Real estate instant offer companies

There are several variables that a seller considers when selling a house: price, sale timeline, effort, comfort with the experience, and uncertainty. Now, the ‘default’ path taken by a novice seller is to hire a realtor to sell the house, but this is changing fast.

Realtors take on effort on behalf of the client and provide comfort in exchange for a 6% commission split between the seller’s agent and buyer’s agent. The realtor also has tools to reach a broader market than the home owner does, and can generally provide a faster sales timeline.

Cash buyer companies are nothing new in real estate. However, they have historically offered prices so far below market value that they were only taken by the most financially desperate sellers or by those in a terrible time crunch.

A new generation of cash buyer companies have entered the market, offering prices far more palatable than their decrepit counterparts. They estimate the market value (usually a lower estimate), and then subtract fees (usually euphemistically named an experience fee) that are slightly higher than that of a realtor. If we assume that on average, a realtor can sell the property at market value, the home owner who chooses a cash buyer company is giving up 2% to 5% of the home value in exchange for a faster timeline, less uncertainty, and less effort.

In addition, real estate instant offer companies remove the effort required in selecting a realtor, and the uncertainty involved in realtor quality.  An excellent realtor may be able to sell above market value. However, the reality is that it is difficult for a first time seller to get a high performing realtor. High performing realtors tend to be busy and delegate new clients to their more junior team members who may lack the knowledge of the high performing realtor who attracted the seller.  With a mediocre or below average relator, the 2% or 5% “realtor benefit” may not exist, and the seller may actually walk away with more cash if he sold to a real estate instant offer company.

A comparison of the real estate instant offer company industry with their substitutes

*All sales involve other transaction costs such as title costs and potential repairs. Since the value of other closing costs does not defer significantly between the different options, I have not discussed them in analysis.
**FBSO is short for ‘For Sale by Owner’

Opendoor, Offerpad, Perch, Zillow, Redfin Instant Buy, and Knock are among the main companies who provide instant offers. They are often referred to as iBuyers. I personally sold my house to Offerpad and contacted all 5 firms discussed above so I am well aware of how this market works. My home was a half-duplex so only Offerpad and Zillow were interested in making an offer on the home. Zillow then backed out due to foundation issues despite my house coming with transferable Foundation warranties.

My house was located in Irving, Texas, a suburb in the Dallas-Fort Worth metroplex. I sold it to Offerpad on early May 2019.

A comparison of real estate instant offer companies

*For Offerpad, I used the number of days it took to close for my home rather than the number of days mentioned on the site. My house had a HOA and companies acknowledge they take longer to close when there is a HOA, usually 3 to 4 days extra. Some companies also have different closing times for properties in different states
**Zillow includes title cost in the fees. Other companies don’t do that. Title costs are usually around 1% to 2%. Zillow follows a different process from the other companies in that they only give you a contract and make an official offer after the home inspection. Zillow, unlike other companies did not display their fee % on their website. The amount in the table is the fee they would have charged me for the transaction (13.9%).

I didn’t include Knock in the table because when I looked at their website on the date this article was written, I noticed that they only offer trade-ins and you can’t sell your home to them without buying one. When I was selling my home, you could sell to Knock without buying from them. At the time, Knock offered a hybrid model of putting the house on the market for 6 weeks and then buying it from you if they failed to sell it during that time frame.

Depending on the city that you live in, you may have less choices on the companies that operate in your area. Almost all the companies started of buying homes in the Phoenix, Arizona area. They often then move to cities like Dallas, Texas and Houston, Texas.  In April 2019, Zillow Offers did not buy homes in Dallas yet but when I asked them for another offer in May 2019, they had entered the Dallas market and made me an offer.

There are also concierge services like Zavvie. They call the 5 companies for you and put in the information on your behalf, help you decide on the best offer, and in theory walk through the process. By the time I found Zavvie online, I had already contacted Perch, Zillow, Redfin, Opendoor, and Offerpad so they couldn’t provide any value to me. They had a friendly customer service representative though.

