Tag Archives: Real Estate Consumer

real estate consumer

Don’t Go Solo, Tech Bro: Do Your Homework

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

  • Someone else already failed at it. Why will you succeed?
  • Real estate is a collaborative business.
  • Look to profitable precedents for true tech investment opportunities.

Picture the scene: “Tech bros” with money to burn surround the table. The disruptor-in-chief is rallying the troops to the tune of nine figures. The pitch is some variation of a model that has failed repeatedly and without exception for decades. “Today,” he states, “we will finally change real estate because we have — technology!”

SoloPro’s enticement of a $1.6 million investment from Lowe’s is just another data point in a long line of over-funded, soon-to-be-failed commission-busters.

That’s not broker-centric hubris speaking. It’s history.

The company’s “nod to the traditional real estate model” by bundling services this week wasn’t just a slide toward traditional commissions. It was the first step in admitting its model doesn’t work. The bluster of “blowing up” agent commissions is a tiresome, thin smokescreen to the seasoned observer.

Tech money is pouring into real estate, but some techpreneurs seem more interested in spending than doing their homework. Many of them need a Real Estate 101 course, with a significant portion dedicated to the history of failed ventures.

Don’t be offended, tech bros — I used to be one of you

I was a techie know-it-all who was appalled by the broker-agent model that dominates the industry. Agents were overpaid and commissions were overblown. We knew tech disruption would rid us of real estate’s high costs and inefficient labor. Then I spent 10 years in the trenches with real brokers and agents, and I saw how wrong we were.

If you’ve ever been lucky enough to hear Sean Carpenter speak, you’ve heard that in real estate, “Everything you need to know, you learned in kindergarten.” Having taught a significant number of kindergarten classes myself, I’d like to deliver a few of those lessons.

Let’s sit on the reading rug, clear our minds and start with the basics:

1. Read — read a lot

Find out if your business plan is just a carbon copy of something that’s already been done. Don’t let your ego get in the way. Many smart people have probably already tried it.

You’re saving consumers money by cutting commission costs? See Help-U-Sell since 1976. See the litany of competitors already entrenched in the marketplace and the graveyard of imitators in their wake.

You’re adding technology to increase the commission discount value proposition? See Redfin. Is $200 million in funding enough to reach 3 percent coverage in your primary market? That’s what it took them, along with continually shrinking the discount model.

The vast majority of that money came after the company changed its tone from adversarial to cooperative. So….

2. Play nice in our sandbox

Real estate is a relationship business. Abrasive characters usually find themselves a new attitude or find themselves out of the industry.

You’re not Steve Jobs. You don’t get to be a sociopath in this industry and get away with it. Real estate’s leaders are intelligent, savvy and financially motivated. They also make a lot of decisions based on long-term relationships. That’s not just the old boys’ club. It’s an acknowledgement that being amicable is profitable.

Many of our leaders were once real estate agents and brokers themselves — the smiling, anything-for-my-clients kind of folks. You’re going to have to shake a lot of hands, listen to a lot of different viewpoints and make a lot of friends to survive long term.

3. Build things. Don’t break things.

Disruption conjures images of broken models. Changing the way real estate works doesn’t have to mean tearing things down, though. It’s usually not the best path to profitability.

Our disruptive friends who are hell-bent on breaking everything in sight are often the fastest ones to the exit when it comes to earnings time. We love innovation in our industry, but don’t walk in, kick down the sand castle and tell us how smart you are.

Rather, build innovative tools that help us do business. Look at who’s actually generating revenue in this industry — listing advertising portals, productivity app developers, transaction management platforms, e-signature providers and so on.

Although some of these companies are still operating in the red, they’re at least hanging around with revenue long enough to establish themselves.

Brokers and agents have money, and they’ll spend it. Innovate and bring us a product we want to buy.

4. Follow the rules (as much as possible)

You’re entrepreneurs, so you’re naturally inclined to break the rules. Feel free to bend the rules of formality, tradition and stagnant thought. Just don’t ask to join the group and then pretend that you didn’t read the rules.

You can be a unique snowflake, but if you stand on your desk and throw rocks, you’re probably going to fail.

You could prove me wrong.

One of you will break all of the rules and be successful. I’ll let you buy me a drink and tell me all about it when you get there. But for most of you, building cooperatively is an easier path to profits in this industry. It has lower hurdles and more successful precedents to follow.

Innovate, but research first. Ask a broker why it won’t work. Take the advice seriously.

Then get busy building something that will loosen up our pocketbooks. History, and your investors, will look favorably upon you.

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.

Trulia-Zillow fiasco reveals disjoint, opportunities in real estate agent reviews

This article was originally published on The Real Daily:

Remember when there was no MLS? Neither do I, but legends of those real estate dark ages paint a grim picture. Brokerages each held their listings closely, and consumers had to go meet with each of them individually at their offices to try to cobble together a mental picture of the total market.

It was disjointed, full of misinformation, and detrimental to not only the consumers’ needs but also the efficiency of the market.

