:47 PM #37591
The business model does not work because RE brokerage is very expensive top operate. You cannot support the business with 1% and never will be able to. The business is being sold because they arent making money, never will and need an exit to save face with prominent investors. My bet is that the acquirer will essentially takeover the debts of the Ipayone with very little if any cash exchanged. There are lots of deals like this going on. I spoke to a manager today at one of the largest brokerages in town. They have over 30 offices and only 3 are squeaking out meager profits.
PC, I dont disagree that alot of RE can go online but that doesnt mean it can be done profitably for alot less than it costs today. Every home is unioque and presents unique challenges. In contrast every pill in the bottle better be identical and there is virtually no difference between seats on a plane in the same class of service. RE is a labor intensive business and always will be.October 10, 2006 at 12:51 PM #37592
I’d love to know what the “labor-intensive” part is.October 10, 2006 at 12:56 PM #37593
All of it. Last time I checked there wasnt any such thing as a RE selling machine.October 10, 2006 at 1:13 PM #37595
The RE selling machine (in my opinion) is the Internet. It displays the houses, in the zip codes I want to live, gives me all the info, and I just need to go to the house, and see if I like it.
I think Perry’s right. IPay may have not been successful, but it just could be a little too early for them, or someone else will tweak the model, and come out ahead.October 10, 2006 at 1:19 PM #37596JESParticipant
I’ve bought and sold two homes since 2001 so I am no expert, but it seems to me that there is alot of room in the industry for technology to create more efficient and lower cost processes. Here’s some ideas off the top of my head where money will be saved:
1) ‘The search’ – Realtor.com and other sites are making it easier to search without a realtor. Online videos, photos, comps, neighborhood photos, tax data, school data, crime data etc. are changing the landscape. I am confident that I can go to any city in the U.S. and figure out everything I need to know about an area online and via my own research. Realtors will still perform this function, but in a much more limited fashion for a more select audience.
2) ‘The negotiation’ – We are now armed with more and more data regarding what homes should cost in a given area and in many cases don’t need realtors to give us comps, inside sales data etc. Also, online systems will evolve and offer negotiation functions over time. EG: If I see a house I like on Zillow, perhaps I make an online offer, they counter, I counter back and say I’ll pay closing costs and we have a deal. If the negotiation process for a home purchase were as utterly complex as many realtors say it is then something other than a high school diploma and a one month course would be required to do it.
3) ‘The paperwork’ – Online resources are lacking right now, and unless you belong to the CAR you basically have to go to Staples and buy outdated, generic forms. This is another area where online resources will grow and already have. I can go online today and find someone to do the paperwork for a couple hundred $, and if I am paranoid I can pay a lawyer to look it over for a few hundred more. I’m sure many lawyers will offer online RE review services in the future. Why pay a realtor $15,000 for this function?
4) ‘The Escrow’ – Resources to track and conduct escrow online will continue to increase. Less paperwork, more streamlined processes = less costly and easier for Joe on the street to keep track of what is going on. EG: Here’s your escrow web link, and on this page you will see all actions taken and also POCs for everyone involved. Would you like automated emails sent to your cell when each milestone is completed?
I’m sure I missed a whole bunch of issues, but clearly things are going to continue to change regardless of whether a few discount realtors go out of business. Already today, but especially in the coming years, many of the traditional functions performed by realtors and used to justify high commissions will be done online. Still, there will always be a need for good realtors, just not as we know them today IMO.October 10, 2006 at 1:28 PM #37597
I agree with JES that alot could be done more efficiently but that is not necessarily the value you get from agood Realtor. The profitability just isnt there and if the margins get cut substantially you wont have quality people willing and able to do what is really valuable.
Does the Internet call the 3 different heirs in 3 different time zones to explain the offer and deal with the emotions of selling their parents home? Does the Internet explain why a certain location or floorplan has held its value better than others? Does the Internet know the soil conditions a neighborhood is built on? Does the Internet know that the kids on the street have been redistricted to a different elementary school four times in the last 5 years?
If you were buying an investment it might be a little more realistic but buying a home is extremely complicated and very emotional. I can say almost without exception that every buyer I have worked with has bought something completely different than what they initially told me they wanted. Most of these changed their mind based upon information they got from me and are extremely grateful that they had someone capable of pointing them in the right direction.
I spoke with client this morning that almost bought a 1300 sq ft house with high HOA and Mello Roos fees they found on the Internet last year for $650,000 which now would have trouble selling for $575,000. The Internet lender was going to put them in an option arm. They now live in a home over 2000 sq ft with no fees and a comparable property just sold for $50,000 more than they paid. They love their home and got a fixed rate mortgage from someone I referred them to. I think they might be inclined to disagree with you.October 10, 2006 at 1:30 PM #37598
The numbers will never be publicized. It will be spun as some great news but those in the know will easily read between the lines.October 10, 2006 at 1:35 PM #37599
I’ve taken more than a few showers in my life but that doesnt make qualified or extremely knowledgable about the process for manufacturing and selling shower curtains. Something as simple as a commodity like this has many complexities which I have no clue about.October 10, 2006 at 1:38 PM #37600
I don’t know – some phone calls to heirs, and floor plan info is not that labor-intensive. I’m not saying what you do doesn’t have value. What I’m saying is you have to re-evaluate how business get’s done. A lot of it is moving to an electronic format.
Look at my firm. We’re in manufacturing. Do you know how many of my competitors don’t have websites, and it’s 2006?! Do you know 90% of my new business comes from my online presence? Do you know how many deals I do on email, without ever talking to my customers face to face?
I’m not saying RE agents are replaceable, but I think those that embrace technology are going to come out ahead.
And if you’ve taken a shower, you should certainly know how a shower curtain is made. It’s a piece of material with hem across the top, and some holes for the rings. Anyone could figure it out. Same with RE. It’s pretty simple. RE agents have tried to keep the general public in the dark for years. I’m glad there’s transparency now.
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