Can We Reduce Real Estate Transaction Costs?
Don’t get me wrong, I really believe in power of real estate investing and what it can do for individual holding the asset. And as a long time investor, I have always been troubled with a few things:
- Cost of doing business
- Time to get things done
Time to get things done
If you’ve ever purchased property, you know that it takes time. Time to figure out money, to find the property, lender, agent, and a host of other things.
The traditional process can take a few days to a few weeks, if you are lucky and making a cash purchase (or getting a hard money loan) and have other things already figured out (deal flow, established agents, lenders, escrow, etc.).
For most individuals, going from “I want to buy” to “I own” can take a few months and a lot of patience, not to mention money (but we’ll talk about that shortly).
There are a few ways that one can purchase a property in matter of days (although the official transfer of the title may still take a few weeks).
One of those ways is buying at an auction. It typically happens over the course of a few hours or perhaps a couple of days. Downside it that you typically can’t do inspection or walk through the property. The upside is that you’ll typically pay way less than the market value of the property (unless of course you overbid).
Another way is buying from seller directly online. You can find those deals on places like Zillow, Craigslist, and eBay. Some require traditional purchase, others will accept cash only or even a credit card payment. A few may decide to accept crypto as well (and the number is growing, although not huge).
But buying directly from seller has it’s problems as well. The upside is that it can typically take faster (if you are a cash, credit card, or crypto buyer). The downside is that there is a huge risk for the buyer if there is no escrow.
…there is a huge risk for the buyer if there is no escrow.
Cost of doing business
And this brings me to the cost of doing business.
Let’s take a direct buy option but you want escrow. If your purchase is less than the specified amount that escrow company wants, you likely can’t get it. Many of the escrow companies are also title companies and unless you’re with an agent, they won’t do business with you. Of course, there are those online escrow companies for smaller purchases, but they won’t touch real estate either.
YIKES!!!
Now we’re right back to traditional buying process: needing agents, escrow, title, title insurance, lawyers, application fees, mortgage, mortgage origination fees, transaction fees, fee fees, etc.
When it’s all said and done, typical real estate transaction can cost you anywhere between 8–12% of the price. And on the average price of a home today of roughly $330,000 that means you are paying 26,400–39,600 per property you sell!
If you are like the average American, you’ll switch home 3 times in your lifetime and now we’re talking roughly $100,000 that you paid in random fees (that’s not counting the mortgage cost or updates, just what you pay to transact).
If you’re an investor, you could easily be paying the above amount in fees per year or two. And that’s HUGE!
Imagine what you could do with extra $100,000!
If you’re a buyer and you’re thinking “Ha, I’m not paying any of that!” think again. You are paying substantial amount of these expenses as well..
A Solution
Crypto is solving many issues we currently have with our financial system, from cheaper and faster, to safer and sounder. You can buy just about anything from just about anyone, anywhere in the world.
This means that you can purchase real estate, among other things, with crypto (and many of the HODLers have or have at least attempted). But we’re still left with the “how do I know you’ll transfer it to me” piece… ah, the pesky escrow and security.
I couldn’t find a suitable solution for my needs on the market, so I decided to build it!
I call it Tsaishen Crypto!
With Tsaishen Crypto, any real estate owner can tokenize their property in seconds. It also allows the said owner to sell their property online, listing directly on Tsaishen Crypto, but can leverage other marketplaces as well (both crypto and traditional).
Now here is where the magic happens, it has escrow built right into it. The escrow is run by a smart contract and it locks up both, the funds and the property until both parties are satisfied with the outcome (thinking funds and docs here).
The entire transaction process can be done in minutes (without escrow) or a few hours or days (with escrow).
For direct buyer-to-seller (peer-to-peer) sale/purchase, this can be a great solution to the current challenges on the market. It’s faster, safer, and much cheaper then the alternatives.
On average, you can expect to save about 30% off of your transaction costs. That may or may not sound like a whole lot, so let’s do a bit of math and see.
Instead of paying an average $33,000 in transaction costs (assuming 10% cost on $330,000 home), you can expect to pay less than $10,000.
Over the course of lifetime, for an average owner, that would mean that you keep 70% of the money that is yours anyways…
… (if you’re stuck with math) we said earlier, 3 homes on average for roughly $100,000. Now, assuming $10,000 per transaction and 3 transactions, that means you pay only $30,000 and pocked the $70,000.
I guess, we truly can reduce the transaction costs and improve our profitability.
If this is of interest to you, stay tuned (a.k.a. click follow) and very soon I’ll share with you how you can make it happen for your real estate deals.
Now, I do have one final question for you:
What will you do with all that extra money?
