patrick.net

First off Patrick, I think your site is sweet. I have learned so much here over the past decade. Fortunately for me, I was able to avoid some housing mistakes after being awoken to some of the hard truths of the housing market by you and some of the other contributors. This was especially true in 2008 when I first read the blog.

In 2017, much of the advice is still pertinent and helpful. The rent/buy calculator for example is great.

The issue that I have with trying to help people with housing is that it is so specific to each individual, and often requires some speculation (no one can predict the future and no one can know everything, for example even a good home inspector can miss important details that can be very costly).

Housing is much like healthcare. Everyone needs it, and it is becoming increasingly unaffordable to the less affluent. This is especially true in desirable locations. And yet everyone needs housing. That is why it is so skewed in favor of the banks/RE agents. They know that people need it (or at least VERY much WANT it because they are tired of paying high rents, or not having a place of their own). So unless we can change the game so that every working person has opportunity to own their own home, I just think the banks/RE agents will continue to fleece everyone. I even heard an ad on the radio on the way home today, it was a joke but referred to the price of a house as 24 years of working full time. It was a joke, but for most people it is ABSOLUTELY true. Can your business change that? Because that is what needs to change. It should not cost 24-30 years of hard labor to buy a house.

Don't you agree?

I'm not sure how you could get a website like that to pay for itself. Are Realtors going to pay to advertise their properties on the website? I don't think so.

Patrick.net is worth 4m now?

How else would spending 1m for 20% interest makes sense. Have you watched shark tank?

You can use your programming and passion with something like dotloop. There is no business model for selling " not buying", it's just a rant not a business.

PeopleUnited says

It should not cost 24-30 years of hard labor to buy a house.

Don't you agree?

Sure, I agree. One partial solution is to wake up as many buyers as possible to the ridiculous blind bidding scam. If more people become rightly suspicious that other bids don't even really exist, then they will bid less, and we will have to bid less to compete with them as well.

jvolstad says

Are Realtors going to pay to advertise their properties on the website?

I would refuse to take any advertising from realtors anyway.

SFace says

Patrick.net is worth 4m now?

Well, actually 5M if I could get an investment of 1M for 20%!

SFace says

You can use your programming and passion with something like dotloop.

Dotloop is done. What else needs doing that is not selling out to realtors?

Unfortunately I don't think housing has the draw anymore. College debt would probably be a hotter issue.

Patrick says

If you don't like the idea, please say why in a polite way.

I like the idea in principle, but how do you get it off the ground when you favor renting vs buying to begin with?

Great idea Patrick. I only wish I could put some money where my mouth is.

Long time ago, I asked myself the question:" why is it always guys trying to hit on/pick up girls? Sex is pleasure for both men and women. How come it is women always have the position to say yes or no and guys have to work hard to achieve their consensus?"
My conclusion was that like lots of other things in life, it is about crowd influence.
If every single men can agree with each other to avoid having sex with women unless women starts to hit on men, then the situation would be opposite.
But the impatience, lack of sexual desire control and competitiveness of men by nature can NOT convince each other to be patient and organized like women.
The point is, if the crowd of men do NOT have patience, each individual male can NOT beat the crowd and have an advantageous position. The only choice he has is to do what the crowd does.
Same thing goes for real estate.
The position of buyers are like guys in dating and the real estate industry is like the girls in dating.
The difference between guys and girls are patience and organization.
Home buyers do NOT have patience and home buyers do NOT have organization.
It is home buyer's nature and the real state industry use this nature against them.

Try to use logic to convince home buyers is like to convince guys get organized and hold mate seeking desire until women hit on men.
The likely hood of this working is extremely low.

So my suggestion is to let the world be its natural state. If you work against human nature, it is difficult.

I literally bought your paper back of housing trap and gave it to a friend of mine. I just can NOT convince him to look at numbers because all co-workers are buying, all neighboring are buying, and they all buying through agents. They all bid up prices based on some unsound information. Real estate always go up, if you do not do it now, you will be priced out ......... all crowd talks.

Your website may work for patient buyers, but out of the 4 million each year, my guess if that there are less than 1% would actually do the work themselves and look for data/suggestion from your site.

Above are my thoughts

The problem from my perspective is this.

