Thursday, June 28, 2018

The Short Con

If you have not heard of the long con you need to see a few movie about Grifters and how they work. The short con is the sleight of hand and a fast burn where the con man sells you the snake oil and leaves with cash in hand and you a useless medicine promising to make you harder/smarter/better.

When I heard of this bullshit I have never laughed so hard in my life.  You know the signs "Will BUY YOUR HOUSE 4 CASH" are targeted largely to minority home owners or cash poor owners who are living in gentrifying areas in which to do what HGTV does best - flip houses.  The biggest load of bullshit I have ever watched as even the New York Times did a story on this subject to explain how complex it is and how it is not as quick and lucrative as you are led to believe.  Just as the Gaines about that lead paint penalty.

But here in Nashville we have another player to the game and this is the fake real estate agent.  Odd that of all the markets that they elected to try a run is here.  Here with a low education and literacy rate, high rates of poverty and an increasing cost of living that is disproportionate with regards to wages.

I loathe Million Dollar Listing as they too turned New York into a housing market that is also oddly disproportionate to the city and its needs so why did this new VC not choose New York, San Francisco or Seattle, all cities undergoing the same issues?  Oh that is because the populace is more sophisticated and educated. 

The reality is that Real Estate Agents are like Lawyers and Doctors only less educated and in turn bigger cons as they do nothing of import.    If you needed one to consult with and advise about comps, price per square foot and the market then fantastic, hire one, pay a flat fee and be done with it and it turn list it on the MLS.  Oh wait you can't.  And that was the point of Zillow/Trulia,  among others to enable owners to sell properties without an agent and I doubt many do as most people don't know real estate law, contracts and negotiations which is hence the gap they fill.  Mind the gap!

Ever watched Property Brothers?  The one with the talent is the construction brother the other is a waste of space and you know in real estate you never waste space.

But this con is a whole new con.  It's Property Brothers sans twins.

This company will pay you to list your Nashville home — and then buy it if the offers don't come

Jamie McGee, Nashville Tennessean June 26, 2018

A tech real estate company, Felix Homes, is launching in Nashville this month with a new proposition for home sellers: They pay to list the home and if the home fails to sell in 90 days, they buy it at an agreed-upon, discounted price.

The model alleviates stress for a seller who wants to sell in a short period of time and alters the traditional real estate agent commission fee structure, which Felix Homes co-founder and CEO Tyler Forte said fails to motivate agents to seek the highest price.

The Tennessean's yearlong look at Costs of Growth and Change in Nashville series culminates on December 20 with a mini-documentary viewing, photography show and continued discussion led by David Plazas about where Nashville goes next.

“Homeowners already have so much on their plate which is why we want to help simplify the process," Forte said. "Felix gives them the certainty of a guaranteed sale, an upfront cash payment to help with everyday expenses and an incentive structure that gets them the highest price.”

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In a typical sale, home sellers list their home with a broker for six months and pay a 6 percent commission when the home sells, according to Felix. Sellers have no guarantee on how long it will take to sell the home and what the price will be, but they are often locked into a six-month contract with a broker.

Felix, based in New York, pays a homeowner 1 to 2 percent of market value to list the home on the Felix platform. For a $400,000 home, the seller would receive between $4,000 and $8,000 for letting Felix list the home. They can spend the money however they like, but Felix typically recommends they repaint or update the carpets.

The model is meant to help those who have accumulated plenty of equity in their home, but they still lack the cash to invest in renovations that will boost their sales point, Forte said.

"The folks we are targeting, they are equity rich but cash light," he said.

If Felix does not find a buyer in 90 days, the company offers to purchase the home at a discounted rate, close to 5 percent below list price, that both parties initially agreed to. The market value is determined by a professional who visits the home ahead of the agreement.

The homeowner does not have to sell to Felix, but if they do agree to the sale, Felix will pay in cash. The company will typically make $5,000 to $15,000 in upgrades, then relist the home, selling to a real estate investor.

"The home seller has the money in their account," Forte said. "They don't have to worry about, is this person going to get a mortgage or get approved for a mortgage."

More real estate: Jay Cutler and Kristin Cavallari list their Nashville home for $7.9 million

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Forte, a former venture capitalist, said the company was born out of his own frustrations with the real estate agent model.

When he was selling his home almost two years ago, he chose an agent who estimated the highest sales price for his home. But when the agent ended up dropping the price, Forte lost $30,000, while the agent missed out on about $800 to $1,000. His takeaway was that if a price reduction only modestly affects an agent, they may be less motivated to sell at a higher price point.

Felix recoups the difference between the price it agrees to with the seller and the sales price, so the company generates an income only when it sells above market value. If a home sells for $290,000 and Felix and the seller agreed to a $280,000 sales price, Felix keeps $10,000.

"We only make money if we are able to really perform and sell that home above market value," Forte said.

The company has capped its earnings at 6 percent to avoid perceptions of taking advantage of clients. Anything above that, which could result in a bidding war, for example, goes to the seller, Forte said.
Nashville launch

Nashville will be Felix's first market. The city was selected out of 30 other possibilities because of its thriving real estate sector and high mobility rates, Forte said.

The average time a Nashville-area home stays on the market is close to 35 days, another selling point for Nashville, he said.

"It is a fairly young crowd, with people who are living in Nashville for four to five years and moving somewhere else, so there is fairly high turnover," he said. "It is also expanding like crazy."

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