That’s where we are today with agent reviews

There are no standards, no structured cooperation, and little overlap or sharing. Plenty of companies are building their own review platforms, but they’re almost all proprietary boutiques. The platform builder wants the consumer to use its review tools, but doesn’t want its competitors to have access to those reviews.

Home buyers and sellers are asked by their agents to write reviews for them—on Yelp, Realtor.com, Zillow, (formerly) Trulia, and any agent matching service where the agent would like to appear relevant. Our clients don’t want to jump through these hoops, and they shouldn’t have to. It’s inefficient.

A clumsy attempt to clean up reviews

Zillow is flexing its muscle in the review space because it currently has the best single-location, quick, verified review platform. When it merged Trulia’s reviews into its own platform, it decided that a large portion of Trulia’s reviews had not been verified, and likely could have been gamed by the agents. They were tossed out without notice to the agents.

The act was clumsy, and the backlash from agents who’d lost their reviews was swift. The mea culpa came almost as quickly as Zillow offered to retrieve the purged reviews for any agent who requested them directly. They would not, however, be appearing on the newly merged Zillow/Trulia review platform.

All sites should verify legitimacy of reviews

While the company tripped over its industry relations in the conversion, the strategy of the purge is still a step in the right direction for real estate agent review standards going forward.

Every review platform should be following guidelines that, at a minimum, verify that the client and agent actually worked together. A company that intends to inform the public on the quality of real estate agents’ services should be intently focused on making sure those reviews are real, via mutual admission, property identification, and other means.

Zillow should be praised

Zillow should be commended for pursuing that verification. While real estate listings are gaining nationwide structural standards with RETS, reviews are just beginning the process of setting standards. Just as big of an issue, though, is that portal reviews are just that—single location reviews. Realtor.com reviews can’t be exported or integrated into Zillow’s review platform. Reviews on Homes.com can’t be integrated into the Yelp profile. It’s the same situation on almost every other portal or agent rating website. They don’t speak to each other.

Ironically, the technology companies who built portals to egalitarianize the consumer listing space are now building walled gardens of reviews to bring back the disjoint of the pre-MLS era.

Each proprietary system hopes to force more consumers into its own custom sandbox. They’re funneling buyers and sellers back into the “meet me at my office to see our exclusive listings” mode.

Good for competition, bad for the consumer

While that may be a good business decision in terms of competition, it blunts the progress toward true consumer visibility of broad agent reviews. Buyers and sellers see a small, skewed version of an agent’s reviews on portal websites, with each one portraying a different picture than the last.

Consumers won’t review us on all of the sites necessary, so we get a sprinkling of reviews here, and a dash of reviews there.

All hope is not lost

There is hope, though. As portals up the bar in terms of review verification, companies likeRealSatisfied and Quality Service Certification continue to deepen our view of the kinds of quality standards that are possible on a brand-agnostic level. If standardized requirements for legitimate reviews become common practice, we may be able to cross-reference reviews on different platforms.

Each website could combine reviews as a whole, or at least reference the agent’s reviews from multiple platforms, side-by-side. The ability for a consumer to see our reviews on Yelp, Realtor.com, Zillow, RealSatisifed, etc, in one place, would be a huge boon to consumers’ ability to see who’s really keeping their clients happy.

I hope NAR will lead the charge

I’ve written before than NAR should be the driving force to make this allegiance happen. Even if it doesn’t take shape that way, tech companies in the review space should continue to develop products with these standards in mind for the good of consumers as a whole.

Agents may have experienced some hassle with the Trulia review losses, but that’s nothing compared to many more years of asking clients to do us a favor in a disjointed, time-intensive manner.

If we can improve the verification requirements for reviews, and agree to communicate cross-platform with those who adhere to those standards, we’ll be doing a great favor for ourselves and our clients.

#AgentReviews

On-demand showings: Uber-like innovation or bait-and-switch?

This article was originally published on Inman News:

Showings on demand: They’re all the rage in real estate tech innovation right now. Everyone is crying “Uber,” and on-demand is the latest amplifier.Hobizbo and Redfin introduced their pitches this week. Curb Call andAgentPair are already working in this space.

The idea is simple. Consumers want their transportation, their food and their shopping to happen instantly. They have been trained to expect that the best tech companies will deliver the results they want faster. From a tech mindset, home showings are a natural next step.

Connected, organized, integrated showing systems have great appeal to our industry. The marketing of these systems as on-demand showings, however, muddles the picture. Consumers who buy into the marketing might just be swallowing a bait-and-switch — hook, line and sinker.

The hook: On-demand

“Instant appointments, instant offers, instant gratification.” That’s the sales pitch of one on-demand outlet and the allure of the term. The hook makes a consumer think that it might take a few minutes for the agent to get to the house, but on-demand must be faster than calling another agent.

If a company has a lot of agents out in the field who can respond to these showing requests in short order, it could be an improvement for the efficiency of showings.

