Overlooked Property Management in Real Estate
Discussions rarely mention property management outside large apartments. Yet it is a major part of the housing landscape. Non-apartment rental and property management rarely raise concerns. Minor issues do exist. That may change. Similar mechanisms exist in both cases. However, they do not impact single-family rentals or smaller multi-family markets as much.
Because we chart a unique course and avoid our competitors’ tools, recent headlines do not affect MoveZen.
Defining the Core Issue
Let’s nail down what is at stake. Lawsuits target certain practices. We will outline the key issues.
Price-Fixing Rental Rates Using Algorithmic Software
RealPage uses real-time leasing data. Apartment companies feed data to it daily. This software recommends a rental rate to customers. It may seem harmless. Yet it resembles price fixing. Efficient pricing can be good for the market. The rate information alone might not harm consumers.
Evidence from the Courts
Prosecutors showed large amounts of data. The data revealed market changes when more companies joined the program. One small community showed little margin increase. Another large community increased margins by 38 percent. Charts like these sway juries.
Is Your Rent an Antitrust Violation? – The Atlantic
RealPage Takes the Anti-Trust Heat
Several cases are ongoing. The original case is in appeals. No one has defended RealPage seriously. That shift in opinion can affect outcomes.
Efficient pricing is good. Overpricing leads to long vacancies. Vacant homes waste money. Lowering prices helps residents save money. It also attracts high-quality residents. Vacancy drains resources. We see it as the second-biggest mistake after poor resident selection.
Leaving Units Vacant is a MoveZen Cardinal Sin
The software often recommends removing units from the market. This leads to high vacancy rates. It suggests a maximum number of advertised units. That limits options for value-hunting renters. The recommendations may be slightly accurate. Yet they frustrate many, especially Gen Z. Some businesses harm communities for small margin gains.
Multi-family investors worry about future rent cuts. Lower future rents can upset current residents. A large complex losing 10% in rent can lose over half a million dollars annually.
The Cost of Overzealous Rent Reduction
Some investors reduce vacancies too much. They lose thousands when they should honor renewal discounts. Offering early renewals could secure leases for 12-plus months. Landlords eventually lower rents anyway. The hesitation is understandable.
MoveZen’s Approach Versus Competitors
MoveZen does not use RealPage. We have tested other algorithms. Appfolio once had a free algorithm. We dropped it because it was ineffective. RentRange is another provider. Larger urban companies use it for rate recommendations. These tools differ from RealPage. However, many tools are poor at setting efficient prices. RealPage uses vast, subpoenaable data. Its customers include giants like GreyStar, Camden, and AvalonBay. In smaller markets, data is less useful. Fewer investors use these tools. Their effect is thus limited.
Flaws in Algorithm-Driven Pricing
Algorithms often look backward. Most single-family pricing uses last season’s rates. Rates can swing by 10 percent seasonally. That creates problems. MoveZen avoids algorithms for pricing. We rely on 20 years of experience. Our approach adjusts for seasonal trends. We do not let a bot decide one of our most important duties. RealPage may be accurate, but its advantage comes from shared data. Plaintiffs argue that creates an unfair edge.
Leveraging Experience Over Algorithms
We have conducted thousands of personalized rate estimates across NC and SC. We forecast future rents rather than peak rates. July 4th usually marks the market peak. Rates then decline in the fall. Many owners hesitate to rent before October. They hold out for peak summer prices. This issue differentiates efficient multi-family investors from mom-and-pop operators. Emotions affect single-family investments. Algorithms have less influence on them.
The Impact on National Tools and Competitors
Large companies use national tools. If they prove effective, we would reconsider our approach. We were surprised to see Appfolio still offers its algorithm. They may be taking a risk. Changes could come quickly. However, many large organizations will be too late to adapt.
The Broker Commission Conundrum
Brokers have long shared commissions. A listing agent splits a fee with other agents. Buyers often hear that sellers pay the commission. This claim is misleading. The back-end arrangement deflects true costs. The courts have upheld these practices. They rarely backtrack on the established system.
Our company knows that buyers’ agency is challenging. The average agent is not overpaid. That is why we entered property management instead of sales. Real estate sales are tough. Only a select few excel in that market.
Winners and Losers in the Brokerage Model
Historically, brokerages fared well while brokers received little. Many agents fought over small commissions. Brokerages benefited from the system. MLS policies enabled giants like Opendoor. Listing with a neighborhood broker became less attractive. Price became the deciding factor.
Modern brokerages are repairing these imbalances. Small neighborhood brokers now have opportunities. However, a corporate takeover could hurt customers in the long run.
Changing Business Models in Brokerage
Twenty years ago, brokerages charged high dues. They prioritized volume over quality. Today, entry-level costs are flat fees. This new model challenges older practices. Many neighborhood brokers struggle to transform. Their business models now face fierce competition. Private equity and digital platforms add pressure. In the short term, small brokers may suffer.
Focusing on Residential Property Management
We focus on residential property management. Commercial agents serve sophisticated business clients. Most news relates to housing consumers. Many agents now handle both sales and leasing. This dual role can cause complications. Sales agents may not grasp the investment side of housing. To manage uncertainty, we plan ahead. We ask: What will we do in 5 or 10 years?
A Vision for the Future of Real Estate Agents
We envision true housing experts. Agents will cover sales, property management, contract negotiation, and showings. Consumers will choose based on skills and reputation. They will see clear, upfront pricing on a menu of services. Brokers may offer only select services. Consumers then pick the best fit.
Industries move toward specialization. The general sales agent may vanish. Agents will be judged on performance data and economic insight. Consumers might hire brokers on flat-fee terms for many services.
The Need for Clear and Transparent Pricing
Clear, upfront pricing is beneficial. Most neighborhood brokers lack funds to change quickly. Private equity and firms like Zillow and Opendoor may take over. This change could damage the industry in the short term. We link articles that show commission declines. Inflation is falling too. Yet these suits have not taken effect. The brokerage commission issue is just one inflated cost in home buying. Long-term damage from FED policies remains the major concern.
What’s happened to real estate commissions since the big settlement (axios.com)
What do we mean by that?
The Looming Housing Shortage
Why houses are so expensive, explained in one chart (axios.com)
We face an upcoming housing shortage. Houses are expensive for many reasons. FED interventions in 2005, 2009, 2020, and now have distorted the market. A recession may force long-term stagflation. AI may boost productivity, but that is uncertain.
The bailout process is complex. Its effects span many industries. Few corporations now control most housing and real estate power.
Economic Pressures and the FED’s Role
Economic slowdowns are inevitable. High inflation forces the FED to keep rates high. Lowering rates may risk a global economic collapse. We do not expect hyperinflation. Instead, expect a shallow recession. Then persistent high rates and inflation will follow.
Why would the FED not be able to bring rates down when they were so successful in the past?
JPMorgan’s Jamie Dimon warns inflation and interest rates may stay higher (cnbc.com)
Mr. Dimon warns of rising costs. Global governments continue to borrow. Lenders may soon demand higher interest rates.
Final Thoughts: Supporting Your Neighborhood Brokers
High prices, high rates, and corporate control shape our lives. The $1000 saved every five years on broker commissions is minor. Our homes and lives are at stake. Only the government can halt these trends. The likely outcome is further consolidation. Support your neighborhood brokers.
Are online prices higher because of pricing algorithms? | Brookings
Unfortunately in this case these are literally our homes, our lives, and the government is the only one that can stop it, and that’s particularly concerning since the more likely outcome is that they join together.
Support your neighborhood brokers.
