Category Archives: Inman News

Posts by Sam DeBord on Inman News and Inman Next

Forced MLS membership no more? The time for ‘choice’ is now

This article was originally published on Inman News:

  • Under “MLS of Choice,” brokers and agents would only pay for the MLSs they choose to access and use. But the question is not “if they choose an MLS;” it’s “which MLS(s) they choose.”
  • MLSs engage in a value-driven service model that encourages customer focus and competition.

MLS of Choice

The committee with the longest name in real estate — NAR’s MLS Technology and Emerging Issues Advisory Board — has posted its solution for creating what some are calling “MLS of Choice.”

This solution will be put up for a vote of NAR’s Multiple Listing Issues and Policies (MLIP) Committee in November. The MLIP Committee makes MLS policy recommendations to NAR’s Executive Committee, which then chooses whether to pass them up to the NAR board of directors for final approval.

Proposed policy change synopsis: Brokers and agents need to participate, subscribe and pay dues to at least one MLS. But brokers and agents can’t be charged fees by MLSs that they don’t wish to access and use.

Changes to NAR MLS Policies 7.42 and 7.43 would allow a broker to participate in multiple MLSs, while the broker’s agents only pay dues to the MLS(s) that they wish to access.

This is accomplished by requiring MLSs to give fee waivers to agents who are already paying subscriber dues to a different MLS (where the broker also participates). The MLS can require the waiver requesting that the broker and/or agent sign a certification of non-use.

In effect, principal brokers choose which of their offices will operate and pay dues in each respective MLS service area. Brokers participate in the MLSs their agents want to access. Agents subscribe to one or more MLSs that best fits their needs.

Intended consequences:

  • MLSs engage in a value-driven service model that encourages customer focus and competition, much like the environment brokers work within.
  • Brokers are no longer prevented by artificial geographic boundaries or financial obstacles from joining additional MLS service areas and bringing on agents who work in those markets.
  • Agents are no longer prevented by artificial geographic boundaries or financial obstacles from joining brokerages with the best support model for their businesses.

Questions you may have

“Won’t some of my MLS’s agent subscribers stop paying for services? Will my headcount go down?”

Subscriber count could go either direction, but there likely won’t be much of a shift. Remember that this change allows brokers to join more MLSs without prohibitive costs. So some MLSs will likely see subscriber and participant counts go up. The vast majority of agents that want/use their local MLS’s services will continue to pay. This isn’t “if MLS,” but “which MLS(s).”

“What if agents try to cheat the system?”

What would be new about that? This was a bigger problem in the past with agents sharing listing books. Today, we have the luxury of software that can verify who’s logging in and using MLS services. Cheaters will always exist. We have to prioritize improving business conditions for great brokers and agents, and not let a minority of bad actors overshadow their needs.

“What if a broker from another area joins my MLS, and her agent wants to sell a property in my area? He doesn’t know my town well enough to be qualified.”

There are always unfit agents. Some are unfit to sell their own backyard.

The MLS doesn’t exist to keep agents and brokers “over there” from selling “over here.” It exists to foster greater cooperation. It is the job of brokers and agents to prove their superior knowledge and value to clients. As we’ve seen in countless consolidations, the fear of “agents coming over the hill” or “across the water” is overblown. It just doesn’t play out in any significant numbers.

“What if that broker joins my MLS, but her agent doesn’t subscribe? Does my cooperation/compensation still go to that agent if he writes a contract on my listing?”

Yes: Cooperation and compensation will continue to flow to the broker participant and, subsequently, to all of the participant’s agents. That won’t change. More brokers joining more MLSs will create an even broader broker cooperation network.

Certainty makes for healthier marketplaces. Sellers will know that even more brokers and agents will be confident in bringing buyers and not be held back by boundaries.

Agents will have certainty that compensation agreements are in place across MLSs. They’ll be confident to occasionally sell a home in another MLS (where their broker is a participant) that just happens to perfectly fit their clients’ needs best. This brings buyers and sellers together in situations that might not occur in a less cooperative environment.

Greater market exposure and certainty are created via the MLS. It’s a win for consumers and the industry.

A request to brokers and agents: Engage with your company’s leadership, your local association and your MLS’s board of directors. Let them know how this new flexibility of choice will improve your ability to do business and grow.

MLS leaders and directors: Let us know your concerns now. We’ve spent much of the past year discussing this issue with your colleagues, brokers and agents. We’ve surveyed membership for feedback. CMLS published a white paper summarizing the issue. It would be a shame to have this policy come to a vote in November without your questions being answered long before then.

MLS policy committee members, and NAR directors: Find out from the MLS’s primary customers — brokers — how they feel about this new potential policy. Ask us questions about the specific policy changes now, so we’re all on the same page in Chicago.

If you’ll be at the CMLS (Council of Multiple Listing Services) conference this week in Austin: Read the MLS 2020 Agenda prior to your arrival. Some of the industry’s smartest leaders are refining the direction that MLSs must take to be relevant and valuable in an industry experiencing dramatic change. Updating the MLS business model was a frequently mentioned concern.

Take it from one of MLS modernization’s master planners, David Charron:

“The moment of truth for MLS leadership must be in understanding that much of what has gotten us here will not carry us further. Much of what we created 10 to 20 years ago is worthless. Dead. So, standing down, or worse, building walls of protectionism, in the face of such enormous change does not properly depict who we are or what we aim to be.

“Successfully innovating on our base and our business model is a tricky maneuver. We have worked so hard to get here! But our primary mission is helping brokers succeed! It’s on us to band together; be that small group that enacts the change that advances our industry.”

NAR’s November vote on MLS Policy Statements 7.42 and 7.43 will be another moment that provides clarity as to whether we’re ready to embrace this kind of change. Let’s move forward.

See you in Austin.

Sam DeBord is managing broker of Seattle Homes Group, VP of Strategic Growth for Coldwell Banker Danforth, President of Seattle King County Realtors, and 2018 Vice Chair of the National Association of Realtors’ MLS Policy Committee. You can find his team at SeattleHome.com and SeattleCondo.com

The future of NAR: Action will be the measure, not words

This post was originally published on Inman News:

Key Takeaways:

  • Fat cats don’t have time to write key takeaways.

I just spent a few days in Chicago with the National Association of Realtors. During my travel, I thoroughly enjoyed Brad Inman’s description of our “fat cat (leadership) gathering.”

As I dined on velvety cream cheese airline crackers aboard the luxury Orange Line into town, I thought about how thrilling it was. I was in the company of the “thousands of NAR ghosts who love the suite life, sometimes travel first class and are experts at finding the best restaurants on their member-paid boondoggles.”

Sitting through a 90-minute working lunch on better engaging our members and supporting our volunteer leaders, I surveyed my conference chicken and steamed broccoli feast. I reflected on the free drink ticket in my jacket pocket for the evening’s festivities. I had to admit that this really was the Ritz.

Speaking of Ritz, even the snack crackers seem to be material evidence when NAR’s new CEO, Bob Goldberg, is discussed these days. Inman said Goldberg’s suite was “larger than an average apartment in New York City and was stacked with more treats than a 7-Eleven. It looked out over the Chicago River with Lake Michigan views that might give rise to grand visions, delusions or both.”


Bob Goldberg’s fat cat candy suite

I imagine that Goldberg’s suite was bejeweled in Reese’s Pieces and Diet Cokes that glittered in the lake’s reflection. If anything signaled delusions of grandeur, the snack bar was it.

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This event might not have compared to the big-ticket galas or the six-figure checks that certain portals lavish on MLSs, but the shiny cardboard cylinders filled with savory oval potato crisps were some kind of wonderful.

Disruption: What’s in a word?