You're trying to "educate" buyers that housing is overpriced, lots of scams, bad investment etc etc. That's a completely rational perspective from your end (and mine as well as such), but...

The "buyers" themselves NEED this scam/overpriced/____/whatever... to continue. Otherwise it falls apart. And that's going to be your biggest challenge.

The other elephant in the room of course is the Fed/Central Banks. Real Estate is de facto a big boys game. In places like Germany where real estate is very much rational, it is rational because the big boys have kept it so. Devalue the euro (just like the US dollar) and.... ;-)

How do you educate somebody against that?

Patrick says

I would like to get funding to re-focus Patrick.net as a business explicitly to help buyers avoid the traps set for them by the real estate industry. The problem to solve is the unmet need for a community and source of data which is entirely on the side of the house buyer. All realtors, banks, and existing real estate sites have a large financial interest in getting the buyer to screw himself with as much mortgage debt as possible, as quickly as possible. Potential buyers are in pain because they do not know what to do and do not have any trustworthy source of advice aside from friends and family. Buyers are often young and unaware of realtors' predatory tactics.

There are plenty of trustworthy resources available. What would set patnet apart from the reams of information out there on this subject now? If people are willingly ignorant and unwilling to do the basic easily available research on the subject what would patnet do to convince them otherwise? JZ hit it on the head, 99% of buyers are impatient and emotional.

A friend of mine said something recently that made it click. He and his wife were buying a nicer house, and he was bitching about how his RE agent was trying to tell them to stay within their means. My friend said "I know but if I want to overpay and be house-poor, let me be". Sometimes people even know it and they don't care. They're looking at the incremental rise in pain spread out over the next 30 years, and at that point, they've lost touch with reality. Good luck selling help to the fools.

Rew says

College debt would probably be a hotter issue.

Thanks, that would make another good website.

JZ says

How come it is women always have the position to say yes or no and guys have to work hard to achieve their consensus?"

Women are in the position to say yes or no to sex, but men are in the position to say yes or no to a relationship. They have different powers, and that just comes out of innate biology: women get pregnant, men do not, so women are choosey about sex and men are choosey about long-term commitment. Could go on about this Red Pill stuff.

While I agree that buyer organization would help lower prices, it's very unlikely because buyers are competing against each other. When one buyer withholds a bit, other impulsive buyers benefit by swooping in, and the patient buyer gets nothing in return for cooperation. Anyway, for all we know, 90% of all bids are fakes. Only realtors get to see them for sure, and you cannot trust realtors, ever.

kapone says

The "buyers" themselves NEED this scam/overpriced/____/whatever... to continue. Otherwise it falls apart.

Please explain more. I don't see why buyers need housing to be overpriced.

errc says

He and his wife were buying a nicer house

I'd bet it was 90% driven by the wife.

Pat, put up some gofundme/patreon stuff so some of us low level "investors" an start throwing a few bucks at ya.

Patrick: Please explain more. I don't see why buyers need housing to be overpriced.

The Bigger Fool theory.

If you believe/have been educated ...that housing IS overpriced, you wouldn't buy it for fear of being the "bigger fool" that's left holding an overpriced asset, that may decline in value. People buy real estate (in places like US...there are many others) with the implicit assumption that it'll go up. That assumption is not entirely wrong, given the history of the value of the US dollar.

rando says

Well, actually 5M if I could get an investment of 1M for 20%!

How much revenue do you expect and why? If you have 10K users paying $10/month, you get $100K/month or $1.2M/yr in revenue. That would get you there, but it's probably unlikely. How much are adverts worth with 10K users?

Given that it's a very unproven plan, I think that the expected worth once developed would have to be much more than $5M to entice someone to take on lots of risk.

IMO, what is really needed is something like Uber for real estate. It would have to be a program / app that cut the costs of sell/buy transaction by 80%. Buyers would get approval letters from banks, which could be submitted to the company. The company would provide locks to sellers and approved buyers could use apps in their phones to set up an appointment to view a house and unlock the doors. The company would also have a method for submitting an offer and scheduling inspectors, appraisers, etc. The company could provide guidance to the seller based on ratings from the bank regarding the chances of getting a loan. I'm sure that there are glitches, but I cannot see why a well funded group with software experience couldn't transform the industry. Cutting the transaction costs would dramatically change the market for buying and for renting.