I sold my house to Offerpad after a long excruciating process of interviewing a few realtors, hiring a realtor, terminating the realtor, contacting all the real estate instant offer companies, signing a contract to sell directly to a friend, having my friend’s financing fall through at the last minute, re-contacting the companies, and finally signing with Offerpad and selling to them.

If you would like to know about hidden pitfalls in real estate, or if you simply enjoy reading about my experience which is best described as a comedic nightmare, join my mailing list.

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How Mailchimp’s poor customer service led me to SendInBlue

Mailchimp is one of the main service providers that bloggers and companies use in order to manage their mailing lists and keep in touch with their customers. Competitors to Mailchimp include SendinBlue, AWeber, and Get Response.

I had initially chosen Mailchimp because it was free up to the point where you have 2000 people on your mailing list. I felt that at that milestone, I would either have a lot of revenue or be close to having enough revenue to cover the paid service. In addition, Mailchimp was the service provider that I heard the most about prior to even considering building my own mailing list.

After creating the Mailchimp subscriber forms for my website, I tried signing up on my site a few times successfully. While making tweaks and sending the information to subscribers (which at this point just included 2 different email addresses that belonged to me), I suddenly received this email:

I logged into Mailchimp and responded to them:

A screenshot taken on May 31st 2019 on the of status of the March 25th 2019 complaint

It has been more than 2 months and Mailchimp still has not responded to me or unblocked my account. I didn’t wait 2 months. 2 days after receiving the reply, I switched to the free version of SendInBlue which allows me to run test emails to my own email addresses without blocking my account. I have used SendInBlue for 2 months with no issues now and I highly recommend them.

Boeing’s overconfidence in their AI system contributed to Boeing 737 Max 8 crashes

Boeing 737 Max 8’s crashes lend insight into the dangers of constructing a system where expert humans do not have the ability to easily override decisions made by AI.

I hesitated to write about the Ethiopian Airlines and Lion Air crashes. It was a terrible loss of life and I believe that no article will do justice to the people who lost their lives, and their loved ones. However, investigations have suggested that this loss of life was preventable. A confluence of reasons caused the Boeing Max 8 to crash among which include Boeing’s lack of quality control and Boeing making it difficult for pilots to override the plane’s auto descent that is triggered from sensor input. This article will focus on the second factor because to me, it looks like the easiest one to fix. It also is a more robust methodology. It is much easier to build in controls to allow a human expert to easily override a bad AI decision, than it is to construct AI that will make perfect decisions every time. Of course, Boeing should also fix its sensors that are known to malfunction but I believe that doing that alone may not protect against other contingencies that it fails to foresee.

Prior to the Boeing crash, I did not know of any AI system from the common man’s every day experience that makes it difficult for a human to override. I probably share the experience of many of you where a taxi or ride share driver saved time on your journey by disobeying Google Maps. We sat in a taxi or a ride sharing service and Google Maps dictates to take a certain route, the ‘most efficient route’ that would take 30 minutes. The driver suggests a different way and disobeys the map navigation system. Estimated arrival time is suddenly slashed by 10 minutes. He soon congratulates himself out loud on how he outsmarted the Google engineers and tells you how lucky you are to have an intelligent taxi driver who knows better than Google maps.

There are plenty of other software around that help us navigate our lives better but I picked Google maps as my example for one main reason. Google maps has an abundance of data. I am confident that the number of trips completed by people using Google maps is much higher than the number of trips that Boeing planes have made. If Google maps makes mistakes, then what are the chances of Boeing not making a mistake? Some may say I am comparing apples to oranges here. Google’s mistake cost the traveler 10 minutes. Boeing’s mistake cost 346 passengers their lives! In addition, one might argue that because lives are at stake, Boeing’s software is more robust than Google Maps. These are all valid points but my main point here is that the taxi or ride sharing driver with his local expertise, or sometimes even normal common sense, is at least in some situations, superior to the Google Maps algorithm built by a team of talented software engineers, likely with expert input from academics and people with experience in mapping and travel.

