Boston Real Estate for Sale

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I just sold my home to Redfin. Did I make a deal with the devil?

This morning I was scanning the internet and came across this story from the San Francisco Chronicle

It started with a little journalistic curiosity. And more than a bit of germaphobia.

I was selling my place in Los Angeles in preparation for a move to the Bay Area. My partner and I weren’t vaccinated against COVID yet, and the last thing we wanted was a parade of prospective buyers breathing all over our pillows and pawing our countertops. As I scoured the internet for information about COVID safety and home sales, I found myself bombarded with ads imploring me to “Sell your home to Redfin.”

I had read about “iBuyers” before — mostly tech firms that paid cash for houses and used algorithms to inform their offers. My understanding was that the business had all but dried up in the face of the pandemic. It appeared I was wrong.

 The ads were intriguing. I filled out a form on Redfin’s site that asked me for some basic details about my place. The very next day I got a call with an offer.

It was good. Very good. Significantly higher than a neighbor who sold her place months before. And Redfin was going to take a 3% commission instead of the 5% I would have to pay to a normal agent. Redfin would send an agent and two inspectors by to make sure nothing was seriously wrong with the place (“We aren’t emotional, like a typical buyer,” a person on the phone assured me). And that was it.

No need to keep things spotless for weeks at a time (or ever, if I’m being honest); we could keep our moving boxes where we pleased. And wouldn’t have to worry about catching COVID. Redfin would give us a 90-day window to complete the sale, plenty of time to get vaccinated and find a new place.

So we signed the papers. I kept waiting for the rug to be pulled out. For some kind of scam to reveal itself. But it never did.

There were hitches, of course.

It’s true that Redfin wasn’t emotional, but it drove a hard bargain on certain repairs. I hired a real estate lawyer to talk me through the process and to help with the paperwork. But that cost a fraction of what an agent takes in commission. We recently closed the deal, and I can’t say I’m anything but happy with the transaction.

Now that the dust has settled, however, I am wondering about the broader impacts of selling to Big Tech. What are they going to do with my place? And what does this all portend for California’s housing market, which is already an overpriced and unaffordable mess?

I had always assumed that Redfin’s plan was to undercut agents out of commissions. Even if Redfin buys and then sells a house for exactly the same price, it’s still raking in a commission on both ends. Multiply that by hundreds of thousands of transactions, and you’re talking billions.

California’s real estate industry isn’t exactly a model of enlightened capitalism. From writing racial segregation into California’s Constitution to preserving the worst of Proposition 13, it has routinely been on the wrong side of some of the most loathsome policies this state has ever devised. No one should shed any tears if tech wants to squeeze them and pass on the savings.

But Stanford finance Professor Amit Seru, who has studied the impacts of iBuyers across the country, said it’s too soon to tell what the iBuyer long game is: “I do think the current play is to bring costs down. But any long-term intention is difficult to parse.”

IBuying could be a data mine. It could be about cornering the listings market. It could be about hoarding supply to drive prices up. Or it may turn out to be all of the above.

“It’s possible one of these companies could become the Amazon of real estate,” Seru said.

Think about it: Using reams of intimate personal and financial data it gathered during my home sale, a company like Redfin could one day sell me a fully furnished home, catered to my personal style, while offering me a loan to cover the whole package. It gets a piece of all of it.

In theory, this could remove inefficiencies in the market and help make buying a home easier and more affordable.

“If you’re buying a new condo in downtown San Francisco,” Seru said, “everyone has a pretty good idea what that’s worth. You shouldn’t have to pay a hefty commission.”

Of course becoming a monstrous monopoly is also a possibility.

Whatever the end game is, agents don’t seem to be too nervous. “We’re confident that navigating the complexities of real estate transactions in California is an evergreen service,” said California Association of Realtors chief economist Jordan Levine. “It’s the Wild West right now a little bit. Each iBuyer seems to have a different objective — other than to maximize profit.”

Two weeks after it bought my old house, Redfin listed it for about what they paid. We’ll see what happens next

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