If you ask most people, they’ll tell you that real estate agents will never ever disappear.
Despite the internet, mobile phones, social networks, and companies (here in Canada) such as comFree and PropertyGuys, the bulk of the market still employs an agent when it comes time to buy and/or sell a home. This is true both in Canada and the United States. And it may always be true.
But there are lots of entrepreneurs and people in the real estate community experimenting with different models. OpenDoor and Open Listings are two new startups out of the US that I’ve been following closely.
At the same time, there is a certain fraction of the market that is willing to go at it alone. By some estimates this number could be as high as 25% in Canada. Of course, this is a hard number to measure accurately since there isn’t just one method of selling a home privately and many transactions likely go untracked.
But one thing that I’ve been wondering for awhile now is why the percentage of private home sales is seemingly so much higher in the province of Quebec. According to Wikipedia, this number might be greater than 50%. And a quick search on comFree (duProprio in Quebec) seems to suggest that this may indeed be the case.
Here are the comFree search results for downtown Toronto. There are 62 properties.

And here are the duProprio search results for downtown Montreal (notice I tried to maintain the same zoom level). There are 2,746 properties.

If anyone has any insights on this phenomenon, I would love to hear from you in the comment section below. I don’t know why this is the way it is.
Yesterday Opendoor.com finally launched their product in Phoenix. If you’re a regular reader of Architect This City, you might remember that back in July of this year I wrote about how they had just raised $10M of funding to make selling your home as easy as a few clicks.
Well, since then, I’ve been following them like a hawk. I had all the founders on Twitter notification (so I got notified every time they tweeted) and I was eagerly anticipating their launch.
Now that they’ve launched, we have a much better idea of how their business model is going to work. I say “better idea” only because there’s still portions of it that are a question mark for me.
In any event, Opendoor basically provides instant liquidity to homeowners. You go on, tell them about your home, and they then make you an offer to buy, which looks like this and lasts for 3 days. The offer they make you is calculated using comparable sales and adjustments based on your home’s unique characteristics.
Upon accepting their offer, they then schedule a home inspection (at their cost) to confirm your home’s condition. Once this is done, you just select your move out date and Opendoor handles the rest. The fee for all this is 5.5%, which the company claims is less than the 6% that realtors typically charge (this would be high for Toronto).
After buying your home, Opendoor plans to turn around and resell it.
What this reminds me of is a “bought deal.” In the world of investment banking, a bought deal is when the bank itself agrees to buy the entire offering of a particular security, as opposed to going out to the market and trying to raise the money. The advantage to the company (offering the securities) is that there’s no financing risk. They know they’re going to get their money. But it usually means the company gets a lower price.
So what I wonder, is if this is what’s going to happen here. Since Opendoor is effectively taking on the selling risk, does that mean their offers will be lower? Or are all their costs built into that 5.5% and that’s truly their core business model? I’m sure some of this will surface in the coming weeks.
I do, however, think they are smart to be focusing on the supply-side of the marketplace and offering virtually perfect liquidity to homeowners. Real estate is a unique asset in that it’s difficult to bring supply to the market. And so if control the supply-side, I think you have a pretty good shot at controlling the market as a whole.
I was at a good friend’s wedding last night (congratulations again to Adrien + Rachel!), and one of the topics that came up at our table was whether it is better to own or rent your home. Now, in North America, conventional wisdom would suggest – almost mandate – that you have to own your place. If you’re still a renter, well then you’re “throwing away your money” my friend.
But are you really?
A big part of the value of owning your home is that it’s forced savings. Every month when you make those principal and interest payments, you’re paying down your mortgage and socking away money for the future. And this can be a great thing for a lot of people, particularly if you’re not disciplined enough to save otherwise.
But when you own a home, you’re also spending time and money on maintaining that home, and you’re also tying up capital that could be used elsewhere. So consider this: what if, instead of putting your savings towards a downpayment, you simply continued to rent and created an investment portfolio that you then contributed to on a regular basis just as you would a home?
Depending on your assumptions, renting could turn out to put you further ahead financially. Here’s an example of that scenario from the Globe and Mail.
Similarly, I remember being told in business school that companies that own their own real estate tend to under perform those that do not. And the rationale is that owning lots of real estate ties up capital that could otherwise be reinvested in the core business. In other words, if your core business is making widgets, then invest your money in making better widgets, not in real estate.
But this is not to say that everybody should rent. Obviously I’m a big believer in real estate. And for a lot of people, owning may make sense. This post was really just to say that the owning vs. renting decision may not be as black and white as you might think.
Image: Flickr
If you ask most people, they’ll tell you that real estate agents will never ever disappear.
Despite the internet, mobile phones, social networks, and companies (here in Canada) such as comFree and PropertyGuys, the bulk of the market still employs an agent when it comes time to buy and/or sell a home. This is true both in Canada and the United States. And it may always be true.
But there are lots of entrepreneurs and people in the real estate community experimenting with different models. OpenDoor and Open Listings are two new startups out of the US that I’ve been following closely.
At the same time, there is a certain fraction of the market that is willing to go at it alone. By some estimates this number could be as high as 25% in Canada. Of course, this is a hard number to measure accurately since there isn’t just one method of selling a home privately and many transactions likely go untracked.
But one thing that I’ve been wondering for awhile now is why the percentage of private home sales is seemingly so much higher in the province of Quebec. According to Wikipedia, this number might be greater than 50%. And a quick search on comFree (duProprio in Quebec) seems to suggest that this may indeed be the case.
Here are the comFree search results for downtown Toronto. There are 62 properties.