Why? The software engineers who built Google Maps wrote the software for general situations. Of course, they tried to program exceptions in as much as they could, but the fact that remains that Google Maps is a solution written in anticipation of problems. It sees past problems and tries to guess what the future problems are. It processes the input’s it receives by calculations that were built in the past. The inputs may be new but the calculations are old. Drivers, in contrast make their calculations in real time.

Boeing’s 737 Max 8 had a faulty sensor. This ‘angle-of-attack’ faulty sensor made the planes nose dive by activating anti-stall software based on incorrectly reading that the wings did not have enough lift to keep flying. It was extremely difficult for a pilot to override this. In the Lion Air flight prior to the one that actually crashed, the pilot prevented a crash by cutting power to the motor.  Investigations on the Lion Air flight that crashed reveal that the pilots were discussing how to deal with the plane’s reaction and were looking at their manuals to see how to deal with it. The fact that solving the issue required cutting power to the motor instead of simply pressing a button or selecting an option that all pilots (as opposed to just a few) are familiar with is a travesty. It shows that Boeing did not make it easy for pilots to override the automatic nose dive that a faulty sensor could trigger.

In these scenarios, the human expert knew that what the plane was doing was incorrect and could have piloted the plane to safety if the AI’s automatic response wasn’t fighting against his control of the plane.

As we continue to make our AIs more complex, will we build in controls to allow humans to easily override the decisions the AIs make? Or do we assume that the team that designed the AI is omniscient, with the almighty ability to foresee all situations in advance? Do we put experts on for the sake of show, or do we allow them to easily wrestle decision making away from the AI in emergency situations?

So far, it doesn’t look like Boeing is progressing in the correct direction, unless the press is reporting it incorrectly. There are many articles about Boeing making “improvements to the software”. There haven’t been any articles I read of Boeing making it easier for pilots to override the software should it make a mistake.

Riding the Facebook wave

Facebook is a giant wave rapidly gaining momentum. Of course, it’s scary to some, a force of nature, a natural conclusion of marrying a social species with advanced technology. You have three options; ride the wave, get pummeled by it, or observe from far away. Which one do you choose?

I think you all know which one I chose.

Facebook, created 15 years ago, has grown from a David to a Goliath rapidly. This is an article celebrating the benefits Facebook has brought to me personally. I write so that those individuals who stand to gain from a Facebook account, are not driven away in exaggerated fear, created by the recent media focus on Facebook’s scandals. I will not evaluate the ethics of Facebook’s monetization or privacy policies, or claim that they are honest and transparent. Those points are important to but are addressed in other articles.

Facebook has helped me in many ways. The examples I think often are when it helped me get my first full time job, facilitated in person meet ups with friends who I might not have thought to contact otherwise, and acted as an aggregator of news.

Facebook helped me get my first full time job. When my promised position fell through due to a hiring freeze, I posted a Facebook status update :

My friend, Brandon Taing who I had not seen for 3 years at the time, helped me get the job by referral because he saw the above status update that I was looking for a job. If Facebook did not exist, it would be less likely that I would have known to contact Brandon. Perhaps, I might have gone through several of my friends’ numbers and texted each one individually, or sent a mass email that might have ended up in spam folders. In addition to Brandon’s referral, I received interviews from 6 different companies directly from that status update. I am not even counting the interviews I received from directly messaging friends on Facebook about opportunities in their companies. Clearly, the existence of Facebook played a massive role in aiding my job search.

The conversation that led to my first full time job

Facebook has made keeping in touch with friends around the world a breeze. I lived in 4 different countries during my life and travelled to 56. A significant percentage of my friends are also frequent movers. Thus, it is difficult without a tool like Facebook to know where everyone is at any given time. While travelling the world and arriving in a new city, I search for friends in a particular city.

