Issue 22 - March 5th, 2021
The bidding wars on homes are reaching a boiling point in Texas, and house hunters are having to fight with upwards of 20-30 offers on homes. I have personally worked in real estate markets in Texas and California, and the starkest difference in the 2 markets is agents’ pricing strategies. In San Francisco and other Bay Area neighborhoods, the “list price” is merely a starting bid. In Texas, the list price is the list price in more normal times and agents would seldomly see “over ask” offers on properties. Texas buyers and sellers knew they could negotiate price down and also work in more favorable timelines on inspections and financing contingencies that make the buyer feel comfortable. Only in rare situations in Texas were buyers completely waiving all inspection contingencies and just taking homes “as-is” for 20% over the list price.
Welcome to the new world in hot Texas markets. The influx of Californians to Texas brings an entirely new home-buying mindset to our markets, and Californians are just business as usual when they go in 25% over ask all cash on a home and waive their financing and inspection contingency. Local Texas buyers are used to going in 10% under ask with 10 days for inspections and 14 days for financing contingencies in a normal market (and they may even try to throw in the furniture for that price). In California, it is completely normal for 40 people to be in the yard at an open house 30 minutes before it even begins, and in pre-pandemic times in Texas, agents were lucky to have 10 people show up to an open house in a 2 hour window.
The acumen and aggressiveness of the California buyers is something that I am sure some Texas agents are learning the hard way right now, but I would say this mentality is here to stay in our markets as things continue to grow and stay hot. Agents need to set realistic expectations with their buyers and give the advice to “make the highest and best offer with the best terms so even if you lose then you won’t regret giving it your best shot.” Buyers should be prepared to search for 3-6 months in these crazy times and know it may take losing 5 plus times to get something that works. It is only going to heat up as the world continues to open, but I am hopeful that inventory levels around the country will start coming slowly creeping back as more people feel comfortable letting people in their homes this summer. Happy bidding!
Newsworthy Links To Share
Douglas Elliman parent company ,Vector Group, launches prop-tech investment venture and announces an investment into Rechat. New Valley Ventures will consider companies of all sizes, supporting their development with in-depth real estate expertise and helping them enter prime domestic real estate markets. New Valley Ventures has also invested in Camber Creek, a venture capital firm whose portfolio includes startups such as Notarize, Curbio, Flex and Darwin Homes, and MetaProp, a venture capital firm with investments in startups such as Milo Credit and Skipp. New Valley Ventures’ affiliate, Douglas Elliman, is the largest residential real estate brokerage firm in the New York Metropolitan area and the sixth-largest in the United States. Read more here.
Rechat, a Dallas, TX based real estate technology company, announced this week the launch of its new digital platform which empowers real estate agents to run their entire business remotely while they are on the go. The product has a CRM, email marketing solutions, marketing tools, document management, and other agent “must have” tools. “The pandemic has changed the way real estate agents work, and this new easy-to-use platform empowers them to manage their contacts and relationships, market themselves and their listings, and actually close transactions -- all in a single app,” said Rechat’s CEO Shayan Hamidi. “Agents simply sign-up and instantly gain access to a fully-integrated platform that was designed with real estate professionals’ needs in mind, enabling them to build their own personal brands from the palm of their hands.” Press release here.
Compass who is moving towards an IPO soon released their financials this week, and they lost over $270 million last year. They also are facing tough questions on whether the business model should garner tech valuations or more traditional public company valuations like that of their foe Realogy. Compass’s primary revenue stream is from agent commissions splits which in my mind does not make them a technology business but more a tech enabled business. They have great branding and other attributes, but in my opinion they are not worthy of a tech valuation. Time will tell how this unfolds as they approach their IPO. Others have weighed in too: Industry observer and CO Boulder Professor Mike Delprete on Compass: "Its gross margin is on-par with traditional brokerage peers in the industry — and, interestingly, are the same as aircraft manufacturer Boeing. These are not the 70 percent-plus gross margins of a technology company."
States Title now known as Doma is going public via a SPAC with legendary industry veteran Spencer Rascoff (Zillow Founder and former CEO) making a personal investment alongside Lennar Homes and Blackrock. CEO Max Simkoff founded San Francisco-based Doma in September 2016 with the aim of creating a technology-driven solution for “closing mortgages instantly.” While it initially was founded to instantly underwrite title insurance, the company has expanded that same approach to handle “every aspect” of closing and escrow. Read more here.
Opendoor launches “cash offers” for homebuyers. Through the new program, buyers will be able to present a seller with an offer backed by Opendoor’s cash reserves, giving the seller more confidence that the deal is on solid footing, without having to wait in limbo on things like financing, appraisal or home sale contingencies. To begin the process, buyers will need to get pre-qualified with Opendoor Home Loans or another mortgage company. Then, the brokerage arm of the company will pair the buyer with a real estate professional in their market to help them present the offer to the seller. Read more here.
JLL has announced an investment into Roofstock, a single family investment marketplace, and struck a partnership that will empower JLL to make a push into residential investment services. Roofstock will also purchase data technology company Stessa from JLL Technologies. Stessa is a free application that allows mom-and-pop investors to track their rental property performance and financial health. The app’s features allow investors to automate income and expense tracking, quickly create tax reports and store their real estate documents in one place. Stessa’s users currently track more than 170,000 individual properties worth more than $45 billion. Read more here.