Goldberg has been talking about “disrupters” frequently, and there’s been an attempt by some to paint it as a show of fear or a victim mentality. I’m not sure if these folks actually listened to his interview with Andrew Flachner or his address to the Leadership Summit.

Goldberg’s message was to embrace the disrupters, the innovators, the change agents — and bring them into a bigger tent.

I don’t know Goldberg well enough to tell you exactly how his tenure will go as NAR’s CEO. Action will be the measure, not words. But as of right now, he’s saying all the things that membership is asking for.

There’s another notion making the rounds that we should stop saying “disruptor” because “innovator” is a better philosophical choice. Although I appreciate the intent, it’s a bit like me telling my kids that crying never fixed anything, so we’re just not going to have it in our home any more.

Great leaders don’t create SWOT analyses and refuse to fill in some of the boxes. Sometimes disruption is elegant innovation that should be embraced and partnered with. Sometimes it’s just cheapness at scale or brute force taking market share.

Sometimes disruption is an unending airport serpentine of passengers waiting for a single dog to smell their bags because somebody at TSA said, “today, let’s do it differently.”

This the other part of the disruption conversation: disrupting the status quo of your people. Goldberg has tasked the NAR staff and leadership to get out in the field and serve members, to know members and to measure members’ satisfaction with the trade organization.

If you haven’t had a chance yet, watch Goldberg’s speech. Listen to the promises, and hold him to them. Hold us to them. We want nothing less.

Focusing on people

Two consecutive Ubers canceled my 6 a.m. trip back to the airport because they couldn’t find one of the biggest hotels in Chicago. I swallowed my fat cat ego and hailed an old-fashioned cab.

It gave me a minute to conjure up the kind of big shot figurehead quote that I read every morning in my Wealth Magazine at the spa: “If your people don’t understand where they’re supposed to be going, all of the technology in the world won’t get them there.”

Excuse me while I light up a Cuban and sign some royalty checks.

All kidding aside with Inman, his final conclusion is spot on and actually much like Goldberg’s philosophy.

“With no shortage of good intentions, big ideas and devoted volunteers and staff, my advice is to stop asking your members to ‘support NAR.’ The slogan should be flipped: How is NAR supporting the everyday Realtor?”

We’re starting off on the right foot. Those who’ve already written Goldberg’s chapter may be in for a bit of disruption themselves.

Sam DeBord is managing broker of Seattle Homes Group, VP of Strategic Growth for Coldwell Banker Danforth, President of Seattle King County Realtors, and 2018 Vice Chair of the National Association of Realtors’ MLS Policy Committee. You can find his team at SeattleHome.com and SeattleCondo.com

NAR politics, Instant Offers and a noisy week in real estate

This article was originally published on Inman News:

  • Credit unions are buying brokerages and bundling services.
  • Zillow isn’t a broker but its toes are deeper in the transaction.
  • Alexa’s going to serve you listings.
  • Upstream’s pragmatic pivot is causing a stir.
  • Your choice of MLS may be growing in the future.

NAR’s midyear meetings took place in Washington, D.C., last week. I was just finishing up a recap when two other big stories dropped.

Credit unions are buying up brokerages

Banks are prohibited from opening real estate brokerages. Credit unions, on the other hand, are not. Steve Murray of Real Trends says credit unions are rapidly purchasing brokerages and bundling services.

“Buy from us. Borrow from us. We’ll rebate 20 percent of the commission to you, and we’ll give you 20 basis points off your mortgage’s interest rate. Oh, and we’ll also make your agent whole on the rebate.”

To me, that’s the biggest news of the week. On to that other story you may have heard about:

Zillow Instant Offers

Zillow’s pitch to agents: We’ll facilitate direct purchase offers from our identified investors/venture capital firms/flippers to potential sellers. We’ll let you deliver a CMA to the same folks.

C’est la vie; it’s a business decision. Consumers are given options to work with agents, but some agent-free transactions will occur via Zillow initiation. Offers and transactions are managed in Zillow’s transaction management software.

Zillow’s not technically becoming a broker with this move, but it’s taking on every activity it can that doesn’t require a license — smart. Some agents are screaming. Some are yawning. Let’s just not pretend that initiating a purchase offer for a buyer, providing the forms for the contract, and directing the services upon which it will be transacted isn’t a big shift.

Some agents will love the seller leads. Some are just fed up with the long-running tap dance act of Zillow’s messaging to the industry. Brian Boero distilled it perfectly.

In the latest scene, we’re told, “It’s just a test.” This is apparently supposed to educate us that transactions happening in the real world are none of our concern until the “test” label is removed by the marketing department.

Of course it’s a test, one that management approved, to see if it’s worth expanding nationwide and monetizing. Just tell us, “Shareholders want profits so we’re looking for new revenue streams, and dipping our toes a little further into the transaction looks like a good direction.” We already know.

The Opendoor in the room

Opendoor is the Instant Offers precursor you’re probably most familiar with. While it was reported on Inman that I “chided” Opendoor previously, I’ll note that I commended Opendoor’s leaders and technology. I merely chided the media fawning over a supposed huge new value to consumers.

Flippers are not new, they’re just better financed with better tools, and now they’re getting better access to sellers.

Opendoor’s folks are genius, just as are Moneytree’s founders. They’re doing transactions with massive short-term fees and significant time savings, and putting their services in front of people who may want them. My opinion that these transactions make financial sense for a scarce few doesn’t preclude the businesses from selling them to whoever will buy them.

Alexa’s hawking listings

Back to NAR midyear: voice activated systems (like Amazon’s Alexa and Google Home) became officially approved technologies for brokers to use for delivery of IDX listing data.

While there was some concern about the ramifications, brokers are already using this technology in the field. We want to ensure that the spirit of IDX cooperation and attribution continues, but not hold back innovative brokers.

Will this tech become popular? Spencer Rascoff said at the T3 Summit that he didn’t think it would be a big deal in real estate search. It’s difficult to say, but imagine what it could do to help folks with visual disabilities interact with brokers and agents.

The technology will change by the day. So maybe Rascoff’s right, or maybe brokers have an opportunity. He does have a lot of other things on his plate.

Upstream

Upstream had two big stories last week. First, more NAR funding was approved for RPR to build out the project. Second, instead of only allowing broker/agent listing input at Upstream’s interface, it will now accept a broker’s feed of listing data from the MLS itself.

Spending a week with much of the industry in one place reminds you how much you don’t know. The politics surrounding this initiative are staggering. There are plenty of folks proclaiming Upstream’s “pivot” as a sign of failure.

It’s a pragmatic swallowing of pride. Many insiders will tell you that the divide created by the unfortunate tone of UpstreamRE’s ancestors’ original messaging to the MLS community made this move a necessity. It’s also a big shift from the ideologically pure original intent.

At the same time, it removes the most significant hurdle to access for nearly every broker/agent in the country. There’s no retraining on listing input. You want Upstream? You got it.

The Upstream direct input (which is necessary in its system to solve multi-MLS overlap) requires technical development at the MLS level to accept the listings.

If multi-market brokers like what they see in the Upstream hybrid input product, they may eventually work with their MLSs and vendors to employ the single input solution. In the meantime, vendors may proactively develop software updates that provide faster Upstream implementation options on the most common MLS software platforms.

RPR in the mirror

It seems that someone whispers “National MLS” nearly every time RPR (Realtors Property Resource) is mentioned. If you’ve done the committee circuit for a few years, you know the routine.

Competitors have reason to keep looking over their shoulders, but this particular fear is tiresome. It’s as if we’re in the horror flick where the victims chant, “Candyman…Candyman…Candyman…” into the mirror to summon the Bogeyman.

Only in this version, the bogeyman RPR comes crashing through the mirror to take our cooperation and compensation agreements if we don’t keep whispering “National MLS…National MLS…National MLS…” to keep it at bay.

