Real estate investing - market data

[Aaron Cooper]

As a real estate investor what market data would you like to see? I am pulling local MLS data and curious as an investor what metrics, numbers, averages would you love to have access too?

[Chris Martin]

Originally posted by @Christian Hansen:

@Chris Martin Hi, I’m in the Raleigh mkt as well and have wondered about Opendoor. I became very curious when my neighbors suddenly sold their house to them. I don’t know if I really agree they are a Wholesaler in the traditional sense. From what I understand/saw they pay a fairly high price for properties but actually charge the seller(original owner) a bunch of fees. Then do some cosmetic renovations and resell at about market price maybe a couple points below. It seems to me it’s all about the volume and I think they are very vulnerable to any market slowdown. I feel their model is very much dependent on the market being strong with low inventories.

This is not a deep data driven conclusion but based on what I’ve heard from various brokers and by looking at some of the purchase and sold prices.

BTW: RE Brokers hate dealing with them as they are not very responsive, I suspect just due to the volume. But again if the market gets a bit squeezed I feel like they could face some challenges if they can’t keep up the pace and are left holding a lot of inventory.

Would love to hear what you think.

 As far as what they are, you tell me. I've read probably 1000 posts on BP where posters contend that virtually the only difference between a 'wholesaler' and a licensed broker is that a wholesaler uses a contract to purchase and has 'at risk' capital at play and a broker just lists the property. I consider most people who call themselves 'wholesaler' on BP, those with no money with their only asset being a business card, as unlicensed brokers. They put together a buyer and seller and (in NC) hold the property for short times (using bridge loans) if at all. From the Opendoor web site:

"Sell your home to Opendoor so you can skip the hassle of listing, showings, and months of uncertainty." 

Opendoor is differentiating themselves from a brokerage, yet search on North Carolina Real Estate Commission and you will find:

C28655 OPENDOOR BROKERAGE LLC

with a BIC in Raleigh and Charlotte. Man, sounds like a real estate brokerage. Yet, unlike a real brokerage, they buy and own the properties. Maybe sounds more like an institutional 'flipper'. Maybe a 'wholesaler'. Anyway, what they call themselves or we call them is kind of irrelevant. The guy in the white robe may care since some 'wholesalers' are selling real estate contracts, which in NC are not real property (the contract is tangible personal property). I contend 99% or more of them are violating NCGS 75-29. Unfair and deceptive trade names; use of term "wholesale" in advertising, etc. but that's for some other post. 

As for the Opendoor business model, they seem to combine brokerage and 'easy' flipping into one operation. I say easy because they seem to buy "MLS ready" property. The questions I pose are: Can brokerages make money in a slowdown? Can flippers make money in a slowdown? Why can't Opendoor? I don't know what their operating margins are, but they very quickly became the biggest broker in the Raleigh area by sales volume. We know that they receive as you say "a bunch of fees" and also from my post on another Opendoor BP topic, using a very small sample set, a modest 4.6% spread on their resale of property. 

My conclusion is different from yours. I think a slowdown and longer DOM for traditional broker sales will bode well for Opendoor. Unlike brokers, they own and control the asset and have the opportunity to adjust/improve assets to compete more favorably in the open market. Traditional brokers will not fund improvements to listed property, even when involving small financial items that are required for traditional loan underwriting. 

But time will tell. I remember well when hedge funds like American Homes for Rent started buying, in 2012, all property in their wheelhouse in Wake county. They currently own over 2000 rentals here and are by far the largest landlord in the area. I wrote about it here on BP in early 2013. So it's not like a big player hasn't come in and upended the local market. It's happened before. I think Opendoor may be around for a while. And in the big picture I think it may be a good thing.