The basic Facebook search filter

For example, I was in London for a week and was able to catch up with a lot of friends, some of whom I had not seen for more than 10 years. Without Facebook, I would have to email a lot of friends individually. This would have taken up more time and been less successful. I would have emailed a lot of people who had moved to London initially but no longer lived there anymore. In addition, I would likely miss people who moved to London recently, since I wouldn’t have been aware of their move. It would be a challenge to email thousands of friends repeatedly to check on their location. With Facebook, I met about twice as many friends as I would have otherwise (half of the friends I found through Facebook’s search were friends whose relocation to London I was initially unaware of)

In addition to keeping up with old friends, Facebook was extremely useful for keeping in touch with new friends I may have encountered once or twice, but that I had a meaningful connection with. For example, during a long bus journey or during a wait at a bus stop, I might add the person next to me on Facebook. Due to distance and a statistical unlikelihood of meeting any one particular person again, I am unlikely to email these friends at high frequency. However, due to Facebook, I am able to find them easily and meet them when I am in their city without frequent communication before. For example, I recently met a Finnish friend on a bus in Albania. I was only in Finland for 3 days. I knew on the back of my mind to contact him in Helsinki but had briefly forgotten his name. When I searched for friends who lived in Finland, he appeared in the search.

Apart from the search function, Facebook’s check in function has helped me.

Often, I have been able to catch up with friends who coincidentally happened to be in the same city I was in, due to a Facebook check-in. For example, I checked in to Buenos Aires and was able to catch up with a friend from Slovakia who I met in Peru who saw my Facebook status. It works the other way around to. An old friend from Stanford was visiting Dallas, and we were able to catch up because I saw his Facebook status that he was coming into town. Another friend from Puerto Rico who I met in Morocco posted that he was in Mexico and I met up with him on his last night there. Without Facebook, these in person meetings would likely not have happened.

I gain immense utility from my friends posting articles on Facebook. In effect, Facebook crowdsources some of my research. Of course, I do supplement with my own research independent of Facebook later. Some people complain of an echo chamber. Facebook is a tool though. If you complain of a biased echo chamber, Facebook is not the problem, the lack of diversity in your social circle is. Using the 2016 United States presidential election as an example, the fact that I had both liberal and conservative friends meant that I saw articles on both sides of the political spectrum. CNN has a liberal bias and Fox News has a conservative bias. Obtaining my news from only one of the channels would surely distort my interpretation of the news. I do think CNN is less overtly biased than Fox but my point here is that neither are objective.

Due to a larger group of friends sharing articles they found important, I had access to niche opinion websites to. Some were more objective than others but even viewing “fake news” had its benefits because it showed me examples of the misinformation that was spreading. Looking at major news events covered through different lenses, at more moderate ends as well as more extreme ends, helped me reach a more informed[1] opinion. In addition, I obtained a broad overview of how different parts of the population think. For the purpose of argument, I used conservatives and liberals as an example. Of course, the reality is much more nuanced than that and a lot of people have a mix of beliefs from both sides.

Facebook also helps me to keep abreast of global news, fresh from their local news outlets. For example, I was able to read local British sources on Brexit that my friends who live in the UK posted. I was able to read local sources in French when Macron won the French presidential election. I was able to read local sources in both English and Malay when Mahathir won the Malaysian elections. I was able to read local sources in Spanish when Fuego erupted in Guatemala. Yes, I could have found all these sources through Google rather than Facebook but Facebook brought all these articles to my doorstep. It lowered the energy required to get to the news, and made it more likely for me to read the news. Relying on a single news channel would have filtered other countries’ news via the eyes of a particular news channel from a particular country.

There are many other uses of Facebook I have not covered in this article. I have mainly chosen to cover the points that are have directly affected me the most. I have friends who met their spouse on Facebook, roommates who used to be strangers who I introduced after noticing their status updates looking for roommates, and friends who get advice on how to solve issues by asking their friends on Facebook.

I encourage you to be the surfer in the image at the top. Yes, Facebook’s power can be intimidating but always remember that Facebook is a tool. Take control of Facebook and harness its power. Just be aware of its limitations.

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[1]The word choice of ‘informed’ rather than ‘balanced’ opinion is deliberate

Credits

Wave picture by Jeremy Bishop