Real estate is the largest investment the vast majority of people will ever make.
In fact, the impact of this transaction will be so significant on both the buyer and the seller that every state has developed a set of real estate laws designed to ensure the legal transfer of real estate.
These rules, however, are complex in that they require the involvement of licensed real estate sales agents, meaning that buyers and sellers are dependent upon the skill and knowledge of these professionals to transact business. While there is nothing inherently wrong with that — after all, most of us rely on mechanics to fix our cars and doctors to keep us healthy — it often means that the real estate agents will need to have much more information about the property during the sales process than either the buyer or the seller.
Specifically, the agent will often have access to buyer bid information that is not available to other bidders and may not even be available to the seller. This is not always a bad thing. Too many bidders can slow down the transaction. When buyers are concurrently selling an existing home, it’s important that the transaction close in time for them to move into the new home before they are required to vacate their old house.
While agents have generally managed real estate transactions well, one must wonder what effect more transparency would have on the real estate sales process. Let’s look at the value of real estate transparency through the origin story of Exceleras.
Inserting transparency into the real estate sales process
Having started our technology business in support of default servicers, moving bank-owned real estate back into the market has always been part of our offering. This functionality has allowed asset managers to work with REO listing agents along traditional lines. But in the years following the Great Recession, we began looking at adding similar transparency to the traditional real estate sales process.
The result was ClearView, which is a real estate offer negotiation tool that is designed to enable a buyer’s agent to submit an offer directly to the bank or seller. The software connects the buyer directly to the seller, allowing the seller to have visibility of all offer traffic. We wanted to know exactly what impact this would have on the sales process.
After collecting data on 30,000 closed properties that received offers between 2015 and 2017, we noticed significant improvements related to the sale of REO properties, including more bids and shorter times on the market.
As you can imagine, we were extremely pleased with these results. Sellers were not only saving time, but also receiving more high-quality offers.
The data regarding transparency in real estate sales
Naturally, we were determined to continue gathering and analyzing more data to verify the results. In 2017, we measured the results again, looking at all 422,305 offers that had been placed on 22,660 individual pieces of real estate.
This is what we found:
- Sellers saw a 66.75 percent increase in the average number of initial offers (not counters) per property.
- Sellers received 3.15 more offers per property, increasing the total number of offers from 4.72 before ClearView to 7.87.
- The average days on market per property decreased by 9.33, bringing the total down from 54.92 days to 45.59 days.
- The average time it took to get an executed contract for sale on a property after receiving the initial offer decreased by 1.4 days.
Our analysis of the data
We plan to continue to monitor the results of this system with an eye toward identifying the exact causes of the improved performance we are detecting. In our minds, the information clearly suggests that transparency into the bidding process creates efficiencies that lead to more quickly receiving quality bids and ultimately higher prices for real estate.
Some sellers have pointed to an additional benefit that’s not as easy to spot in the data: a possible reduction in fraud. Agent fraud is relatively rare and a good asset management system goes a long way toward limited the incidence of fraud. With more transparency in the process, real estate sales fraud becomes more difficult to accomplish.
Perhaps the most exciting discovery in this research is the positive impact transparency has had on the sales price. As the average properties are selling for about 108 percent of the listing price, we’re excited to see what else transparency will create for customers in the real estate sales process.
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