There’s opportunity here for big brokerages and offices. There are also dozens of reasons why it might not the best way to conduct showings for sellers, brokers — or even the buyers themselves — but that’s a separate conversation.

This is about lead generation and conversion. Getting consumers to believe homes are available on-demand is enough to garner their contact information. That’s goal No. 1 in lead gen.

It’s also enough to make consumers believe they don’t need to call anyone else. Because they’ve already input their on-demand request, they’ll feel comfortable waiting for that company to fulfill their request instead of calling around until someone answers. That’s a big win for lead conversion.

The line: Schedule your showing time

The scheduling feature of showing systems is a step in the right direction — on its own. If we can standardize the systems and make them available to more markets, we’ll be improving our workplaces and consumer satisfaction with the process.

There are some other showing software tools that allow buyers to schedule showing times with agents as well. As long as a consumer is notified responsibly about the likelihood of seller constraints and lead time before a showing is likely, this is good for real estate.

The more we can electronically organize a showing between two agents, two sellers and two buyers, the better all of our experiences will be.

Tech companies should be applauded for their continued improvement of the streamlining of scheduled showings.

The sinker: Reality and consumer trust

Brokers know most homes are not really available on-demand. Listings can have restricted showing hours or require that the listing agent accompany the buyers at the showing.

They have occupants, guests or children who are home. They work night shifts or just don’t pick up the phone to confirm a showing time. Often we have to wait for a listing agent to receive our call, call their client and relay the message back again that the showing time is OK.

Giving consumers the impression that on-demand showings are our standard practice — as opposed to a fortuitous, infrequent occurrence — is more base than innovative.

Like the ads that say, “I’ll sell your home in 90 days, or I’ll buy it!” Let’s not obsess over the questionable sales pitch as if it has changed the dynamics of the transaction.

Anyone who has worked in real estate for a significant amount of time knows that the majority of our showings require more than getting an alert from a buyer and running for the door.

If we’re totally honest with consumers, we can offer them the ability to schedule an appointment with the caveat that it might not be available.

A system that integrates the sellers’ schedules and seamlessly contacts sellers, buyers and their agents to streamline showings would be a huge boon to most real estate markets.

On the other hand, on-demand holds a flashy treat out to the buying public. When consumers order it, half of them get their two-day-shipping Amazon Prime packages delivered four days later.

We know that’s what will happen when we advertise on-demand. The question for brokers is: Are we willing to offer something we can’t deliver for the sake of getting the lead, and then apologize later?

In real estate, there’s no such thing as instant gratification. Let’s not pretend there is and confuse our customers in the process.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth, and a director for WA Realtors and Seattle King County Realtors.  You can find his team at SeattleHome.com and SeattleCondo.com.

Upstream and RPR: the smart grid to power the real estate machine

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

The negotiation, dissemination and confirmation of an agreement to build Upstream this past week between brokers and NAR’s board of directors was shocking in its speed. Virtually the entire broker sphere is on board. Upstream, with its newly unified backing, has the potential to alter significantly the power structure of the real estate industry.

To put the agreement in its simplest terms: The brokers representing the vast majority of agents nationwide support Project Upstream. Their goal is to create a broker-controlled gateway to all online display of real estate data with broker-specific rules attached. They’ve partnered with NAR to fund building that gateway with RPR — the largest parcel-centric property repository in the industry — as its database.

Brad Inman wrote this week that brokers are biting back at “the machine” of technology that wrested control away from them decades ago. He wondered if Upstream would be just another middleman.

As I watched the partnership solidify in D.C. this past week, it was almost bizarre to see this new power player emerge during a nonprofit trade organization’s annual legislative meeting. All outward appearances were that this was just another buttoned-down event designed for measured, process-driven political decision-making.

In reality, a group of executives and technology minds were seizing an opportune moment and wresting control of the industry’s conduit to the consumer world online. This new power player, the middleman that he might appear, was Michael Corleone eliminating his stunned opposition while attending a baptism. No one thought him capable of such swift and broad consolidation of power until it was too late.

Brokers and NAR can now create a smart grid to control the flow of power to any vendor, MLS or portal that is dependent upon broker data for viability. This isn’t just “taking our data back.” It won’t just allow brokers to decide where their data goes. It will define how, when and where much of that data is displayed and used at any end point.

The real estate tech machine has always been powered by a tangled web of broker data too disjointed to control. It looks like a Brazilian favela, with rogue users strapping their own data lines anywhere they see fit and supplying unreliable power sources to anyone with the willingness to plug in. We know it’s a risk to the end user, but no one has ever built the infrastructure to replace it all in an organized and fully funded way.

That can end with the smart grid dashboard of Upstream.

Brokerages can curate their data-driven content on a granular level if Upstream is built out as a flexible, powerful platform. A brokerage could deliver its full data set to an MLS, restricting the data to co-brokerage and IDX uses. Controlling its own syndication dashboard through Upstream, it could decide it only wants Portal A to receive five photos of each listing and require a linkback beside each to the broker’s website (driving direct contacts from consumers). Other portals, vendors and partners might be required to follow a different set of display guidelines based on their relationship with the broker. Each broker could form its own set of rules for each of its data recipients.