RPR has contractually agreed to never become an MLS. MLSs have been consuming each other at the rate of around one every four days. 100 have disappeared in one year. How many has RPR replaced?

‘Coming soon’ listings

MLSs across the country are trying to develop “coming soon” statuses. It seems like a solution for a problem that doesn’t exist, but agents want another marketing angle. So MLSs are obliging.

Currently, any MLS could accept an active listing, allow for a restriction on showings for two weeks while the seller fixes things up (with a seller’s signed consent), and create the “coming soon” buzz without adding a new status for MLSs and standards developers to deploy.

If a new status is the hoop everyone wants us to jump through, though, we’ll probably do it. So let’s define it.

If the property is shown, it’s not “coming soon,” it’s active. If it starts as “coming soon,” then goes active, and one minute later goes pending, it probably wasn’t ever “coming soon.” It was active.

We can do “coming soon,” but only if we’re going to be honest about it — not to promote double-sides, in-house sales or preferred buyers.

Politics at midyear

There’s a lot of talk about tax reform. As we hit the hill in D.C., our message was as clear as ever. No matter the tax policy coming forward, it should incentivize investment in homeownership, much like we incentivize investment in health care, retirement and education. That’s a tough message in a D.C. atmosphere that’s very loud, but we’re still carrying it.

Some members want us out of politics, but today’s reality is that if you’re not at the table, you’re on the menu. We’ll be at the table for our industry.

Can the Voice for Real Estate come through a revolving door?

I’m a local association president. Our board’s CEO relays media calls and interviews to me. I appreciate the deference and the recognition it creates, but I can see how it weakens the continuity of our voice as an organization. The tradeoff is difficult to swallow.

At NAR, we hoist a new name up for the media once per year and hope that it sticks. This is our tradition, and it’s a great gift to our presidents, but it’s probably time to take a hard look this practice’s effect.

Our voice needs to recognizable to stay on top. Our new CEO, or someone she/he hires, needs to be consistently in front of the media.

Is the board too big?

Most dare not even whisper these words, as a position on the board of directors is a sacred cow, not to be touched. NAR has about 900 directors on its board. What’s the ideal size of the board? Maybe it’s exactly what it is today, but it shouldn’t be heresy to ask.

Our volunteer members do amazing work supporting leadership from the committee levels. Can we have a real, effective debate at our current board of directors’ meetings with our current size?

Our data divisions make us vulnerable

Realtor members have less than ideal access to our data. Between NAR data, nationwide MLS data and RPR data, we have the opportunity to meld these resources into an incomparable asset for use by our membership. Yet we let it sit in artificial silos to protect our territories.

Meanwhile, innovative data companies create tools to aggregate and repurpose such data while we sit on our hands and watch or, better yet, cut them a check to buy it back.

There’s a lot of distrust within our organization. While there are many reasons for it, they make us weak relative to outside forces.

Legacy

Multi-generational Realtors are often the most devoted and knowledgeable leaders. I’m continually impressed when I travel to events at the percentage of committed volunteers who are second, third or even fourth-generation Realtors.

Our incoming president, Elizabeth Mendenhall, is a sixth generation Realtor. There’s no replacing that institutional knowledge. Kudos to those of you who carry that torch.

MLS of Choice

I’ll introduce this topic with the moniker it has taken on in the media, but this issue’s logistics are significantly different than Board of Choice. Yet, its intent is similar: to serve broker and agent members with a better, more flexible service model. Giving brokers and agents more choices in the MLS services they pay for is the path forward.

We’re looking into ways to incentivize brokers to grow and join MLSs without cost prohibitive policies holding them back.

The issue is complex and I won’t attempt to define all of the parameters here. Just know that we’re working with all of the stakeholders — MLSs, brokers, agents, associations — and trying to find a policy solution that positions all groups to be prepared to thrive in a changing marketplace.

You can contact us with your stories, concerns, and suggestions at mls@realtors.org. We’d love your feedback.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Shortcuts: Zillow Group’s power play, actual intelligence, and NAR’s next move

This article was originally published on Inman News: 

  • Zillow Group’s agent input ban will improve accuracy and squeeze brokers.
  • Its Premier Broker program and data management tools are taking aim at teams and Upstream.
  • Redfin uses agents to create better Zestimates, and no one should be surprised.
  • “Realtor” has immense value. NAR’s CEO search should keep D.C. in mind.

Zillow Group has been using its leverage in more dramatic fashion recently. The headline this week is an upcoming moratorium on agent-posted listings.

Beginning May 1, agents’ listings will only be allowed on the company’s portals if they come via a broker or MLS feed.

This is a power play, and one that the company has every right to make in its quest for a better product. Zillow Group is willing to crack a few eggs to make this omelet.

It’s being sold as an improvement to accuracy, and that checks out. Manually input listings are notoriously error-prone. (Of course, that’s not the only benefit.)

800-pound strategy

The ban creates an immediate friction point for agents whose brokerages and MLSs don’t feed to portals. It puts a wedge between agents and clients, and ergo, agents and brokers.

When clients find out that their agent literally cannot put their listing on Zillow, and their broker can’t fix it before open house weekend, the situation is going to get white hot.

A little message for Jay Thompson, Zillow’s director of industry outreach — please take some vacation and rest up now. May is going to be the season of 1,000 wildfires.

The move will create more feeds for Zillow, and some resentment. Strategically, though, it makes sense.

The big brokers won’t squawk. Most of the country has already signed on. Only the stragglers and iconoclasts will feel the squeeze.

Some agents will continue to be indifferent, some will demand their brokers create a feed — and those whose needs go unmet will find a new brokerage.

The 800-pound gorilla is tired of asking. Independent and holdout brokers: You’re going to feel the weight of its thumb coming down soon.

Premier Broker vs. hiring a team

Meanwhile, the concierge service for the Zillow Premier Broker program is the back end of a team in a box.

Lead generation, text/email/phone conversion, distribution, tracking and management — it’s done. Just answer the phone when your concierge wants to hand off a live one, and you, the solo agent, now have team support.

The program has huge upside. It’s not perfect. Many Zillow consumers have a bad habit of contacting a new agent for every listing and rerouting themselves into spirals of increasing contacts and annoyance from lead converters and concierges.

Those leads are not happy campers when they get an agent on the phone.

The back end works well, though. It affords brokers some shortcuts to team efficiency without all of the hiring and testing of products.

I’m surprised that Zillow Group is using a third-party CRM for tracking; they’ll probably have their own soon.

This program will be popular as long the pricing keeps brokers’ ROI (return on investment) in the black.

The data management arms race

Somebody recently told me to stop writing so much about Zillow. I will when ESPN stops covering the Patriots.

Build or buy? Zillow Group has clearly been leaning toward buying for its data management platform. Paul Hagey (of Inman fame) and I took a deep dive on the developments in this year’s Swanepoel Trends Report.

Jack Miller, president and CTO of the Swanepoel T3 Group, did an outstanding job fleshing out the entire industry’s competitive data management tools.

Bridge Interactive, Retsly and dotloop, when combined with Zillow Group’s in-house tools, could satisfy a wide range of broker demands. The real estate behemoth is buying up a set of tools that cross paths in major ways with Upstream.

Whether that’s the intention, the positioning, or the marketing angle doesn’t matter. The tools being purchased by Zillow Group are designed to solve some of the problems that Upstream solves — albeit perhaps in a way that’s less logistically elegant.

The company is shortening its timeline to a user base by spending instead of creating. We will see quickly whether or not that pays off.

AI (Actual Intelligence)

Inman reporter Teke Wiggin’s piece on a study of Redfin vs. Zillow online valuations sparked some interesting debate.

Wouldn’t every valuation improve with a human-derived “condition” factor added to the algorithm? Forget artificial intelligence, this is actual intelligence in the machine.

