Institutional Investors Rely on Algorithms to Buy Homes Sight Unseen

The Wall Street Journal recently reported that large institutional investors are now using tech algorithms to buy residential real estate investments without setting foot outside their offices. Using data such as crime rates, nearby schools and neighborhood home values, companies such as Starwood Waypoint Residential Trust and Blackstone are outbidding smaller, local investors, with many evaluations taking mere minutes.

As foreclosures dwindle in the market compared with the high numbers of the past few years, Wall Street-backed buyers are increasingly using data analysis to find, bid on and buy investment properties across the country.

These programs are now responsible for sizing up homes based on historical and other data, and are able to calculate potential income from a property at a fraction of the time it takes to assess a property using traditional methods. Additionally, larger companies using this technology are able to pass completely on areas with lower rents or with homes in need of repair, without having to physically view the property.

According the Wall Street Journal, about half of 2009 home purchases in the U.S. were “short sale,” but as those types of purchases have decreased, big buyers are looking at mainstream real estate listings and incorporating technology to compete, effectively shutting out local investors.

Some smaller real estate agents have even gone as far as to say that bulk purchasers are taking homes away from would-be individual owner-occupiers. Click here for the full story.