Broker experimentation with subsets of data and rules, displayed on different advertising outlets, will allow us to develop long-term analytics showing what kind of marketing actually sells homes. No longer reliant upon the vendor’s statistics, brokers will be able to develop rational models for marketing that are based on sales instead of impressions.

Upstream is a gift to relations between brokers and MLSs. It takes away the MLS’ need to syndicate, and it takes away the broker’s ability to protest. The MLS continues to provide the cooperation and compensation rules at the broker-to-broker level, while brokers are free to experiment with their consumer-direct advertising as they see fit. RPR has always had a noncompete with MLSs, so there’s no national MLS controversy.

It’s a massive coup for NAR. Brokers could have built Upstream on their own, but interbrokerage rivalries would have slowed the process significantly. Recognizing this as an industrywide watershed moment, they tabled their past disputes and added a unifying voice to lead it (and to fund it significantly). RPR was a financial drag in the past, but it looks like a product that was built to do exactly this. Pivot or not, it’s an ideal partner to jump-start the initiative.

When it all shakes out, access to more standardized, reliable data will be available to anyone willing to play by the rules. That might inhibit a few tech companies’ plans, but it’s a much-needed maturation for the industry’s data foundation.

Real estate’s utmost service value is to the transactional parties, not hobbyists or entertainment browsers. The people directly responsible for helping sellers sell and buyers buy could once again be sitting at the control panel that powers sales-related real estate data across the Web. That’s a good thing for our industry.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and a director for Washington Realtors and Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.

Upstream & The National Broker Public Portal: Unearthing, Creating Super-MLS Data Layers

This article was originally published on Geek Estate Blog:

Upstream, Broker Portal, and MLS DataProject Upstream aims to become the defender and gatekeeper of brokers’ real estate listings nationwide.  The National Broker Public Portal intends to provide a nationwide display of data that puts brokers at the controls.  The former is not intended to exclusively fuel the latter (though it seems like a match made in heaven–more on that later).

Upstream is not an MLS and will not replace the MLS’s co-broker, commission, and professional standards roles.  Its creators do not intend for it to be public-facing on its own.  It’s intended to feed many portals with standardized data.

Upstream and the National Broker Public Portal are projects about advertising online to the real estate consumer. Accurate data and fair display guidelines are important to brokers.  Based on consumer traffic numbers to certain portal sites, consumers don’t seem to care as much about the same issues.

Brokers need to achieve their goals by creating their own vision of perfected data display, while simultaneously building an attractive platform that consumers will not only approve of, but proactively search out.

Differentiation on a level that consumers can easily and quickly understand will be key to gaining a significant market share at a price that’s attainable.

To differentiate in the consumer space broker projects need unique data layers that are only available to brokers.  They can create them by:

1) Reworking the proprietary data they already have, or

2) Generating entirely new layers of data that accompany any new listing that enters the marketplace through their gateway.

Unearthing another layer of current listing data

When we say the portals have “access to MLS listings”, we’re really talking about just a small subset of listing data.  Portal advertisers show the basic listing data, and surround it with other data from publicly available sources.

An Upstream-type gateway could require its members to give broader access to their listing data fields in return for being a part of this new unique consortium of data providers.  By allowing more data fields into this sole repository to become publicly displayed, a preferred portal that is allowed to display this data can claim a truly unique identity.

Just one example of data that might be leveraged for unique consumer content:  keybox history.  The preferred portal might be able to display:

  • The number of showings for a property
  • The rate of showings
  • The days in which the property gets the most activity
  • Aggregated showing data across neighborhoods and cities
  • Heat maps on Sunday traffic for house hunting
  • Which neighborhoods are trending upward
  • Which ones are lagging and have better potential for discounts on prices

That’s just one facet of listing data that’s currently behind a shroud.  We could think of another half dozen in an hour.  An initiative to expose this kind of data on a single website would have immediate consumer impact.

Creating a New Layer of Super-MLS Data

If an Upstream-style project really gained ground as the starting point for listing input, why not give the option, or potentially the requirement, that new listings on this data source add new fields that might not have existed at the MLS level before?

Imagine requiring every single listing entered on Upstream to include a legal description, a floorplan, a permit history, or a 3D-model of the home.  Think of the value of a Super-MLS layer of data that added the kind of consumer-viewable documents and features that can’t be found anywhere else online and can’t be reproduced through public data sources.

Of course these things would have legal and financial ramifications, but the point is not that the examples given are the specific answers.  The answer itself might not be apparent today, but the ability to provide a listing with a totally unique display layer, one that isn’t available to any other advertiser, is riveting.

Why would it work?  The company inputting the data has 1 million data entry staff members.  