A real person’s insights about current condition would be an invaluable addition to an otherwise computer-driven model.

Redfin took the shortcut. Agents are already scoring these homes based on today’s condition. They even have market knowledge. Redfin simply leverages their insights via list prices and adds context to current data.

The results of the study were clear. When listing prices are available, Redfin incorporates them, and its estimates become significantly more accurate than Zillow’s. But Zillow’s estimates for unlisted properties are still more accurate than Redfin’s.

It seems obvious that Zillow could win in both categories by incorporating list prices on listed homes’ Zestimates.

Zillow argues that consumers don’t want that. They want “independence” in their estimates.

No, they don’t. Consumers want the right price — remember that accuracy we were striving for earlier? It’s right in front of you.

Save our CRM

Vendors at Inman Connect New York repeated a phrase to me that I don’t hear often enough: “We integrate with your CRM.”

For all of the tools offered to agents, too many are built as standalone or loosely connected functions. CRMs with APIs, and vendors willing to use them, are taking away major pain points.

Brokers want our agents focused on their database, in their CRM. Some vendors are getting this.

Aiva, the AI-powered assistant by Deckspire; “First,” featuring predictive analytics (guys, you’re killing our searches with that name); and Cloud Attract from W + R Studios were just some of the product folks I talked to that understood this concept as a core issue.

Don’t build another CRM. Build something that works with our current CRM.

Goggling vs. feeling

News Corp. has helped realtor.com do some leapfrogging in the virtual reality (VR)/augmented reality (AR) world. Their work with Matterport and REA Group has provided the foundation for VR and AR in apps for goggles or the good old-fashioned mobile device in your hands.

They are a nice step forward, if VR’s where you think the industry is headed. Some of the hype is overblown, but it will be a nice a supplemental tool to increase conversions of internet traffic to in-person showings.

Buyers will love VR for property introductions. But when you think about downsizing mom and dad into a condo for their “final home,” or buying that first bungalow to raise children in, goggle-and-buy rings hollow. We want to smell how that home feels.

What’s in a name?

Marc Davison took us on an entertaining creative journey about the name “Realtor.” What’s the value? It depends on your audience.

When I go to Washington, D.C., in May and walk into a Senator’s office, you can be sure they understand it.

When our state’s legislative leadership calls us for insights on a policy negotiation, it’s clear that they know who we are.

Broker-owners ask us to come talk to their agents about what we do because they understand the value.

There is a disconnect with the public. It’s clear that they don’t distinguish between a licensee and a Realtor. But that in no way diminishes their knowledge of a Realtor’s value.

This isn’t a term that grew organically out of a need to describe a category of professions, like a doctor. It’s a trade organization being so effective with its label that its name has superseded the commonplace occupational designation.

The Realtor moniker being indistinguishable from a real estate salesperson makes us victims of our own success.

There’s clearly some frustration about the lack of distinction from consumers. We can continue to work to improve and distinguish Realtor members. But this is not such a bad problem to have.

Top job

National Association of Realtors CEO, Dale Stinton, responded to a reader letter on Inman. Read that twice.

Going forward for NAR, getting the right mix of transparency, accessibility, focus and resoluteness won’t be easy.

Kudos to Dale for being a leader willing to engage membership in an introspective and stout discussion about the association’s outlook.

Choosing the next CEO will be difficult. The right candidate needs a keen understanding of technology, communications, public policy and — most importantly — organized real estate’s multifaceted bureaucracy.

Somebody who knows D.C. pretty well just stepped aside from an MLS CEO position to allow the formation of a better marketplace for members.

That kind of leadership deserves a spot on the interview short list.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Is Opendoor the payday loan of real estate?

This article was originally published on Inman News:

  • According to research, median Opendoor homesellers give up 14 percent of their homes’ value through equity and fees.
  • The results for homeowners are like a payday loan: Some scenarios could push seller loss percentages into the 20s.
 Opendoor is a venture-capital-financed property flipper with a $1 billion valuation.

Inman had a fantastic piece last week by Mike DelPrete analyzing Opendoor’s progress in its first two years. Read it.

Quick observations based on Mike’s piece:

  • Opendoor buys and resells homes. Sometimes it fixes them up a bit, but its average relisting time is just 20 days.
  • More than half the time, the gap between the price Opendoor pays sellers and its resale price on the flip is 5.4 percent or greater.
  • On about 1 out of 5 resales, Opendoor pockets price gains of 10 percent or higher.
  • Consumers are also charged 6 to 12 percent in fees, averaging between 8 and 9 percent.

To Opendoor’s credit: There is a need in some specialized cases to turn real estate into a liquid asset in short order.

Even if the assets are heavily discounted in the process, there’s a niche audience that requires this service. Opendoor’s founders are brilliant in creating and selling this marketplace, and the company’s growth is evidence of that.

There’s good cause for some buzz, but the fawning over Opendoor’s value to the consumer seems off-key.

Forget the buyback options, warranties and unmanned lockboxes — these flashy headline-grabbers distract from the meat of the story. The shine on this unicorn is blinding some to the casualties of its financial mechanics.

Friction and leverage

Much of the excitement around Opendoor is in its removal of “friction” from a home sale.

Friction can mean the preparation, negotiation, financing and other logistical checkboxes necessary to maximize returns in a traditional sale.

Friction also includes financial transaction costs, though. The company’s median sellers appear to currently spend around 14 percent of their homes’ value between fees and equity to work with Opendoor. A significant number lose 20 percent or more in equity alone.

Of course we can look at the possibility that improvements to the property contributed to price gains. But Opendoor’s average home only sits 20 days between closing and relisting. That’s enough time for a quick shine in most cases.

We also don’t know if a full-time, local specialist agent could market and negotiate the home to an even higher price than Opendoor. Its average sale is giving a 5 percent discount off the list price to the buyer. The company’s carrying costs on vacant homes (financing 90 percent of purchases) incentivize it to be flexible in negotiations to expedite turnover.

Some have touted the model creating “leverage” for sellers, who are viewed as an underserved market.

Although it’s true that there are few other avenues for sellers to offload a home this quickly, the simultaneous decimation of equity wipes out the benefit to the vast majority of sellers. For most homeowners, it’s more of an outlet to swift surrender than a gain in leverage.

Location, location, location

Opendoor is successful so far in Phoenix, where there are no transfer taxes.

What happens when it moves into cities and states where transfer taxes can absorb up to 2 percent of the value on each sale? The seller may pay one tax directly, but the tax on the second sale probably has to be built into the pricing model, as well.

Someone eats those costs. The percentage of the home’s value being absorbed or spent in fees, taxes and equity could start reaching into those magical mid-20s for some.

There’s a sector of consumer finance that squeezes these kinds of short-term gains out of consumers. It’s not a media darling like Opendoor. Its existence is the reason for an entire category of usury laws.

Blissful ignorance?

These sales look more like payday loans than consumer innovation.

There should be no joy in watching home owners squandering so much money, so quickly. Their equity, in the homes that we’ve assured them are the best investments of their lives, is plucked away in a swift and slick transaction.

It’s clear from the numbers that most of them would greatly benefit from hiring an agent and waiting it out — if they had those numbers.

Buying and selling a home is all about informational leverage, though. Opendoor’s pricing model is, apparently, highly advanced, and the company deserves credit for its technical prowess.

The most profitable course for Opendoor would probably be targeting homes where its lowball offer price is similar to an identified, public online valuation. You can imagine the conversation: “It’s close to the Zestimate. It’s easier. Why not?”

Set an extra $15,000 to $20,000 cash in front of the same Opendoor seller in Phoenix and ask, “Can you wait a little while for an agent to get you this much more from a buyer? It’s what you, and your retirement account, deserve.”

Who are we rooting for?

When consumers have access to quick money schemes, some willfully ignore the big picture ramifications.