And here are the duProprio search results for downtown Montreal (notice I tried to maintain the same zoom level). There are 2,746 properties.

If anyone has any insights on this phenomenon, I would love to hear from you in the comment section below. I don’t know why this is the way it is.
Yesterday Opendoor.com finally launched their product in Phoenix. If you’re a regular reader of Architect This City, you might remember that back in July of this year I wrote about how they had just raised $10M of funding to make selling your home as easy as a few clicks.
Well, since then, I’ve been following them like a hawk. I had all the founders on Twitter notification (so I got notified every time they tweeted) and I was eagerly anticipating their launch.
Now that they’ve launched, we have a much better idea of how their business model is going to work. I say “better idea” only because there’s still portions of it that are a question mark for me.
In any event, Opendoor basically provides instant liquidity to homeowners. You go on, tell them about your home, and they then make you an offer to buy, which looks like this and lasts for 3 days. The offer they make you is calculated using comparable sales and adjustments based on your home’s unique characteristics.
Upon accepting their offer, they then schedule a home inspection (at their cost) to confirm your home’s condition. Once this is done, you just select your move out date and Opendoor handles the rest. The fee for all this is 5.5%, which the company claims is less than the 6% that realtors typically charge (this would be high for Toronto).
After buying your home, Opendoor plans to turn around and resell it.
What this reminds me of is a “bought deal.” In the world of investment banking, a bought deal is when the bank itself agrees to buy the entire offering of a particular security, as opposed to going out to the market and trying to raise the money. The advantage to the company (offering the securities) is that there’s no financing risk. They know they’re going to get their money. But it usually means the company gets a lower price.
So what I wonder, is if this is what’s going to happen here. Since Opendoor is effectively taking on the selling risk, does that mean their offers will be lower? Or are all their costs built into that 5.5% and that’s truly their core business model? I’m sure some of this will surface in the coming weeks.
I do, however, think they are smart to be focusing on the supply-side of the marketplace and offering virtually perfect liquidity to homeowners. Real estate is a unique asset in that it’s difficult to bring supply to the market. And so if control the supply-side, I think you have a pretty good shot at controlling the market as a whole.
I was at a good friend’s wedding last night (congratulations again to Adrien + Rachel!), and one of the topics that came up at our table was whether it is better to own or rent your home. Now, in North America, conventional wisdom would suggest – almost mandate – that you have to own your place. If you’re still a renter, well then you’re “throwing away your money” my friend.
But are you really?
A big part of the value of owning your home is that it’s forced savings. Every month when you make those principal and interest payments, you’re paying down your mortgage and socking away money for the future. And this can be a great thing for a lot of people, particularly if you’re not disciplined enough to save otherwise.
But when you own a home, you’re also spending time and money on maintaining that home, and you’re also tying up capital that could be used elsewhere. So consider this: what if, instead of putting your savings towards a downpayment, you simply continued to rent and created an investment portfolio that you then contributed to on a regular basis just as you would a home?
Depending on your assumptions, renting could turn out to put you further ahead financially. Here’s an example of that scenario from the Globe and Mail.
Similarly, I remember being told in business school that companies that own their own real estate tend to under perform those that do not. And the rationale is that owning lots of real estate ties up capital that could otherwise be reinvested in the core business. In other words, if your core business is making widgets, then invest your money in making better widgets, not in real estate.
But this is not to say that everybody should rent. Obviously I’m a big believer in real estate. And for a lot of people, owning may make sense. This post was really just to say that the owning vs. renting decision may not be as black and white as you might think.
Image: Flickr
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