Agents are the data creators.  Even a well-funded portal’s engineering army is a fraction of the size of the agent masses creating unique content on a property-by-property basis.

When the data gatekeeper becomes the de facto starting point for the industry, whatever new layers of proprietary data have been added to the listing input fields will become the standard of operation.  The listings could still be fed to MLSs for B2B/IDX/co-brokerage functionality, while a single consumer portal which is allowed to be the sole national display vehicle for these new layers would be able to hammer its opponents over their heads with this Super-MLS listing data.

Get To The Point Or Go Back To Work

The conversations we’ve had about portals selling our data back to us have been long on what brokers want.  They’ve always been short on how to realistically get those things in a consumer advertising market, which is far more important.

If brokers want to create better data, and display it in a superior way, they should focus first on who will pay attention.  Ask what new things can be done with the proprietary data they already have.  Add on a layers of new proprietary fields and make them a feature or a bonus for the agents who input them–an opportunity for their listings to stand out, not just to do more work.  Create a reason for consumers to fund the project(s) through traffic going forward.

By unearthing hidden listing data and creating new Super-MLS layers, you might just have the kind of data that consumers can’t get enough of and that a portal could benefit financially from in a big way–and that’s where the data creators start taking their leverage back.

Sam DeBord is a former management consultant and web developer who writes for for Inman News and REALTOR® Magazine. He is Managing Broker for Seattle Homes Group with Coldwell Banker Danforth, and a Director for WA REALTORS® and Seattle King County REALTORS®. You can find his team at SeattleHome.com and SeattleCondo.com.

Future Mortgage Option: Lending Insurance To Avoid Rate Volatility

This article was originally posted on the GeekEstate Blog:

Imagine you’re one of the millions of Americans who have been locking in in record low interest rates on adjustable rate mortgages within the past few years. 4.0 percent on a 30 year mortgage is a good deal, but 2.25% on a 5 yr ARM, or 2.5% on a 7 yr ARM cuts your payment nearly in half. Since most mortgages are refinanced or the property is sold within a seven year time frame, it seems like a good financial bet.

Still, five to seven years from now you’re not sure where rates will be. Your ARM could reset annually and potentially leave you at a 7.5 percent in an 8-10 year period. If market rates are near 7 percent at that time, your options will be slim.

It would make sense to have a product that alleviates that risk. There seems to be a niche market for lenders, and insurance or investment-related service providers, for a “future mortgage option”.

The idea would be fairly simple and probably highly profitable for the service providers. Allow a homeowner to apply, and pay the fees upfront, for a mortgage refinance at a set point in time in the future. A homeowner could secure a refinance of their home today at 5.0% fixed for 30 years, but delay the actual closing and recording of that mortgage until five years from now. The lender would be locked into an agreement to close that financing at the defined future date. If, upon reaching that date, the homeowners decided the refinance wasn’t worthwhile, they could simply decline the refinance, and forfeit the closing costs that they had paid upfront.

Of course, like anything related to mortgage lending, there would be plenty of risks that need to be addressed.  Here are a just a few:

  • To ensure the financing is still available in the future, the lending institution would need to be insured by a larger organization that could follow through on its obligations in case it goes under.
  • The borrowers would be prohibited from taking on any additional leverage on the home–the balance of the liens against the property at the point of application would have to be the same or lower upon the date when the future mortgage is to be recorded.
  • The 3rd party fees necessary to record the mortgage, collected as part of the closing costs, would have to be held in some kind of reserve account by the lender. It would probably make more sense for the lender to only collect its origination fees or “points” upfront, and then collect the recording-related fees at the future closing date if the homeowners elect to go through with the refinance.
  • The lender would incur the risk of the homeowner’s employment situation changing in the interim.  That’s a risk that every lender takes with long-term mortgages already, though.  Within 30 years, there will inevitably be changes with some borrowers.
  • The lender would incur the risk of market values declining in the interim.  Again, this risk is inherent in any real estate lending.  A company involved in ARM lending is already keenly aware of the profit margins necessary to take on the risk of short-term market depreciation.

This might make the future mortgage option sound like a bit of a niche product. To the homeowner who is making the hedge bet of a low-rate ARM, though, it’s exactly the kind of backup insurance that would be attractive.

We insure everything. Why wouldn’t we pay a few bucks upfront to mitigate the risk that rate volatility creates for our largest monthly expense and our most valuable possession?

Homeowners with today’s ARMs are banking a nearly 40 percent reduction in their mortgage payments.  At the median U.S. home price with a 20 percent down payment, they’re saving almost $20,000 over seven years.  In high cost markets, their savings could easily reach $50,000. Spending a grand or two upfront to ensure that, at year seven, their payments are still reasonably low would be financially responsible.

Lenders would obviously be the primary business beneficiaries of the product, but financial advisers and insurance agents could reasonably offer it as an option to their clients as well. There would certainly be some regulations involved, but there would probably be a way for these service providers to directly partner with lenders in offering the products to customers.