Payday loans are popular for a reason, and it’s not because using them is a sensible long-term decision. We may not be in the business of regulating consumers away from their own poor decisions, but cheering them seems distasteful.

I’m impressed with Opendoor’s strategy and growth. If the company’s crafted storyline continues to be more visible to consumers than the actual financial results, it could continue to make a lot of money for its investors.

Sometimes new business models just find a better way to extract more money from consumers without creating significant new value for them.

That’s fair, but let’s not canonize Opendoor just because it’s using technology to increase its margins. The new “I buy ugly houses” guy is just better-financed, with a slicker pitch — and a higher fee.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Human satisfaction: Can a bot fake it?

This article was originally published on Inman News:

Excitement about new technology in real estate is usually followed by long delays in practical application. Logistical, territorial and legal hurdles often stand in the way.

Bots seem to be overcoming those barriers with ease.

How do bots work in real estate?

Bots in real estate create artificially enhanced relationship management. From conversation to conversion, nurture and management, software systems are being built to interact with end users as if there was a relationship with a human on the other end.

Sometimes these systems tell the consumer interacting with them that they’re a bot. Sometimes they don’t.

In some cases, they’re a little bit of HAL 9000, assisted by a little bit of Dave the human.

The gray area creates an interesting question: how much “faking it” is ethical — and how much does the end user care?

No doubt you’ve seen “the scene” from When Harry Met Sally. (Millennials, go YouTube it — maybe not at work.)

The conversation centers on whether participants in a transaction can really tell whether or not their counterpart received the desired experience.

Actor A may feel like he has achieved a win-win outcome, while Actor B may just be humoring his obliviousness. Not unlike a parent letting a child beat them in a game to deliver pleasure through illusion, “faking it” is sometimes the most pragmatic decision.

When Riley met Jenny

When the transaction is business-to-consumer, faking it may often be preferable. If a bot can provide a human-like experience with a fulfilling outcome for the consumer, isn’t everyone better off?

Meet Riley. He is a combination of bot and human, but he doesn’t like to talk about it.

Consumers, by and large, don’t know he’s “human-assisted AI.” An inquiry to Riley about a property may begin with some standardized questions and replies. Quickly, though, it transitions into an actual human experience.

Riley’s job is to answer questions and keep the consumer in conversation with value and time that the agent or business-person may not have at the moment.

I conversed with Riley a few times, looking for the moment where the contextual intelligence of a real person took over.

It’s a smooth transition. Most consumers probably aren’t skeptics, looking for the seams in the process.

Even if they knew, though — would they care? Probably not, if the outcome they desired had been delivered.

Call 867-5309 for a good showing

Jenny has a different point of view. She’s built on IBM’s Watson technology, 100 percent bot, and proud of it.

Not afraid to answer 20 texts or Facebook messages at 3 a.m., she wears her digital brain on her sleeve and tells consumers who she is upfront.

It’s a good bet that consumers will be more willing to barrage a bot than a human with extensive and repetitive inquiries.

Jenny’s job is to quickly dispense of the most mundane listing maintenance duties: answering sign calls about property details, showings, flyers, open houses and so on.

Her primary goal is to make the listing management system efficient. Call her Lucy, Clippy or TI-85 — it doesn’t make a difference. Consumers know she’s a bot.

Will Jenny’s upfront AI admission limit other opportunities?

She could transition to lead conversion mode mid-conversation. Already knowing that they’re talking to a bot, though, consumers would probably be less likely to answer a long string of questions about themselves.

Then there’s that nagging truth about real estate: Human loyalty generates long-term clients and referrals. Consumers who feel that their agent has personally provided his or her time to them will often feel obligated to work with, and refer other clients to, that agent.

The giving of human time — real or perceived — generates loyalty. Can a self-identified bot deliver the same feeling?

Team in a box

A team of bots seems like the ideal setup for efficiency.

Riley is mum about his AI to improve the consumer’s experience in the initial conversation. He is the lead conversion bot.

Jenny is the card-carrying bot office manager, delivering answers efficiently with a machine learning badge.

Sally is the incognito sphere nurturer who leans heavily on the real agent for support.

The level to which they support one another or reveal themselves as inhuman will depend on the ethics, perception and aggressiveness of their employers.

Of course, technically, these bots don’t have to be disconnected entities. They’ll likely be built as a single software program with different personalities for different duties.

Call it a team in a box. Defining the personalities is the key to optimizing the user’s perception.

The technology is already capable, but the personal nuances will determine consumers’ acceptance of the experience.

“You don’t think that I can tell the difference? Get outta here.”

Harry didn’t know until he was told. Will consumers know — or care?

A quick note:

CRMLS has begun passing on listing licensing fees from third-party portals to its member brokers. Bravo! The dollar amount is minuscule today, but the decision is still significant.

CRMLS can’t disclose which portals are paying for direct feeds, and how much they’re each paying, due to contractual obligations. This isn’t a surprise. I’ve been asking around the industry for years and getting jazz hands as a response.

The spotlight is beginning to shine through the smoke and mirrors of listing syndication finance. How much will portals pay for a listing? How much is that listing worth in ad revenue? How many MLSs are being paid by portals, and how many are willing to pass that revenue on to the brokers?

Why not create a model where the portal pays a referral fee to the broker/MLS based on a percentage of advertising revenue generated? Brokers know they’re not leveraging their listings’ advertising value. Creative options for greater revenue capture will continue to grow as broker margins shrink.

More exposure of these kinds of financial agreements is good for real estate. Pricing is arbitrary when sellers don’t know the market value of their product. Let’s continue to air out the details.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Provoking, flipping and dropping bombs (Inman Connect Speed Wrap)

This article was originally published on Inman News:
by Sam DeBord

Last week was Inman Connect in San Francisco, one of the best events of the year (and no, not only for the parties).

I’m writing to you from a campground in the Cascade mountains, so I’ll try to wrap up a lot of content quickly.

Bots taking over

Connect is always looking for the leading edge of tech. Bots are right at our fingertips.

Amazon’s Alexa was on stage at #ICSF answering Brad Inman’s questions — the way lead management software will in the near future.

A number of companies are already providing a combination ofhuman/bot lead conversion that works for agents while they sleep. Those conversations are digitally stored.

The human concierges likely won’t last long. Machine learning and that database of interaction analyzed against conversion rates will create a finely tuned sales bot in no time.

It won’t replace the agent in the transaction, but it could replace the inside sales lead conversion/appointment setter. I’d hire one. (And this week, Inman launched its own bot for readers, too.)

The software has eyes

Speaking of machine learning, RealScout has nailed it. Millions of human eyes interpreting real estate images have been transformed into a software intellect.

The machine can read images more accurately than its human counterparts. It sees the open layout and the box beams, even if the agent doesn’t identify them in the listing.

Consumers use natural language search and enjoy a curated discovery process, free of the artificial constraints of archaic code.

This is where the real estate experience improves. MLS and agent/broker inefficiencies are overcome by intelligent investment. Technology and capital come together to add value to the process.

We need more of this.

‘MLX > MLS’

That headline on W + R Studios’ website might be unnecessarily provocative, but that’s pitchman Greg Robertson’s style. Cloud MLX won the Inman Innovator Award, and it’s better than any MLS interface I’ve seen.

Like RealScout, it breaks free of traditional MLS search constraints.

With instant search suggestion feedback and past favorites/saved searches built into real-time interaction, the user’s efficiency grows with continued use. It’s a secondary or complementary MLS interface (there’s no “add/edit” listing feature). For now, it’s not a direct competitor to the big primary MLS providers.

This company is doing CMAs better than MLSs. It has better listing alerts. Now it has a superior user interface. What’s next?