By driving realtors out of business, you could create a whole new group of voters for Trump to exploit.

I'd bet it was 90% driven by the wife.

---------------

I'd book that bet. Look, I'm fully aware of the pitfalls of feminism, and I know that men will subject themselves to bad decisions in the name of women, but get a clue. There are plenty of men fully willing to (knowingly) make terrible financial decisions.

Those were his own thoughts/feelings/words.

I have another friend, hard working family man, builder, who justifies getting ripped off by Comcast $250+ a month, simply because he wants the sports package.

Not everyone is driven by being a tight ass Jew, that headaches away countless hours, making sure they never leave a penny on the table. I mean, I am, so I'm privy to lots of these type conversations with friends, but I understand that many others just don't care.

Some of us drive cheap old 35mpg Hondas, shop at ALDI, take the time to shop electricity providers to save 0.01 cents per kW/h, buy boring dividend equities for the DRIPs, shop their mortgage rates, parse through Credit Card offers for money saving deals etc. all with the hope to meet our goals of early retirement.

Others just don't give a fuck. They want what they want and will sacrifice their future to have it now.

Short of teaching these things to children, who not only get zero education on the matters in their mandatory public education, rather they are misinformed, marketed and advertised at, to make bad decisions.

Good luck with your "Re-venture " with this, your most noble of efforts, but heed the advice from those that tell you, your efforts are futile

With out a complete, crisp and clean Business Plan to measure cost benefit and risk/reward like so many ideas this is dead on arrival.
Do you have a business plan Patrick or just the idea?

Women has the patience and organized strategy towards sex and both men and women have a say in relationships.

House buying is the sex part, there is no relationship afterwards.

It is also true that the competing buyers would always competes out those that are patient and sane as long as the RE industry can make one competitor insane.
So, the buyer who follows your data and advice would find he/she always gets compete out and after 1 month he would conclude that your advice is NOT reflecting reality and he then would join the crowd and do what other buyers do.

So I think the attempt to expose fraud or realtor tricks would NOT benefit any buyer simply because as long as they can trick one, everybody else is competed out.

The only cure of this probelem is to rein in lending and bailouts but that is what government set up to do. Slavery and wealth transfer.

YesYNot says

rando says

Well, actually 5M if I could get an investment of 1M for 20%!

How much revenue do you expect and why? If you have 10K users paying $10/month, you get $100K/month or $1.2M/yr in revenue. That would get you there, but it's probably unlikely. How much are adverts worth with 10K users?

Given that it's a very unproven plan, I think that the expected worth once developed would have to be much more than $5M to entice someone to take on lots of risk.

IMO, what is really needed is something like Uber for real estate. It would have to be a program / app that cut the costs of sell/buy transaction by 80%. Buyers would get approval letters from banks, which could be submitted to the company. The company would provide locks to sellers and approved buyers could use apps in their phones to set up an appointment to view a house and unlock the doors. The company would ...

Already been done to a large extent. It's called Redfin.

kapone says

Already been done to a large extent. It's called Redfin.

I disagree. Redfin makes money off commissions so they are not trustworthy.

JZ says

So I think the attempt to expose fraud or realtor tricks would NOT benefit any buyer simply because as long as they can trick one, everybody else is competed out.

I agree, it's a major problem if you have to bid against insane people willing to bankrupt themselves.

But are you really bidding against them, or did the realtor just make up a fake bid to get you to bid higher? You cannot tell, and that is a major flaw keeping this all working against buyers.

Graybox says

Do you have a business plan Patrick or just the idea?

No business plan. I honestly cannot really project revenue aside from "It would be large if we got the attention of most buyers and had a sterling reputation for honesty."

errc says

Good luck with your "Re-venture " with this, your most noble of efforts, but heed the advice from those that tell you, your efforts are futile

But it's meaningful, and that's worth a lot. Maybe there are enough investors out there with high ideals willing to bet that they can do well by doing good.

rando says

kapone says

Already been done to a large extent. It's called Redfin.

I disagree. Redfin makes money off commissions so they are not trustworthy.