Take it a step further, and consumers could be offered both products at once–an ARM and a future mortgage option. It might require two different lending institutions to be involved, since most lenders love their five percent ARM adjustments and wouldn’t want to gut them with a secondary product. The added income on the future mortgage fees might just be enough to get a single institution to offer both simultaneously, however. Effectively, they’d be creating an ARM with a single fixed adjustment date and rate, and a higher profit margin for closing it.

It’s a somewhat complex product in its implementation, but with our zeal to insure ourselves from any risk in our lives, there are probably a lot of homeowners who would buy into a future mortgage option.

NAR has an opportunity to create the primary, trusted source of Realtor research

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

Quelling the angry mob part deux: NAR New Orleans edition

There’s a lot of commotion this week at the National Association of Realtors’ annual convention in New Orleans about the “Realtor of the future” (ROTF) policy proposal.

The document, developed by a presidential advisory group under instruction from the strategic thinking committee, has proposed some improvements to the Realtor way of doing business.

The point that will likely get the most attention is the development of a Realtor “rating” system.

Part 1 of this article was written in the not-so-recent past when Realtors were lambasting the new AgentMatch beta program on Realtor.com.

There were all kinds of problems in its implementation, probably most important being the messaging of that never-really-launched product. Visually ranking members against one another is the kiss of death for a trade organization and its partners.

Let’s be very specific with our wording on this topic as we consider the “Realtor of the future” proposal this week, though. Rankings, ratings and reviews are three distinctly different things.

Rankings imply a best-to-worst display. Ratings, most often seen as “how many stars out of five,” can be displayed on an individual or accumulated basis, but don’t necessarily need to be stacked or ranked between members.

Rankings, ratings and reviews are three distinctly different things.”

They’re often accompanied by reviews. Reviews are what we as Realtors are already used to, and perform much like testimonials, except that some reviews might be negative. “Testimonials” are virtually always positive.

The words used to describe the policy proposal in ROTF were, frankly, unfortunate and could taint many members’ views: “NAR should develop a methodology to rate Realtors.”

I’ve had the privilege of working for a short time with some of the committee members involved with this policy proposal, and I know that the impression those words give are not in line with the intent of the objective. NAR, as an organization, will not rank, rate or review Realtors.

The objective was to create a review system that allowed clients to review members. NAR members could highlight their client interactions on a distinct, fair platform unadulterated by advertising sales models.

We regularly bemoan the loss of our listing data and our portal’s dominant place in online search, but this committee can see the loss of another huge opportunity coming down the line. Either a third-party review platform like Yelp or a real estate advertising portal like Zillow will own the mind share of consumers when searching for background on Realtors.

Not only will they no longer be reading the testimonials on your website for research, they wouldn’t believe them even if they found them — this dominant source of agent reviews will become the trusted go-to destination for verifying who you are as a business person.

While some members might prefer to stay out of online reviews altogether, that ship has sailed. Companies like Yelp, Agent Ace, HomeLight and NeighborCityhave been posting their own versions of agent reviews and rankings for years already.

Consolidation and greater visibility in the agent review space online is going to happen. It’s already is happening. We, as Realtors, are the content for this platform of real estate research.

The potential outcomes are fairly simple:

No. 1: Yelp wins. Consumers post reviews with scored ratings about you, and you live with it. You can respond to the reviews and ask other clients to post positive reviews, but unless you pay up for advertising, those good reviews are going to conveniently disappear. You play in Yelp’s back yard, and you pay up or your business pays. It sounds conspiratorial, but after speaking with many agents and reviewing their stores, it’s sadly true. There is no compassion for your reputation at Yelp. They exist to please their consumer users, and the businesses who buy advertising. That is all.

No. 2: Zillow wins. Consumers post reviews with scored ratings about you, and you can invite clients to do so as well. The reviews are verified by the transaction, and are, frankly, far better managed than Yelp. The platform is easy: Agents share those reviews on their own websites through the new API and spread the Zillow name as the trusted source to consult for information on Realtors.

If you don’t create your own profile, you can’t be reviewed by consumers on Zillow. I’ve been assured that won’t change, though I wouldn’t be shocked if future management decided to attach agent names from MLS sales data to transactions and allow any consumer to review any agent (remember when Redfin tried to give all Realtors a visual profile online with their data?).

With tech management, it’s usually not so much about whether they should expose more data, but why they haven’t done it faster. Zillow has created the best review-rating system to date, one worth emulating in many ways. That doesn’t mean an advertising portal is necessarily the best place for the industry to cede total control of the review and research of its professionals.

No. 3: NAR wins. The organization creates a Realtor-friendly review system that also caters to consumers’ desire for more information on the professionals they’re hiring. By developing a system that allows consumers to review Realtors, and for Realtors to respond to those reviews, all the while verifying that each review came from a true client before being published, the organization taps into its enormous membership rolls.