The arms race

Congrats to the entrepreneurs who are being acquired in this bubbly market. Commissions Inc, a little startup out of Atlanta, sold for $250 million. That’s one-quarter of what News Corp paid for Move/realtor.com.

Leads and customer management software are still the story, no matter how many speakers try to shout it down.

Bridge Interactive Group was just acquired by Zillow. If you’re not familiar with them, have a look at their services, then look at Project Upstream’s. There’s no cold war here, just some friendly comrades building agent tools and ad platforms.

 

Bridge Interactive Group

 

Flips, bidding wars, and discounts

There are a lot of new business models getting airtime at Connect.

Haus is a bidding war platform that promises transparency. The legend is that an Uber founder got angry when he was outbid on a home, so he started a new company where everyone can see everyone else’s offer.

It’s going to be as hot as the taxi business. The potential user base is sellers in hot markets who want to give away their strategic advantage. Why would listing agents encourage their sellers to dump their informational leverage? How did this question not come up immediately to the founders?

Knock is another startup. It flips homes by giving sellers a guaranteed price. The property is listed publicly, and either Knock buys it at the pre-arranged price, or the seller gets a premium if it sells for more to another buyer. Knock takes some kind of fee, which should be front and center on its website but isn’t.

Transfer taxes limit some flip models. They can be up to 2 percent of the purchase price. In a traditional flip with two sales, that 4 percent really squeezes the profit margins.

Opendoor is taking a strategic approach by traditionally buying/reselling flip homes in states with low/no transfer taxes. They’re pretty successful so far. Homeowners are willing to forgo the money available on the open market for a guaranteed price/easy closing. It will be interesting to see if they can scale in other states.

I have an uneasy feeling about how well these sellers are informed about the value of their homes. It’s one of those uncomfortable topics like pocket listings: consumers have free choice, but the quality of advice they receive from their advisers has a great effect on those choices.

SoloPro came to talk about its limited-service model. It embodies the philosophical disconnect between many outsiders and industry insiders.

The company “unbundles” real estate services. Its marketplace lets consumers meet licensees for flat fee, discount services. Open a door for X dollars, write an offer for Y dollars, Agent Z who happens to be available today will serve your needs.

The agency relationship can’t be dismembered without losing value. Piecemeal representation is lesser representation. Continuity creates value. Inexpensive is sometimes just cheap.

Hobbled-Leigh

You’d think the cast Leigh Brown had to lug around as MC of Connect would have slowed her down, but she came out swinging. Her performance was edgy and smart, in classic Inman style.

In a departure for Connect, she pitched politics and the Realtor PAC from the stage. Some cheered, some grumbled.

This is a pretty simple one, folks. You might not like politics, but we all enjoy the extra money RPAC is putting in our pockets. Anyone who sells, owns or vends to those who do, is benefiting from those carrying the water.

Dropping bombs

I don’t mind when speakers use off-color language, but it’s painful when they don’t know how to wield it. It’s a lot like a weapon. If you’re going to take it on stage, you’d better have a really good (expletive) handle on it.

A few wannabe gunslingers put us all through some pain last week. Don’t be one of them. If you’re not sure, don’t try it.

Startup Alley

Agents don’t want more tools. They want fewer, better tools, and First promises that.

Instead of adding a new CRM, First simply monitors a user’s social networks. Using predictive analytics, its algorithm identifies moments in your sphere’s lives that may signal a move. The agent is alerted to make contact.

Just keep doing what you’re doing on social media and your vendor will do the rest. We need more of this: horsepower on the back end, simplicity for the user.

Unsolicited advice

I’m always struck by the number of entrepreneurs that appear to not have sought broad guidance before launching. There are some really smart folks who could simply sit down with some savvy brokers and agents to find out that their product is functionally obsolete in this industry.

They might save themselves the first failure or pivot.

This isn’t about discouraging innovation. Push the edge, but first ask a few people if it’s just a cliff.

It’s not just the old stodgy guard that’s saying your product/model won’t work. It’s often someone who wants you to improve the experience but can already see what you can’t.

We just might save you a lot of time and money.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.

How long can aging agents dance on the bar?

This article was originally published on Inman News:
by Sam DeBord

  • “Raise the bar” is more bullhorn than boots.
  • Incremental change is insufficient.
  • International regulation should focus our industry on prompt action.

I’ve been trying to write this for some time, but it’s difficult to put a positive spin on it. I’ve put it back on the shelf a half dozen times, but after having a chat with Brad Inman in Seattle this week, I thought: “This is Inman. Just let it rip.”

So, here goes:

The real estate industry has a perpetual ritual. It’s titled “raise the bar.” After a decade of observing it, I wonder whether it’s a choreographed song and dance rather than a call to action.

The lyrics come from rote memory: “More education! More training! Higher barriers! It’s too easy to sell real estate!”

Self-flagellation follows: “There are too many bad agents. It’s our fault. It’s our brokers’, our licensing boards’, our associations’ fault. Mea culpa, mea culpa, mea maxima culpa.”

Feeling relieved to have aired our indignation, we return to the status quo until next year’s performance.

Paved with good intentions

To be fair, expressing our desire to better our industry is valuable. There are many people who have devoted their efforts to improve our practitioners.

That the progress is so slow is perplexing, though. With countless voices proclaiming to be the prophets of professionalism, there are far too few putting those words into action.

“Somebody should do something.” This is our usual unenforceable delegation. The National Association of Realtors, brokers, the state licensing board — someone else should raise the bar and shrink the pool of ill-equipped agents.

I’ve had the privilege of sitting through the conference calls and meetings with committees, task forces and licensing boards that intend to raise real estate standards. There’s a revolving door of well-intentioned people who express their viewpoints but won’t endure the process.

There’s little continuity. Little moves forward. The stalwarts become jaded and begin to give up (mea culpa). The bar remains the same. More untrained agents get licenses, write contracts and balloon the already overcrowded rolls of consumer complaints-in-waiting.

 More agents, not fewer?

A counter-narrative to the overpopulation of agents has popped up recently. It strikes me as bizarre, and it goes something like this:

There’s a problem with the aging population of agents. The boomers will retire, and we won’t have enough knowledgeable practitioners available. The public will be underserved. Unfit entities will fill the void.

The real estate market must be booming if this is our current concern. There are roughly 1.5 million agents today. There are 5 million homes sold annually.

Retiring agents will train their successors. Larger, more efficient teams will take up the slack for those that don’t. If we cut the agent population in half, we’d still have plenty of manpower to handle consumer demand.

The demographic trends are an interesting study. The aging population won’t create a shortage of competent agents, though. Let’s put that distraction to bed.

NAR membership: Crutch or benefit?

There’s also been talk of NAR’s compulsory membership being an impediment to its members. Its revenue would suffer if it supports barriers to membership that reduce headcount.

It could, however, gain a more selective group of members as its distinguished Realtor representatives, according to a thought-provoking piece by Russ Cofano. If NAR didn’t compel membership, maybe only the best and brightest would rise to the top, uniquely identified as Realtors for all consumers to see.

That’s an engaging topic for the trade association. It won’t change the landscape of the overall sales force, though. We will only improve the industry’s reputation by creating standards that ensure all salespeople, Realtor or not, have the proper training and experience to do business with the public. If that means fewer members and fewer licensees, so be it.

Winter is coming

If we needed a wake-up call, the winds of change are storming in from the North. British Columbia, Canada, is attempting to put its real estate industry into a regulatory stranglehold. Canadian real estate has been dancing on the bar as long as we have. The Crown is tired of waiting for it to get down.

Rob Hahn put together a thorough breakdown of the potential changes. The regulations potentially placed upon B.C. real estate practitioners and the powers stripped from their associations would be sweeping.

Whether those winds spread to the U.S. is still in question. That we should be prepared for the possibility is not.