Yes, Redfin makes money from commissions, but if they provide a service that's "worth it", then there's nothing wrong with that. "Worth it" of course, is in the eyes of the beholder. Think of it this way. You can "educate" your buyers all you want, but if the sellers don't wanna sell for the price that you think is "fair value", who's losing out? Seller/Buyer/Both/You? :)

The problem you have is that I'm not convinced you have anything TO sell. Counting eyeballs is getting old...just look at Snap's stock...and you'll never get that many eyeballs. Your revenue model consists of:

* Advertising non-conflicting products and services, like rentals, investments, and home improvement. Advertising by realtors or other conflicted interests will never be allowed. - But this is based on eyeballs. Will you have enough eyeballs?
* Subscriptions to premium forum and news features. - If people won't pay for a NY Times subscription for all the "premium" stuff (just ask them, they are getting killed), can your premium content provide a higher perceptible value?
* Fees for data streams useful to buyers, such as recent death, divorce, and bankruptcies by area to find houses likely to come on the market soon. - This is all public domain data, which can be searched for free. You, actually, will have to pay them to get access to their APIs for integration with your system(s), however, there's some value here.
* Fees for alerts of new property on the market which seems likely to be cash-flow positive for landlords (and thus also a safe purchase for one's own use). - er... minor issue here. Where do you get the data for these properties? MLS? uhh.. and Landlords who are actually on the market are probably looking at the same sources of data that you will be, and most, if not all of those systems support alerts.

See, here's the thing. I actually agree with your views. Quite a bit. But the problem is that "viewpoints" are not quantifiable, nor do they represent a business model. Educating people about something can be very lucrative (hell, the mass media has been doing it for decades), but educating people on something they likely DON'T want to be educated on, is way more difficult.

OK, advertising is not all that compelling, but I believe the last two items could be very big. Realtors are never going to tell buyers about property that is likely to come on the market soon (because the realtor cannot make a commission), and that is where the real deals are. People might pay quite a bit for that info when they are looking.

And I know landlords would pay for good rental cash flow analysis of properties coming on the market, because I did it for a while and had a few thousand $ per month in revenue by doing that just with Craigslist data, until Craigslist cut me off.

The problem is then collecting public data on deaths, divorces, and bankruptcies, and collecting data on houses for sale and likely rents.

You're right, which is why I said, there's some value there. On your last point however, I'm not sure I agree. It'll work on a small scale, where you have "newbie/wannabe" (for lack of a better word) landlords, but does not work for any serious landlords. Serious landlords didn't become serious landlords without being able to do that analysis themselves.

In addition, now they will be depending on analysis based on somebody else's algorithm/assumptions/?? vs their own. If that algorithm is "proven" (which is a catch 22 situation) then it's sellable, but if not... :)

Patrick what will be the draw for visitors and listers?

FortWayne says

Patrick what will be the draw for visitors and listers?

It will be the only real estate business on the internet that is not trying to get buyers into massive debt.

Buyers will like that. If there are enough buyers, then listers will list their houses just to get them in front of buyers.

Great thread & good comments!
WTH is happening to patrick.net?

Here's another related idea. (By reading this idea, you automatically sign an NDA, and I'll haunt you for the rest of your life, if you break it).

What's the single biggest thing in real estate that's "subjective"? The price.
- If you're a seller, you are never sure what the right price is, to list your property. You hire an agent, they do some gobbledegook called a CMA and tell you a price. You have no way of knowing if that's realistic or the used car sticker price. The definition of a used car sticker price - The used car salesman is crossing his heart and hoping for a fool who'll pay the asking price.
- If you're a buyer, you don't know if the list price of a property is the "right" price to buy at or not. You either hire an agent who (read above about CMA) gives you an opinion, or you form your own, which may be right or not.

The problem in two words - price discovery. How do sellers and buyers "discover" the market price in real estate? The simplistic answer is, list it and find out. But that has a whole bunch of problems with it. Too high, and it won't sell, too low, and you're giving away money.

Idea:

- For a "small" fee, let folks list their property on your site/app/whatever at a price that THEY think is right, for a certain amount of time.
- The buyers get to bid it up or down. - There's some grey areas here, have to think this through.
- All seller/buyer contact info is completely private/hidden. Pseudonyms only.
- The monkey wrench (and the incentive for buyers) is that the top bidder at the end of the time period gets the seller's contact info (and vice versa for the seller) automatically. No obligations, but they have contact info. - Some grey areas here.
- The seller can do this as many times as they want, hell they are paying.