NAR creates the primary, trusted source of Realtor research online. Far more members use the system because it is ubiquitous, not tied to any single advertising outlet or broker’s website, but something that can be ported anywhere online and be recognized as the real estate professionals’ official seal of review authenticity. Consumers love the Realtor-based database because it combines the ease of use of the Zillow model with a much broader member base to research.

Adoption of a review system by even one-third of NAR’s 1 million members could easily be seen outpacing the number of reviews on other sites within a year. When consumers go online for reviews of real estate agents, they, and over time their search results, would gravitate toward a database of research far more expansive than any of its competitors.

The opportunity

Reviews and ratings can be scary for us as business people. I was against the entire spectrum of these ideas when they were initially conceived. The only reason I was asked to be a part of the AgentMatch advisory board and to work with some of NAR’s committee members in this discussion was my opposition to the ideas being brought forth and the way in which they were proposed to be implemented.

It has become clear, though, that there is not just a risk in missing the train again on agent reviews, but a huge opportunity to claim the public profiles and consumer reviews of our professionals as our own and build them into a net positive for the organization’s exposure.

It must be done with absolute care for our members, but not so blandly that it isn’t interesting to consumers. It can’t be castrated into a shapeless testimonial repository in order to avoid some Realtors receiving a few less-than-stellar reviews.

We will all receive reviews that aren’t perfect. That’s the point.

Consumers don’t believe that agents get five stars every single time they sell a home. They actually prefer a 4.7/5 because it’s believable. Getting honest feedback from our clients helps us improve our skills for our future interactions and improves the industry as a whole.

If that’s not a good enough reason to start creating reviews on a NAR platform, it also allows each Realtor to house their most significant source of reviews on a platform that’s sworn to protect their business interests instead of with the next technology upstart with a very different financial motivation.

We’re at a defining moment in our industry’s history for the control of Realtor research, and the ability to affect its display. We can own it, make it a consumer-friendly and attractive product, and also manage it in a way that is respectful of our members.

Or, we can sit back, watch another technology wave pass us by, and wait for our next set of data overlords to explain to us how we they will review, rate and rank our members in the way that will most benefit their company.

That’s much scarier than getting a public review from a client.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and a director for Washington Realtors and Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com.

Price Per Square Foot in Real Estate: When Data Makes Us Less Informed

This article was originally published on Geek Estate Blog:

As professionals, we’re often as fascinated by real estate statistics as consumers are. Price per square foot is one of the metrics that is frequently quoted in attempting to value homes for sale, and it has become a ubiquitous stat on real estate websites.

While it’s an interesting piece of data in an online listing, frankly, it’s a waste of time. Price per square foot is a number that boils down dozens of unique factors in a house or condo and attempts to bundle them into one tiny package. Unfortunately, all it really does is instill a false sense of confidence. It takes away all of the unique, broad, and interesting features of the home that allow us to effectively evaluate its worth and instead melts them into a beige, unremarkable mass.

Price per square foot is the equivalent of putting a cheeseburger, fries, and Coke into a blender and trying to charge $5 for the resulting “Happy Meal”. To lean on it as a means for supporting a valuation is lazy. It ignores view, geographic orientation, floor plan, upgrades, nearby amenities, and property condition and gives the impression that it can encompasses them all with a single number.

As real estate agents, we often struggle to explain this to our clients. They feel more informed when websites are crunching data into these easy-to-digest figures and often think we’re being disingenuous when we tell them to ignore statistics like price per square foot when evaluating a home for sale.  It seems illogical that this new information might actually be detrimental to their ability to evaluate a home, but unless they’re buying an entire neighborhood at once, it often is.

Let me give a quick example that might help explain this for the consumers most likely to use the price per square foot measure–condo buyers.  Condos in the same building are theoretically the most similar homes in terms of location and style and should measure up comparably.

I pulled 44 sales in Seattle’s Escala condo building from the first half of 2012, and measured their price per square foot against floor number–just one of the many factors that could illustrate the ineffectiveness of this valuation strategy.

** Yes, this is a very old Microsoft Excel chart ;) **

Seattle Condos Price Per Square Foot

The first conclusion is fairly obvious:  If we used price per square foot to compare one condo to another for value, we might be under $350/sq ft for one condo and over $650/sq ft for another.  Averaging those numbers around $500/sq ft would still make valuations of some condos on lower floors and higher floors off by over 40 percent.

If we took the floor of the condo into account and only compared “nearby” properties to one another, the trend line of the numbers might seem to make more sense in the aggregate.  For the individual home buyer, though, the resulting valuation could be still be remarkably inaccurate.

There are condos on the 2nd floor that sold for higher price per square foot valuations than some on the 10th floor.  A condo on the 20th floor sold at a lower rate than one on the 9th floor.  Condos within one floor of another often have sale prices that deviate up to $100/sq ft from one another, up to a 30 percent margin of error.