The essence of the government’s argument is that the real estate industry was allowed to self-regulate. It was given time to work out issues. It failed to act.

Our regulatory environment is significantly different, but we’d be foolish to ignore the implications.

Raise the bar: Brass tacks edition

We have reasons to improve. We have the motivation to improve. So, what would it take to discourage the hobbyist agent from dabbling in real estate?

Incremental changes won’t work; 200 hours of annual education isn’t enough. We all know about those online education schools (wink, wink). Licensing fees of $1,000 aren’t enough; $5,000 Realtor dues might not even be enough. Agents can make five-figure commissions on a single transaction. Two to three sales a year is a significant second income for many.

Higher education requirements and fees are popular suggestions, but they miss the point. Only training and on-the-job experience teach an agent how to run a business and act like a professional.

Mandated mentorship

A required apprenticeship would be a beneficial barrier and a boon to the real estate sales profession. It’s not a new idea, but it’s one that is usually passed over for easier so-called fixes. That’s probably because this kind of radical change would require immense, broad support.

Before licensees ever work solo with a client, they should work as an apprentice to an experienced agent for a significant length of time.

This isn’t a manager signing off on contracts. It’s a mentor required to train an apprentice in the full world of real estate. That’s more than paperwork. It’s interacting with clients and customers, marketing, business building, conflict resolution, etc.

Of course, this won’t affect the legions of hobbyists who already have licenses. When you’re in a flooding boat, though, your best bet is to plug the leak before bailing water.

Boots on the ground

Are we dancing or are we lifting? Our actions will make the answer clear. If you feel the need to talk about raising the bar, take the next step.

Engage your local Realtor association, your MLS board, your brokers and your managers. Prepare for a long haul. It’s not glamorous, but it’s necessary.

The irony doesn’t escape me — I’ve been dancing while you’ve been reading.

So I’ll shake off the cynicism and get back to work. I hope to see you there.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County REALTORS. You can find his team at SeattleHome.com and SeattleCondo.com.

The broker-driven future of the MLS

This article was originally published on Inman News:
by Sam DeBord

  • Brokers need to understand the new initiatives changing the way we work with MLSs.
  • New tools can create efficiency and improved data storage and analytics for brokers and vendors.
  • Consumers will have access to broader, more accurate information and tools.

New technology initiatives are reshaping the future of broker relationships with MLSs. The sheer magnitude of the changes coming to the MLS portion of our industry is creating uncertainty for some and unease for others.

These initiatives are complex. That’s why many agents, and even brokers, simply avoid them. It’s what we were taught: If the MLS is working, there’s no need to investigate further. Get back to business.

That focus is not selfish or small-minded — it’s a virtue to salespeople.

These are historic times, though. Brokers and vendors are driving the creation of tools that will radically change our industry’s data delivery system — streamlining and enhancing it significantly. These efforts will require not only understanding, but broad, demonstrative support by the broker community to come to fruition.

If we’re going to make intelligent decisions about the future of the MLS, we need to understand it. Many agents don’t know how their MLS works, let alone Upstream. Here’s a start, from one broker’s perspective:

The future of real estate data

 

To be clear, this is not a technical data flow chart. It’s merely a visualization of how the MLS world could fit together in the future. The intent is to illustrate the players involved and how they are connected. Many technical details will be glossed over in an attempt to provide brevity and clarity.

The players:

MLS service providers

Core MLS service providers handle the MLS’s listings and office information database. These could be Corelogic, FBS, Black KnightRappatoni, a custom solution, another vendor, or in the near future, RPR AMP. These companies provide the back end for the MLS and deliver data to some vendors for brokers.

They usually also provide a front-end interface for MLS users. This could be Matrix, Paragon, etc. In the case of RPR AMP, it could be multiple front-end interfaces for MLS users simultaneously sitting on top of the AMP database.

Secondary MLS interface providers

There are also secondary interfaces available to MLS users. Homesnap MLSand CloudMLX are optional enhancements to an MLS’s user interface options. They are built on top of any core MLS provider’s database. They don’t affect the primary MLS interface but provide a different (and sometimes more streamlined) way for a user to interact directly with the MLS database.

Upstream

Upstream is the database that would streamline brokers’ data output. Brokers who join Upstream would no longer send listing and office data to dozens of unconnected outlets. They would use the Upstream database to store and update all of their information.

All of their data could then flow downstream to their providers (including MLSs) at the individual broker’s discretion. This would increase efficiency and improve data storage and analytics for brokers.

Those brokers who do not join Upstream would continue the current process of listing and office data distribution on their own. They would send separate data feeds to multiple MLSs, office tools, vendors, portals, etc.

Aggregators

Aggregation products allow access to IDX data across multiple MLSs for brokers. They provide a feed that brokers can use with their office tools and vendors. The breadth of the data is dependent upon the aggregator’s MLS reach.

Some aggregators have additional data. Zillow’s Retsly Connect adds public records data for broker use. Trestle from CoreLogic adds consumer-facing public records data and AVM data. It’s far and away the largest with 100 MLSs already signed up, but it won’t be available until late 2016.

Broker office tools and vendors

One of the misunderstandings about Upstream is that it’s only about listings. Brokers are currently feeding different kinds of data to a wide range of office tools. Company records, office addresses and photos, agent rosters and photos, staff information, accounting, transactions, and customer records are all uploaded to disparate databases that don’t talk to one another.

With Upstream, these broker tools and vendors can all go to the single source of that data for the information. The broker merely needs to keep one central set of records with Upstream to ensure uniformity.

Portals

The major consumer-facing real estate portals currently receive listings from many sources. Agents, brokers, MLSs, franchisors, vendors and syndication systems send listings of different levels of quality to be displayed on these platforms. The data rights of the senders also vary widely.

In an Upstream world, a foundation of rights over the listing data and photos would be established for any broker or agent member using the system. Listings delivered by broker consent through Upstream to a portal would have pre-existing rules attached to their usage and display.

Brokers could negotiate different or superior agreements with the portals if they wished to. In short, portals wouldn’t be taking listing photos and recycling them as they please. The broker retains control of them.

Broker Public Portal

The BPP is a totally separate animal. It’s essentially another consumer-facing portal, but it’s broker-owned and managed. Its intention is to deliver an accurate, timely, responsibly displayed database of brokers’ listings to consumers.

BPP recently hired Homesnap to provide the technology for its product.Somebody pinch me. Homesnap has shown an uncanny ability to combine software interfaces that attract consumers, deep connections of MLS data and a cooperative style that works well with associations. If there is a company that fits the mold for this to be a successful venture, Homesnap is probably it.

The environment:

Friction

It seems logical that a broker with access to Upstream at the front end of data distribution and an aggregator such as Trestle at the nexus of multi-MLS data would be significantly more empowered than one using today’s traditional system.

It shouldn’t be surprising, though, that some of these initiatives face pushback from entrenched players. In some cases, they create significant new work and additional complexity for MLSs. MLSs need to be at the table with brokers in the planning and implementation phases. The transition will not be easy.

Action

There will be objections to this new model, some with genuine concern for viability and some self-preserving or self-serving. It will hit road bumps, and there will be growing pains. The rumor mill is already in full churn. That shouldn’t discourage us from seeking long-term improvement in our systems.

The funding is in place to begin the process, and most of the industry’s biggest players are on board. Upstream has five alpha markets already selected to begin testing the program.

Then what becomes of the MLS? I’ve heard intelligent people predict everything from a national MLS to the end of the MLS. Neither is happening nor would they be good for the industry.

Focused MLS

These initiatives are taking items off MLSs’ plates that create controversy. Most brokers don’t want the MLS to make advertising decisions for them. They want fast, inexpensive access to broad MLS data. They want flexible software options.

