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Sunday, Feb 25, 2024

Tech Expedites Non-Traditional Home Sales

On both the broker and consumer sides, residential real estate has become a technology play. In the future, adults — millennials and younger — will dictate home-buying trends, and that will not include driving from open house to open house. With every year, more prospective homebuyers are expected to hunt for home ownership online. “The millennials overtook the baby boomers,” said Randy Reyes, franchise owner of Valencia-based Hommati. “They don’t want to come out of their homes, they do all their searches online.” Right now, Reyes said, millennials are about 35 percent of the buying market. “By 2025, it will be 50 percent,” he said. That’s where property tech comes in. Per industry experts, the days of real estate agents driving around a neighborhood, putting up signs and advertising in magazines will soon be over. The worldwide value of property technology, or proptech, currently stands at $5 billion, and participants in the San Fernando and Santa Clarita valleys are part of the emerging industry. Surging sector According to Inc.com, investment in U.S. proptech is on pace to exceed $10 billion. Since 2013, when analysts began tracking the industry, proptech has reached $35 billion through 2018. Compass was the first proptech company to crack a $1 billion valuation, followed by Chinese real estate portal Homelink; then by SMS Assist, which deals with rental property management. Soon after, they were followed by Opendoor, TenX and Purplebricks in real estate sales; VTS in commercial real estate; and Habiteo in real estate development. An early pioneer and success story of property tech is Rex Real Estate. In 2015, entrepreneur Jack Ryan launched Rex, an online real estate platform intent on changing the way people buy and sell homes, in Westlake Village. The former Goldman Sachs investment banker self-funded his 15-employee startup to the tune of “more than $2 million but less than $10 million,” he told the Business Journal at the time. Ryan decided to start the company in Westlake Village after becoming familiar with the area through an investment in another startup, digital postal service Zumbox, which closed in 2014 after raising more than $30 million in outside funding. When that venture failed, Ryan said, he knew that some of the engineers who had worked on it would be looking for new opportunities. They included a few people who had worked on Realtor.com, the official website of the National Association of Realtors. Initially, Rex’s business model relied on a 1 percent commission at close, as opposed to traditional agents’ typical 5 percent commission. Ryan figured at the time that he’d need to sell homes in the $400,000 to $40 million range for the company’s financials to pencil out. The firm has since grown exponentially. In February 2019, Rex Real Estate raised $45 million in a third round of financing, bringing its total investment to $75 million since the e-company’s investment. Rex – which relocated its headquarters last year to Austin, Texas – now has locations in San Francisco, New York, New Jersey, Colorado, Nevada and Arizona while maintaining its Los Angeles presence in the Warner Center at 21550 Oxnard St. in Woodland Hills. Simi Valley slice Brad Rice, the founder of Simi Valley proptech company Homepie Inc., came from the mortgage end of the business, having previously headed Mortgage Corp. of America. “A few years ago, I had an idea where real estate is going with technology,” he told the Business Journal. “I started to see some disruption in real estate with discount brokerages and iBuyers and such.” In 2018, “a lot of funding started going into proptech,” Rice continued. “That inspired me to get off the idea and working at the beginning of early 2019 took it out of the idea stage.” In March 2019, Rice began developing his proptech concept before launching Homepie.com on Jan. 14. Homepie is a website where consumers go for commission-free help to buy or sell a home. The site is a provider of do-it-yourself tools for homebuyers and sellers who wish to transact without a real estate broker. According to real estate data provider CoreLogic, the price of an average house in the Los Angeles six-county region is around $535,000. A typical real estate broker will charge a commission to the seller for 5 to 6 percent of the sale price and the commission, half of which goes to the buyer’s agent. “On the low end of the spectrum, Californians are paying tens of thousands of dollars to get help,” said Rice. “So we built software that allows the buyer and seller to perform the transaction at no charge for folks that don’t need expert advice.” “Proptech companies have been focused on the digital transaction management for over a decade, building tools for real estate agents and brokers,” said Jay Bettinger of Bettinger Law, a Newport Beach business attorney with internet technology expertise. “Depending on the type of transaction, it is a step-by-step process that centers around two things: contract management and coordination (with lenders, inspectors, appraisers, escrow, insurance and title). Homepie has built a remarkable solution that allows consumers to transact without using an agent or broker, eliminating that expense completely.” Homepie receives advertising and fee revenue from lenders, inspectors, escrow and title companies, but users of the Homepie platform are not obligated to use their partners. “It’s more of an advertising play. A complete ecosystem that is all about buying and selling homes,” said Rice, who appreciates being based in Simi Valley as he believes that there is no better