A new trend involves residential properties being sold sight unseen. A prime example is with Akuansa Graham, executive with the Starwood Waypoint Residential Trust who recently purchased a three bedroom home in Georgia for $124,000 without having ever seen the property.
Transitioning from Public Auctions to Computerized Sales
Following the years of the most recent financial crisis, Graham began going to public auctions in a bid to find homes going into foreclosure. However, the way the 38-year-old executive conducts business today is very different. Sitting at a computer, Graham depends on algorithms that help determine the value of a home, crime rates, proximity to schools, and more. With this, he gains a definite advantage over the competition when it comes to getting bargains.
In a statement, Graham said because it is impossible to see competitors, it has become even more important to move before they do. There is a growing number of real estate investors who depend on quantitative data analysis to speed up the search for a dwindling number of available homes that can be flipped into rental properties.
These computer models are math driven by historical patterns that have the ability to determine positive and negative aspects of homes without being seen. These programs are so well-advanced that they can even determine future income from different properties in just a matter of minutes. With this, Alaska Permanent Fund Corporation, Blackstone Group LP, and other real estate giants have the ability to look for neighborhoods with softer demand for rental properties and homes that need excessive repairs.
High-Tech Home Buying
Technology has changed the way investors purchase homes. With major advances, a tremendous amount of data can be evaluated in very little time. Using this technology, investors can make smart decisions without physically going to a location.
After the housing market crash, most investment deals were made at public auctions in a face-to-face manner. In 2009, homes purchased for less owned on mortgages or those purchased after foreclosure accounted for about 50 percent of all purchases throughout the country.
However, fire sales as they were called, began to slow down. In turn, this forced Wall Street backed buyers to turn their attention to more conventional listings in order to satisfy investors interested in greater exposure to the real estate market. By last year, the number of short sales and foreclosures dropped to 31.2 percent specific to sales of single family homes.
A real estate agent in Atlanta Georgia said that investors who purchase real estate in bulk are making it hard for individual home buyers to compete. Simply put, individual buyers are getting outbid. Starwood Waypoint has a team of people who evaluate possible home buys using a data map that actually ranks living among various neighborhoods based on information provided.
In all, roughly 15 variables are used to calculate a bid price, as well as monthly rent and the cost of renovation. Using some type of automated value model, a bid is submitted and the home visited via a mobile device. Although most homes being sold sight unseen has to do with companies, some individuals are starting to catch on.