Voila - price discovery and a useful service?

Thanks, I appreciate hearing ideas and agree that price discovery is a problem.

What would stop sleazy realtors from being the top bidder all the time, just to get the seller's contact info? Realtors are desperate to have sellers list with them around here.

What would stop sleazy realtors from being the top bidder all the time, just to get the seller's contact info?

Educated buyers who'll be competing for the same thing. There's more buyers out there than realtors.

Isn't that your intent? :)

Edit: And there's some grey area about "top bidder". I still have to think this through (I've actually been thinking about this for a while). The bidder with the highest price is not what I have in mind, more like "last man (or woman) standing", based on some algorithm. Gotta think about this.

rando says

Thanks, I appreciate hearing ideas and agree that price discovery is a problem.

What would stop sleazy realtors from being the top bidder all the time, just to get the seller's contact info? Realtors are desperate to have sellers list with them around here.

Competition

Have you ever considered becoming a Real Estate attorney?

Then start a site that allows sellers to escape paying commissions.

American Real Estate is already bought and sold in a process that resembles an auction, where their list price is akin to a Reserve or Buy it Now price.

Fat chance of convincing sellers to take anything less than the Highest price they can fetch. However, better Information, education, and transparency are all tenets of Free Market Americanism that so many claim to desire.

So maybe a better means to your end would be a Real Estate auction site, that contains good data, and educational tools.

kapone says

The bidder with the highest price is not what I have in mind, more like "last man (or woman) standing", based on some algorithm. Gotta think about this.

OK, let me know. I was assuming that "top bidder" was based purely on the number.

But since we're on to price discovery, how about a site that tells you the approximate fair value for a house based on rents? I suppose you can already kind of do this with the various rent-vs-buy calculators out there. And would people pay to know the fair value based on rents?

errc says

So maybe a better means to your end would be a Real Estate auction site, that contains good data, and educational tools.

I would love it if a real estate auction site could work, but would people use it? Realtors would all tell sellers "Nah, don't auction your house, trust me and my sleazy bag of tricks like fake bids to get you much more money than transparency and honesty ever could!" (And then the realtor goes off and silently blocks the highest bid, making sure his own agency get both sides of the commission and the seller never even hears about the bid.)

rando says

But since we're on to price discovery, how about a site that tells you the approximate fair value for a house based on rents? I suppose you can already kind of do this with the various rent-vs-buy calculators out there. And would people pay to know the fair value based on rents?

I wouldn't tie "fair value" to rents. In a number of cases, that calculation is skewed one way or another for a number of reasons. For e.g. a house on 5 acres in a relatively prime neighborhood is valuable from a buy perspective, but not so much from a rent perspective. While the renter would love that land while he/she is renting, they don't perceive the value of it the same the buyer does.

What I was talking about is essentially crowd-sourced price discovery. But, you gotta give the crowd some incentive to participate in the process.

kapone says

What I was talking about is essentially crowd-sourced price discovery.

I do like this idea. Just don't know how to implement it with resistance to manipulation by realtors.

rando says

I do like this idea. Just don't know how to implement it with resistance to manipulation by realtors.

That's where the big bucks will be. :)

APOCALYPSEFUCK_is_ADORABLE says

Poobah, Can I have a blog on criminal justice and banking regulation on your new website?

Hey, would you like a dedicated site for that?

"Apocalypsefuck on Banking Regulation"

Might get a big following. Would not be all that hard to set up a parallel site with a different domain name, especially after I've finished migrating the source code to node.js (seems to be taking forever, but making progress, see http://node.patrick.net for a version with lots of features missing)

See, long term, the solution to the realtor problem is to take away the incentive to pursue "listings". That's easier said than done.

What you need (in my opinion) is something similar to MERS (Mortgage Electronic Registration System - https://www.mersinc.org/), not quite...but similar....maybe even a tie up with them. Take away the whole thing about Registration/Transfer/Title search/title insurance etc etc. The "entity" (similar to MERS) has "technical" ownership of the asset, but only from a tax/legislative purpose. They turn around and have a perpetual contract with you, the owner. If when you want to sell, the entity just has to issue a new contract to the new owner and void the existing one, no running around like a headless chicken searching for the title.