place to launch a proptech concept than in Southern California. “I’ve been in the Los Angeles and Ventura (counties) market for so long that I know it, it’s my backyard,” Rice said. According to Rice, an average of 7 percent of all homes are sold by owner. “That is after 16 percent attempt to sell by owner, so more than half of them fall off,” he noted. Homepie currently has 12 employees and eight outside developers. Rice expects to hire another 35 employees in 2020 as demand grows for the service. Beyond social media and search engine optimization marketing campaigns, Rice intends to advertise his new venture via traditional media, including television and radio spots. Santa Clarita startup In Santa Clarita Valley, Reyes, who came from a sales and marketing background, recently launched the Valencia branch of Hommati, an Ohio-based company that offers a range of high-tech services to aid real estate agents with their listings and create more appealing visuals for home buyers. Hommati deals directly with the broker side of the equation and not the consumer side. A few trending technology services that Reyes specializes includes Space Mobile Applications – building engagement within apartment buildings with easily accessible applications that send push notification with community updates; Virtual Home & Property Tours – which offers 360-degree virtual tours so buyers can view a space in real-time, no matter where they’re located; Digital Auctions & Property Buying, an listing service platform that allows anyone to buy and sell a property digitally without ever having to physically see it; and Augmented Reality & Virtual Staging – which gives buyers the chance to creatively envision a space all the way down to the details and imagine life in the house of choice. Hommati “allows the agents to have all of these services under one roof,” Reyes said. Operating from 28316 Constellation Road in Valencia, Reyes works with his 19-year old son, Austin Reyes, who handles the tech side, including production of a Matterport 3D camera to capture virtual tours, video editing and aerial drone imagery. According to Randy Reyes, the digital legwork really does work as realtors enjoy a speedy turnaround. “They sell within one to two months,” Reyes said. “(Virtual technology) allows the homebuyer to see everything before they come to buy the home.” It also “helps them save time (and gas),” he added. Encino contractor search Not all proptech business models lean hard on the “tech” portion. Encino-based GreatBuildz is a free service that originates online but ultimately provides an old-school approach to uniting customer with renovation contractors for those seeking to remodel their homes. “It’s not an algorithm, it’s not an app,” said GreatBuildz’ Paul Dashevky. “We connect homeowners with reliable pre-vetted general contractors.” GreatBuildz partners/co-founders Dashevky and Jon Grispul are an uncle-and-nephew duo who paired their individual talents to launch the business in March 2019. Dashevky brought his know-how in construction while Grispul imported his tech and customer service skills. “I spent the last 10 years (flipping real estate),” said Dashevky, who added that he’s completed 350 flips in locations such as Thousand Oaks, Santa Clarita, Pasadena and Long Beach with a former partner as part of a Calabasas-based S-corp company called WestCliff Realty. Dashevky’s ideas for GreatBuildz is a derivative of his greatest burden flipping houses. “The most painful part of my job bar none was hiring solid reliable contractors,” he said. “If I struggle (with that aspect), the average homeowner doing this once every five or 10 years must really struggle to find contractors.” When Dashevky polled his friends and clients, he learned that they would usually hire contractors based merely on “a good gut feeling and price.” “Price and gut,” Dashevky continued, “is not a solid way to tell good from bad contractors.” GreatBuildz is free for the consumer. The company receives commissions from recommended contractors. “We stay involved with both the contractor and the client,” Dashevky said. “We get paid when the job starts and when it’s completed.” GreatBuildz is not about finding the right plumbers, roofers and other one-off home-service vendors who may provide a few hours service and then leave; rather, the service is geared to find general contractors who are on the job for days on end. “With general contractors, if you’re doing a major project and they suck, they will make life suck for months on end,” Dashevky said. Unlike most property tech, in the case of GreatBuildz, the service starts online and segues into old-fashioned customer service. The company currently has a staff of five. “We launched the platform and started getting calls from good contractors,” Dashevky said. “We add about two a month.” Currently GreatBuildz has about 50 contractors in its database. Dashevky would like to reach 200 by year’s end. With more than 20,000 general contractors in Southern California, Dashevky said, “we have a lot of room for growth. … We want to organically grow (via) online advertising, conferences and (media).”

Michael Aushenker
Michael Aushenker
A graduate of Cornell University, Michael covers commercial real estate for the San Fernando Valley Business Journal. Prior to the Business Journal, Michael covered the community and entertainment beats as a staff writer for various newspapers, including the Jewish Journal of Greater Los Angeles, The Palisadian-Post, The Argonaut and Acorn Newspapers. He has also freelanced for the Santa Barbara Independent, VC Reporter, Malibu Times and Los Feliz Ledger.

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