While the overall price per square foot trend is upward as the floor number rises, clearly any individual condo cannot be reliably compared to others in the same building using price per square foot.  The floor number is just one way of illustrating the inefficiency of the measure.  We could easily produce similar charts for condos facing East vs West, or those with views of a lake vs. a city.  We could show that the upgrades in the home, the proximity to a desired amenity or a noise nuisance, or even the access to elevators and parking spaces will all affect the home’s value in a way that makes aggregated averages so inaccurate that they’re often not worth even considering.

Establishing the true value of a house or a condo is not a simple task, even if we’d like it to be.  The more we attempt to ease the process by boiling together the unique and interesting qualities of a piece of real estate, the less effective our valuations of that real estate are.  Statistics often only tell a small part of the story, and in this case, price per square foot tells us very little at all about a home’s true value.

10 Real Estate Road Trip Facts We Bet You Didn’t Know

This article was originally published on Coldwell Banker’s Blue Matter blog:

Summer time often means long road trips away from home.  While the freedom to travel wherever you please makes for great summer vacations, the trips themselves can sometimes hit entertainment road bumps.

Keep your road trip companions on their toes and be the Jeopardy champion of factoids with these quirky and intriguing real estate facts:

  1. India’s richest man built a 27 story home.  With 6 floors dedicated to parking and 400,000 square feet of living space, it requires 600 staff members to maintain it.
  2. The day you list your home matters.  Homes listed on Thursday and Friday get more buyer tours, sell faster, and for higher prices.  Homes listed on Sunday get more online views.
  3. The smallest home in Great Britain measures just 10 feet by 6 feet.  It was once inhabited by a 6-foot, 3-inch fisherman.
  4. A FROG is actually a room.  The Finished Room Over Garage is a term used often in the Southeast U.S. (and there’s even an unFROG when unfinished).  Other parts of the country refer to it as a bonus room or great room.
  5. In Scotland, homeowners paint their front door red when they pay off their mortgage.
  6. In the Pacific Northwest, bathrooms can disappear before your eyes.  A house with two powder rooms (1/2 bath + 1/2 bath) and two more baths with standup showers (3/4 bath + 3/4 bath) actually has 2.5 bathrooms total.
  7. Brass hardware actually disinfects itself.  There’s an ionic effect in the metal that is toxic to all kinds of germs and pathogens.
  8. Dead bodies heat homes.  In Sweden and Denmark, crematoriums pass the heat from their incinerators on to the local utilities for residential use.
  9. It’s not just the home.  8 out of 10 buyers would give up square footage for the right neighborhood, and 6 out of 10 would give up yard space for a shorter commute.
  10. Real estate listings with the words “beautiful” or “gorgeous” in their listing descriptions sell 15% faster than other listings.  They also sell for 5% higher prices.  Is that just correlation or some great marketing causation?  Ask your Realtor.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth, and a state director for Washington Realtors. You can find his team atSeattleHome.com and SeattleCondo.com.

Do We Need Real Estate Tax Incentives?

This article was originally published on Realtor.org:

The U.S. tax code includes multiple incentives for buying and owning real estate. The mortgage interest deduction and property tax deduction are just a couple of the incentives that have come under fire in new “tax reform” plans for their purported special treatment of the real estate industry and home owners.

Do we really need tax deductions for real estate? In short, no. We don’t need them at all. We also don’t technically need government-incentivized public schools, roadways, or infrastructure for businesses. And yet, we find ways in our balancing act of budget spending and revenue to make room for them. There’s a reason for that.

The tax code in the United States, as imperfect as it is, was designed to encourage behavior that is good for the country. We don’t tax purely to attain a certain level of assets in a treasury account. We choose to tax certain activities at lower rates to spur economic growth. We spend those tax revenues on the kinds of programs that create a healthy atmosphere for further growth: an educated populace, safe transportation, viable communities in which to do business, and a stable, secure country.

If a taxpayer’s behavior improves the country’s health via increased economic activity, we support it through the tax code. We allow deductions for student loan debt, for having children (social security revenues are dependent on a growing population), for buying health insurance, and for business expenses. If an activity contributes positively to the standard of living for Americans, our tax code does, and must continue to, make that activity affordable through tax incentives.

No matter what stripe our politicians bear, they almost universally accept the notion that we’re all better off when the economy is booming, tax receipts are increasing, and our citizens’ net worth is rising. Real estate accounts for around 15 percent of our GDP. It’s one of the biggest drivers of consumer purchases nationally and excise taxes locally. Every single home purchase drives tens of thousands of dollars in related economic activity. Real estate’s ability to spur economic activity is unmatched.

We could spend a lot of time extolling homeownership’s impact on the stability of communities, schools, and families. These are all important. For fiscal discussion purposes, though, we need not go past the dollars and cents. Real estate activity has led us out of every economic downturn in recent history, and it is on its way to doing so again today. Incentivizing real estate sales and homeownership has a net positive effect on jobs, on communities, and on tax revenues in the long-term.

Do we really need tax incentives for real estate? We don’t need them any more than we need to be economically prosperous. The choice to keep those incentives or not is ours, and the answer seems obvious.