They want to have their data synchronized across their plethora of tools without having to update it manually in so many locations. Upstream, AMP, aggregators and secondary MLS interface tools take much of this burden away from the MLS.

Brokers also want the MLS to continue doing what it does so well — cooperation and compliance. Brokers are the MLS. Its existence is invaluable to us.

The idea of a compliance arm of a national MLS handling enforcement is frightening. Imagine the federal government replacing all local police forces with the national guard and expecting everything to be OK. “Seattle, you’re OK with people smoking pot in the park. Provo, you’d like to throw ’em in jail for the weekend. We’ve got a single answer for both of you that will please neither. Your papers, please.”

Painting the corners

There are a lot of angles and conspiracies regarding how these initiatives benefit some parties over others. Many have credence. These are businesses trying to make money.

That doesn’t have to be the narrative about these initiatives, though. They also create a picture of an MLS system that effectively serves its brokers, while brokers simultaneously gain back efficiency and control over their data distribution. They remove conflicting territories.

Will some outside platforms lose leverage? It seems that they might, but improving the business for the brokers and agents who actually generate transactions should always be viewed as a benefit to the industry.

And lest we forget, there’s a consumer angle. They’ll simply get more accurate data across consumer-facing outlets, better tools developed at faster rates and access to broader information across markets and MLS territories.

That’s worth a shot.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.

Will ‘smart contracts’ replace real estate closers?

This article was originally published on Inman News:
by Sam DeBord

Key Takeaways

  • Criminals are taking advantage of poor security in real estate transactions to defraud buyers.
  • Security holes in the real estate transaction could be fixed with verification software.
  • The role of a closing agent could be drastically altered with smart contracts taking over verification.

Most of a real estate closing revolves around trust and verification. Buyers and sellers use trusted intermediaries to verify that properties, funds, contractual obligations and insurance safety nets are all properly vetted before closing a sale.

That’s part of the reason a real estate transaction has so many participants. Agents, lenders, inspectors, title insurance providers, notaries and closers provide independent verifications of individual facets of a sale. An escrow company or an attorney is usually the organizing force that pulls these individual points of verification into one trusted transaction.

Security is lacking

The security of the current process is weak at best. Homebuyers are frequently being robbed of their purchase funds. By simply hacking an agent or closer’s email account, criminals have put themselves in control of the closing communication.

The hackers spoof the closer’s email, ask the buyer to change the wire instructions, and the funds roll into an unverified bank account. By the time the buyer realizes what has happened, the money has been laundered overseas through multiple wire transfers. It’s gone.

Software security to replace human fallibility?

This kind of real estate fraud is possible because of a reliance on unsecure, disjointed communication methods. The purchase process has no safety envelope. It lacks a seamless layer of overriding security that verifies each sale condition throughout the process.

What if software could replace the parts of the closing process that rely on human verification for security? Smart contracts aim to do just that.

Imagine a digital contract that independently verifies every step in a real estate sale including the identities of the buyer and seller, the funds sourcing, the lender sign-off, deposits, property title transfer and delivery of payoffs to sellers and lien holders.

Before getting into the technical details, let’s look at the roles of an escrow closer or an attorney in the closing process.

Closing functions that could potentially be replaced by secure software:

  • Administration of transaction as a neutral third-party
  • Control of earnest money funds
  • Verification that proper paperwork is in place
  • Examination of title for liens, judgments, mortgages, clouds
  • Ordering of title insurance policy
  • Pro-ration and transfer of property tax and utility bills
  • Preparation of closing documents
  • Administration of signing appointment
  • Transfer of purchase funds to sellers and lien holders
  • Recording of deeds with local government

Closing functions in which human input may trump intelligent software:

  • Live verification of personal identity
  • Explanation and recommendations for resolving title issues
  • Review and explanation of contract items
  • Guidance of clients during unexpected or unique circumstances

Clearly, there is a large portion of the closing process that could potentially be absorbed by secure software. This isn’t to say that the smart contract is ready to take over 90 percent of a closer’s role today.

The potential is real, though. Some of the world’s biggest banks are already developing software based on a technology concept called blockchain to create smart contracts for the financial world.

This is not bitcoin. Although many have only heard of blockchain technologyas the foundation for the digital currency, its use as a software model can be applied to any number of reputable business processes.

The real estate concept, in an oversimplified explanation, is a digital contract embedded with smart money. Buyers, sellers, lenders and all other parties are identified by their personal information.

This data comes from decentralized databases that add to the verified blocks in the data chain — banking, credit reporting, employment, government or other information gathered from trusted sources.

After verifying individuals, the blockchain assigns them an encrypted ID, which allows the smart contract to approve their actions going forward.

You’ve been verified; you no longer need to be trusted

From here, a homebuyer can create smart money by uploading funds and programming them. The buyer’s programmed money goes into the contract with stipulations attached to it.

The seller cannot touch the funds until the buyer’s programming instructions have been met: inspection approved, title clears, lender releases funds, county records the deed and so on.

The lenders, title companies, government agencies and others can all become verified participants in the blockchain smart contract. These identified users in the transaction can make the sale move forward when they verify that certain steps have been accomplished. Only the verified sellers and lien holders will be allowed to receive the closing funds.

What does the smart contract mean for escrow and attorney closers?

Smart contracts could drastically alter the way real estate transactions are closed. With much of the verification process now handled by a network of databases instead of human interaction, there’s the potential to remove much of the labor that’s currently necessary. This is the way most technologies disrupt industries — through efficiency improvements.

Timelines for closings could be reduced. Software doesn’t take holidays, evenings or weekends off.

It’s clear that a smart contract with enough access to the right data could administer a large portion of a real estate closing. Any item that pertains to verification is ripe for delegation to the smart contract. The complexity of the human interaction in the transaction isn’t something to underestimate, however.

Barriers and holes in the process

Smart contracts can’t review and explain contract documents to a nervous seller or buyer the way a human closer can. It’s a stretch to believe they’d replace the closer completely.

It would also be foolish to ignore the most glaring hurdle to the full-fledged adoption of smart contracts in real estate. That is the decentralized and unharmonious makeup of the industry itself.

A typical transaction might have a buyer’s broker using Instanet software while a seller’s broker is using dotloop. Meanwhile, the escrow company and lender are trying to shoehorn everyone into their own custom software product.

Each individual wants the process to work smoothly, but no one wants to use the other’s solution. A consensus blockchain-style foundation could allow many different software products to access the same smart contract, but the industry’s track record of coalescing around a single solution is less than stellar.

Moreover, the cross-industry participants necessary to close a financed sale make for an uphill battle. A single contract needs every member of the transaction to adopt its platform to be effective.

Brokers, lenders, title companies and even government agencies that record transactions would have to sign on for a truly seamless, secure transaction. That will take significant time and influence.

Digital disruption through leadership or pragmatic paper?

Smart contracts have significant potential for increasing the security of transactions, improving the speed of sales and making the closing process more efficient. They could effect profound changes on the role of the real estate closer, but they don’t eliminate the closer’s role entirely.

The smartest software in the world can die in unfulfilled anonymity in this industry. Adoption of smart contract technology won’t happen from the ground up. It will require the kinds of voices that can convince government agencies, banks and big brokerages to sign on.

Whether it’s blockchain or another solution, consumers deserve industry leaders’ full attention on providing a safer way to buy and sell homes. If it happens to make transactions faster and more efficient in the process, everyone benefits.

Every buyer and seller should be warned of the current danger of digital fraud at the outset of a transaction. Of course, there’s a simple way for many of them to avoid it.

Drive to the bank. Get a paper cashier’s check. Drive it to the closing office. Sign the paper. Thank your closing agent in person. As archaic as it sounds, until there is a solution, it couldn’t hurt.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and President-Elect of Seattle King County Realtors. You can find his team at SeattleHomes.com and BellevueHomes.com.