- Some vendors and lenders think that Opendoor and similar companies have a good solution to the $62 million fine levied by the FTC against Opendoor.
- The Department of Justice’s Investigation on the National Association of Realtors was also a hot topic during the convention. Some agents were concerned about what could happen to the buyer’s commission.
- A discussion around tech and the capital that’s coming to real estate through investors investing in real estate trusts raises concerns that homes get played like stocks in the stock market.
In the fifth episode of Poplar Propcast, Justin provides an inside look into the Inman Connect convention, which brings together real estate professionals with a wide range of expertise, including agents, brokers, lenders, and researchers. This episode focuses on the discussions and conversations on the convention floor surrounding the three main topics that were discussed: the recent fine of Opendoor by the FTC, the Department of Justice’s investigation on the National Association of Realtors, and the trends in tech and capital coming into real estate.
To explore this topic in greater detail, listeners can check out the full episode on Google Podcast or your preferred podcast platform. This blog post serves as a summary of the highlights covered in season 1, episode 5 of Poplar Propcast.
The case against Opendoor
Justin discussed the recent $62 million fine levied against Opendoor, saying that FTC had alleged that “Opendoor’s marketing promised sellers they’d make more with Opendoor than other avenues when that was not always the case.”
Despite this setback, Justin noted that some real estate professionals view Opendoor and similar companies as having a good solution to a common problem in the industry. According to him, “The agents and lenders I spoke to about this actually think Opendoor has a really good solution to a problem.” The problem being the “mismatch between selling a house and buying the next one.”
Justin observed, however, that some agents and lenders applauded the news of Opendoor’s fine, and that “there was this kind of joy or glee taken in an interloper being punished.” Justin noted that there was tension in the industry as change came from outside, and there was pressure on the National Association of Realtors to modernize. However, some agents who have been in the industry for decades were resisting change.
The Department of Justice’s investigation into the National Association of Realtors (NAR)
On the DOJ investigation into the NAR, Justin said the investigation came “after a settlement was not finalized in an earlier antitrust case in 2020.” He said there was an agreement in place, but it was not finalized, “leading to this new investigation taking a different direction.”
He said the DOJ was primarily focused on the seller side commission and trying to determine if the lack of transparency around how buyers were paid was detrimental. He said the investigation aimed to evaluate whether buyers being paid by sellers could cause a conflict of interest for buyer’s agents, potentially leading them to prioritize closing deals over the buyer’s best interests.
Justin pointed out that “for the last 50 years when someone buys a house in the United States, both the seller and the buyer’s agent typically receive 3% of the purchase price.” However, in most cases, the client doesn’t even know how their agents are being paid, citing a recent survey by Brian Boero, revealing that over “20% of recent buyers had no idea how their agent was paid, while over 50% stated that their agent never even discussed compensation.”
As the discussion pivoted to the changes that could happen to the buyer’s commission, Justin claimed that the worst case would be that “buyers’ commissions could be eliminated entirely.” However, this could have significant implications for the real estate industry, as half of the almost $80 billion currently funding the industry comes from buyers’ commissions.
“This is where agents make most of their money, and it could have a profound downstream effect on companies like Zillow, apartments.com, and Redfin, who advertise agents for buyers and have a vested interest in collecting leads for buyers’ agents when someone requests a tour,” says Justin.
Trends on Tech and Capital Coming Into Real Estate
The last piece of conversations in the podcast floated around the issue of tech and the money that came into real estate. According to Justin, “Many tech companies are entering the industry to tap into the highly lucrative commission piece.”
“They’re inserting themselves as discovery tools, controlling the lead side, or also acting as the broker and using that commission as part of the funding for their operations,” he said.
Justin cited one company that buys homes, “and when it comes time to sell, it would list the property off of the MLS for a few weeks, taking advantage of an owner exception.”
“During that window,” Justin said of that company, “offers little or even no commission. By doing this, it creates a pool of investors in real estate trusts that gets houses played more like stocks in the stock market.”
However, not all buyers are interested in treating homes like financial assets. Justin claimed that “A lot of people buying homes in the United States don’t necessarily want to live in a securitized asset. They want to live in a home.”
He expressed concern about the lack of transparency in the industry, stating, “How do you know what kind of underlying structures are selling it to you? How do you know which kind of underlying structures have a stake in your home, and how do you make sure that the house that you’re living in doesn’t turn into something that needs to be liquidated for a multinational corporation to make their earnings call?”
Ultimately, as Justin noted, this trend of tech and money entering the real estate industry creates a strange place for buyers, where transparency is lacking, and financial interests may be prioritized over the interests of those simply looking to find a home.
Talking to Vendors
Justin also disclosed he had interviewed three vendors to inquire into the problems they were trying to solve.
The three vendors he interviewed were:
- Matt Kuchar, founder of Showami (showami.com) – a company that has realtors able to show a home when you’re unable.
- Madeleine Mitchell of Phixer (phixer.net) – a photo editing and enhancing service to help your listings stand out.
- Vance Miles of Acra Lending (acralending.com) – a lending group that can help you buy your next investment property
If you want to listen to the full interview, Justin shared the clips on episode 5 of the Poplar Propcast. Justin ended by urging his listeners to check out these vendors if their services have any use to your business.
The fifth episode of Poplar Propcast covered the discussions on the floor at the Inman Connect convention, which brought together various real estate professionals. The conversation highlighted the tensions around the industry, including the case filed against Opendoor, and the investigation of the Department of Justice on NAR. Despite these challenges, the real estate industry is evolving, and it will be interesting to see how it adapts to the changes.