Online real estate transactions now account for over half of all housing purchases in the US alone. The Web offers a place for buyers, sellers, agents and investors to do business that bypasses the traditional “brick and mortar” style of doing business – and it’s changing the game for all concerned in ways both good and bad.
The online world of real estate takes many forms. Only databases provide a place for agents to list their services and properties. Buyers can search by price, location, agency and more. These sites serve agents and brokers who make the initial contact with a prospective buyer through he online portal, but then the rest of the transaction takes place in the traditional way.
Those big online listing sites also serve a new breed – real estate agents, buyers and sellers that exist only online. The entire property transaction can take place electronically, without any parties ever meeting in the physical world.
Online transactions are fast and convenient. They can be conducted from anywhere in the world – an appealing prospect for investors interested in buying properties abroad or those who want to diversify their portfolio at home – a strategy Jason Hartman recommends.
But as a recent article from Business Insider reports, those very features are creating conflict between “brick and mortar” real estate agencies and those doing business purely online. The parties involved in the current conflict are UK_based OntheMarket and a host of competitors angry at the site’s success at poaching their clients with lower listing rates and more services.
While that might not seem like much oaf a concern to housing market watchers elsewhere in the world, it points up the fact that online real estate transactions continue to play a major role in both commercial and residential real estate purchases throughout the world. And because that’s true, all parties involved must learn how to navigate the ups and downs of this rapidly changing landscape.
The world of online real estate includes options as diverse as massive databases of properties and agents, auctions, agency and individual agent websites, and private transactions conducted directly between buyers and sellers through classified ads and even social media.
Transactions can be conducted completely online, or go offsite into the physical world after the initial contact is made. Title searches and many other aspects of closing a deal can be done online too – and thanks to social media all parties can stay in frequent, real time contact. Properties can change hands via online funds transfers to private accounts or sites like PayPal in virtually any currency – even Bitcoin.
But s the frustrated agents in the Business Insider piece point out, bypassing the tried and true system of buying and selling property comes with its own set of risks. Entities that exist only online can be legitimate –or not. They can vanish in a heartbeat, often after collecting large amounts of money from unsuspecting investors with dollar signs in their eyes. That’s what happened in a recent scam in which a bogus real estate investment company sold eager investors on a plan to buy up cheap houses in distressed Detroit – and then vanished, taking investors’ funds along.
Because the entire operation was conducted online, once it closed up shop, the investors who had been bilked had virtually no chance of getting their money back. The online world is home to other scammers, too. In a variation on the old “Nigerian prince” scheme, scammers post up heart-tugging ads about hardship and tragedy, begging for someone to sell them a property outside their country. Gullible investors put up money – and never see it again.
Listing scams also abound. Scammers snatch legitimate listings from the large databases and relist them under their own name, selling and re-selling the same property over and over again until someone catches on.
The new popularity of using Bitcoin for online transactions of all kinds – not just for real estate – also opens the door for scams. Bitcoin can be used for just about any transaction that both parties agree upon, and that includes buying and selling homes and other big-ticket items. It’s becoming increasingly favored for international transactions, especially when one or both parties hail from countries with unstable currencies.
But Bitcoin is anonymous and untraceable. If a deal goes bad there’s no recourse for either party. There’s no way to stop a check, trace a deposit, or do any of the things that can protect a transaction involving traditional currencies. And bypassing the safeguards of traditional process creates risk too.
While real estate professionals, buyers and sellers of the traditional variety may complain, but online property transactions are claiming an ever-bigger piece of the real estate pie. In this ever-changing world full of conveniences – and risks – it pays for investors to take Jason Hartman’s advice to stay informed – and in control. (Featured image: Flickr/mikhailchurykin)
“Real Estwate Agents Are Waging War Against the Internet.” The Economist via Business Insider. businessinsider.com 20 Feb 2015
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