If you want to sell, the entity itself provides the infrastructure to execute your sale. They would have most information/processing in house anyway.

But this requires big bucks...which is why Berkshire's getting into it. That should give you a hint.

I'd add calculators, analysis, and filters to existing databases of real estate data. Offer all the functionality you mentioned as a free service and build your community (all as mentioned). However, WHEN a member uses your app functions to search for an investment property, or whatever, you need to have clear landing pages wherein the user enters info to find the proper bank, mortgage agent, real estate agent, leasing agent, etc... These agents pay anywhere from $15 to $100 per lead, depending on quality and industry.

A pure lead gen matching service, w a core value of community and free analysis for custom research... it could work.

kapone says

What I was talking about is essentially crowd-sourced price discovery. But, you gotta give the crowd some incentive to participate in the process.

Don't we already have that now? I'll give you two examples.

1. My (delusional) parents are trying to FSBO their house for One Million . It has gotten 0 bids/inquiries for that price over 3 years. They once de-listed it, then mistakenly relisted it for 100K. They got 47 bids/inquiries in the first day - some willing to pay 300K - before they realized their mistake and added the extra zero to make it a million. Now, they did not let the price discovery complete, but we instantly knew it was worth somewhere between 300K and under 1MM (my best guess is 650k).

2. My wife's car blew up. I didn't give a shit about it so I did no research and just listed it on craigslist for $1,500 as I would have GLADLY have someone take it off my hands for that. Turns out, I massively underpriced it and I got hundreds of calls in an hour offering me up to 3-4K. Once I realized my mistake I told everyone to meet me in the parking lot at 6PM and I ran an all cash auction. 3 guys showed up and the winning bid of $2,850 cash took it away.

2 months later, as a science experience I decided to re-list the car I sold at 5K to see what happens. I got 3-4 inquires in a week before the ad expired and one half hearted lowball of " would you take $2,500 for it". Thus in a reasonable amount of time, buyers (who are always the ones who set the price) did the discovery work. I could have maybe gotten one of the guys who offered me 4K on the phone to come through - even though none of them decided to show up? Maybe, Maybe not. Either way, all I wanted was something north of $1,500 so I was tickled to get $2850. Likewise, the guy (who was by definition the "greatest fool" when he paid $2850) was sooo psyched to get a car to rebuild with his son. This is the magic of the market - this is price discovery!

I don't think that price discovery is the biggest problem. There is an issue that people who live in and are emotionally attached to a house will look past the problems and overvalue their house. Sellers likewise will look at every flaw. Part of the realtor's job is to help these people see reality. OTOH, if there were no Realtors, people would find their way to reality on their own.

kapone says

Already been done to a large extent. It's called Redfin.

I suggested that transaction costs could be reduced by 80%. Does Redfin offer to list and sell your house for 1% of sales price? No. Does Redfin authenticate buyers and provide a way for them to schedule and view houses on their own? No. Redfin has basically put some data up on a web site and allows users to view inventory and do their own CMA. They (or someone else) needs to roll out something that is outside of the MLS in a region like San Francisco. The primary issue with only charging 1% to list a house is that the buyer's agent wants to get paid. As cash strapped buyers learn to do their own CMA (hardly rocket science), they can bypass agents. A city like SF is the perfect place for proof of concept. Once the model is established, the ball will roll out to other regions.

The problem with doing what I suggest is that you will be fighting people like Redfin, who already have a big team established. But, they are not even trying to do what I suggested. They are really just a cut-rate Realtor shop using technology to offload their work onto buyers.

Like others have stated, there is already an auction for every house sale. The auction doesn't have to be automated. In fact, it cannot, because people have to value things like inspection contingencies.

Therafin says

I did no research and just listed it on craigslist for $1,500 as I would have GLADLY have someone take it off my hands for that. Turns out, I massively underpriced it and I got hundreds of calls in an hour offering me up to 3-4K.

This is really interesting. You can judge the viability of a price point by the number of inquiries at that point.

You can do that once or twice, like Therafin's delusional parents, but it's hard to really pin down the price that way since people remember the history of asking prices and will make inferences about you, mucking up the data, if you list the same property over and over at different prices:

* you lowered the price, so you're desperate to sell
* you changed the price 20 times, so you're crazy