I read an article about “The Gig Economy”. The “gig” is work contracted to individuals. Like Uber and Lyft. Quick and easy money for services done by local people but without the benefits of full time employment. Now, real estate agents and brokers are contract individuals anyway.
It made me think about that scenario within local Real Estate markets and businesses. In the last 3-5 years, large foreclosure real estate websites have popped up. The employees of those companies contract with banks and lenders to liquidate the properties they foreclosed on. I’ve worked with a few.
I paid one company a 30% referral fee. Typical referral fee within local agents is usually 25%. But, another 5% was okay for my business and no additional fees were applied to a buyer.
However, companies like Homesearch.com located in Lewisville, TX. They apply a 5% buyers premium or at least $2500. within their home buying agreements. Many of the disclosures for buyers to consider is that the seller’s will not pay any seller title typical fees either.
LMS Management’s address is a mystery. A “processing buyer’s fee” or “short sale fee” is added on top of the negotiated purchase price. I’ve seen it a high as 10,000 plus all title fees. Their short sale disclosure state’s that their fee can not be added to contract or the HUD1 according to FHA and VA guidelines. I’ve helped many seller’s do a short sale and it was free to both parties.
Hubzu.com is owned by Altisource and they are located in Atlanta, GA. They also add a buyer’s fee and the reo settlement processing is outsourced to India. The communication and ownership of a file for a local Real Estate buying agent is non existent. The buying process is frustrating for a buyer, the local lender and the local real estate agent. A sale I worked on last year, the title company was in Atlanta, GA. (owned by Altisource) They were to provide title insurance to the buyer. The lender later found out that it was not provided (it was on the HUD1 and deducted) and had to work the file several months pass the closing day to get it fixed. I can imagine that it was hard to when the company wasn’t local.
Auction.com is located in Irvine, CA. and a company many of my investor clients will not work with. Apparently they’ve worked with them before and said it was a disaster. They ask for a bid deposit and bid increment on their site. The sale asks for 5% earnest money deposit or $2500. which ever is greater and responsible for all title fees.
So, if I was a local real estate buyer in my area, which I have been, I’d have to say that I wouldn’t think the property was such a great deal if I’m nickel and dimes to death. From a buyer’s perspective a property is listed on the local MLS and the listing price isn’t really the listing price. It’s a lot higher because of company fees that they want me to pay to buy a property. Not such a great buy anymore.
If smart real estate investors and smart home buyers who don’t mind a fixer upper, don’t see the best bottom line in their efforts then who buys these homes? How will this effect our local housing market and neighborhoods.
The Housing and Urban Development tells Americans that home buying is the best investment. It will repay you in future years when you go to sell it. But, that is only true in how you buy it.