Ideas for Buyers and Renters
OR many people, coming up with a sufficient down payment and obtaining a mortgage are the major hurdles to buying a home. But what if a buyer could add the value of the real estate agent's commission to the down payment?
Brian Hastings, the president of Patriot Real Estate System in San Dimas, Calif., has developed and patented a real estate transaction system that would let buyers act as their own agents, and use the share of the sales commission that would otherwise go their real estate agent as a credit against the down payment. The commission is typically 6 percent of the purchase price. Mr. Hastings won a patent for his idea in June.
In his patent application, Mr. Hastings writes that arranging traditional financing has proved to be a hurdle to many buyers. In 1995, a federal housing strategy flatly stated that the "lack of cash available to accumulate the required down payment and closing costs is the major impediment to purchasing a home" for many people. It called on real estate and lending industries to reduce closing costs and find ways to make more financing available.
Mr. Hastings's attempt to address the issue falls into the category of business method patents - ideas for ways of conducting businesses, like one-click ordering online, rather than tangible inventions. Patents are often issued for methods of doing business that may appear intuitive or impractical, but they are valid as long as they do not defy science, like antigravity machines.
A patent like Mr. Hastings's, however, could find defiance in another quarter. Real estate agents, who make their living from the commissions they earn for listing, showing and selling property, are unlikely to give that up without a struggle.
Still, changes are occurring in the real estate industry. The Multiple Listings Service, for example, was once a closely guarded resource in the real estate industry, available only to buyers who signed on with a licensed real estate agent. Many in the industry objected when real estate entrepreneurs first suggested making such listings available online, but real estate listings are now commonly available on competing Web sites.
Mr. Hastings's idea is to encourage buyers to represent themselves, reducing the role of real estate agents and brokers. People already can act as their own agent in buying a home, but they rarely get to claim a portion of the sales commission.
Under Mr. Hastings's system, buyers would use a computer system to search for the property they want to buy. A user would create a profile in a database, and the system would then search a database of homes for sale. When a match was found, the system would alert the buyer and then send information like photographs, video or audio descriptions of the property. The potential buyer would also be able to request reports on neighborhood demographics, schools, environmental issues and comparable home sales, the patent says.
The system would also coordinate visits to properties that buyers wanted to see, and offer help drafting a contract or purchase offer. Finally, the system would track the buyer's activity to create a file that would be used as proof of qualification for a commission credit if the deal went through. Since commissions can vary, the credit would depend on the negotiated percentage.
In his patent, Mr. Hastings says that his system was approved in 1998 by the Department of Housing and Urban Development for property secured by Federal Housing Administration loans, and he hopes that the patent will make the technique available to other borrowers. Mr. Hastings received patent 6,751,596.
Those who rent rather than buy face fewer financial obstacles, but renting could be even more convenient if tenants could charge the rent. Joseph Richiusa figured he would bring together the interests of both credit card companies and consumers with a system of paying rent with a credit card.
Mr. Richiusa, who lives in Burbank, Ill., said he believed landlords would be receptive to the system, because credit card companies would assess a prospective tenant's credit history, assume the lending risk and virtually guarantee timely payment of security deposits and rent.
In his patent application, Mr. Richiusa says his credit card can be "a stand-alone program with credit cards limited to usage to rental payments, or it could be a program bundled together with general credit card purchasing capabilities." Either way, the credit card would be issued to tenants by a financial institution or commercial lender, the patent says.
Potential tenants might never actually use the card. In his application, Mr. Richiusa suggested that many might want to simply present it to a landlord, along with an application for an apartment, as evidence of ability to pay. The tenant could still pay cash for rent, or use the rent credit card only occasionally as the need arises. And landlords, he suggests, might be more understanding of late rent payments if they had the credit card to fall back on.
Mr. Richiusa even suggested that not having a rent credit card might one day be a red flag for some landlords.
"If the tenant unreasonably refuses to obtain a renter's card, the landlord would probably be justified in both suspecting the tenant's sincerity, and acting upon that suspicion," Mr. Richiusa writes in the patent. He also says the renter's credit card could be set up for "other rental transactions," such as renting cars, sports equipment or machinery. Mr. Richiusa won patent 6,738,751.
This is not a commitment for a loan or an ad for credit as defined by paragraph 226.24 of regulation Z.