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Open real estate agent data generates vast new liability for ‘pocket listing’ brokers and agents

This article was originally published on Inman News:

A new twist in the expanding market of pocket listings and private listing associations may start to cause real estate brokers to reconsider their positions on the practices. Scrutiny over “whisper listings” has led to questions of potential financial liability for real estate agents, and their brokers, who regularly involve themselves in these transactions.

A panel last week at Inman News’ Real Estate Connect conference in New York discussing pocket listings showed little difference in opinion on the quality of service being delivered by practitioners who pocket-list homes. The forum participants included many executives from the largest MLSs in the country. The featured broker/agent speakers included Shaun Osher of CORE in New York City, and Danai Mattison of the Mattison Group in Washington, D.C.

Their views on pocket listings were refreshing and unequivocal. Osher was particularly frank. The main takeaway: There is no place for “premarketing” or “coming soon” in an MLS-accessible market. If a home is being marketed in any way, it’s for sale. Limiting its exposure puts an agent’s personal financial gain at odds with a client’s financial return.

Possibly more striking was the conversation with Neil Garfinkel, a partner with the law firm AGMB in New York. In his personal opinion, those who engage in pocket listings are opening themselves up to potential litigation. A former client who felt they were led into a practice that didn’t maximize their financial return, and didn’t fulfill the agent’s standards of duty, will at some point be the bellwether for pocket listing litigation in the industry. Real estate licensee duties can be fiduciary or statutory depending on the state, but almost always call for a high standard of care for a client’s well-being.

While the liability discussion on that day centered on a single former client suing their personal agent, there are a number of much larger issues that seem to collide at this one point. As real estate brokers and agents battle over opening large sets of agent production data to the public, the executives of most of the largest real estate companies seem to be signing on to the idea (Realogy’s and Re/Max’s CEOs concurred at Connect). It’s becoming clear that the dissemination of agent sales data is becoming a question of “how” as opposed to “whether.”

This new look into the practices of real estate agents and their brokerages will allow consumers to see everything their professional service providers do in a new light. Individual sales and practices will be boiled down into averages, probability and patterns.

For the agent or brokerage heavily involved in pocket listings, it may be the biggest liability they’ve ever encountered. The sales production they’ve been touting for years will now be scrutinized against the backdrop of nonexistent MLS-recorded sales. Off-MLS sales, known to be attributed to these agents, will be dredged up from public records and contrasted against similar homes that were exposed to the broader market. Class-action lawsuits and fair housing violations are just the start of the new potential threats that will need to be analyzed by a real estate broker entering this new world of “transparent” production data.

We’ve all heard the flimsy elevator speech as to why certain clients are better served with pocket listings. In reality, anonymity, exclusivity and other past concerns have all been overcome by the newest MLS rules and technologies. Even if those arguments held water for a unique few clients, pocket listings are clearly an unsavory practice when serving the vast majority of home sellers. So what happens when it becomes statistically clear that an agent is advising the majority of his or her clients to limit the exposure of their listing? When a publicly visible pattern of repeatedly pocket listing clients’ homes is now available online, the spotlight on the agent, and the brokerage, will begin to get a bit hotter.

Consider a “boutique” brokerage whose agents, across the board, almost exclusively practice pocket listings. The owner or managing broker of this office will inherently be assumed to approve of, or even encourage, limiting the listings’ exposure. This demonstrably repetitive practice will be available for every disgruntled, poorly served or financially troubled ex-client of the firm. There is a very real opportunity for a group of former clients to bring litigation against a broker, without having to prove the details of an individual transaction. The broker — and its agents — will have digitally written their confession in the form of a long-term record of off-market production statistics.

Fair housing violations have always been considered a potential red flag in pocket listing transactions. When an individual agent pocket-lists, he may or may not be limiting a home from any number of protected classes or groups, but it’s difficult to prove in a one-off transaction.

As open production data surfaces, however, the brokerage that repeatedly limits which groups of the buying public have access to their listings will be under an enormous amount of scrutiny. There will be, without a doubt, organizations dedicated to crunching this data and matching past transactions to buyers and sellers, attempting to determine if a certain class of citizens is being excluded in practice. The potential of being labeled as a fair housing violator should be enough for most brokers to immediately re-evaluate their agents’ policies.

As for financial liability from former clients, the potential runs from painful to career-ending. A single client suing for the refund of commissions paid would be a significant strain on the business. An entire class of clients bringing suit could bankrupt a brokerage in short order.

There’s nothing to say that the financial pitfalls couldn’t be heavier. The amount of equity a homeowner lost in a pocket listing could far-and-above outweigh the agent’s commission. If the client was truly wronged, this loss in equity could reasonably be considered as the amount an agent or broker must recoup for the seller. As the open data pool gets larger, analyses based on neighborhood comps will contrast open market sales and pocket listings, unearthing disparate sale prices and projections of losses (or profits) based on one practice versus the other.

It’s likely that a brokerage with a regular pattern of pocket listings will have a record that shows lower final sale prices than those garnered by comparable homes listed on the MLS. It won’t require a “he said/she said” client vs. agent level of proof. There will be a long-term statistical testimony of a brokerage’s approved practices, the industry’s knowledge of that practice’s deficiencies, and a data-driven picture of the clients’ losses.

Of course, this vast picture of liability could be overblown if the data reveals pocket listings to be a boon to home sellers. While the overwhelming industry consensus casts a great amount of doubt on that scenario, it is possible. Still, there’s far more downside potential to taking that position as a broker. Having your company’s pocket listing practices justified by data merely allows you to continue doing business as usual. If the data turns the other direction, the vultures looking for deep pockets will start circling quickly.

In the end, the publication of agent production data, done in a responsible and ethical way, could force some unintended positive changes on industry practices. If more consumers are advised by their agents and brokers to get full exposure in their local markets, home sellers’ personal financial outcomes will be enhanced. At the same time, an increase in public listings will expand and improve the quality of closed sales data used by brokers, appraisers, banks and others. Raising the level of real estate’s professional practices, improving clients’ returns and increasing overall sales data quality are just a few more reasons the industry is leaning toward a more accessible future.

Why You Can’t Find That Home For Sale on Zillow or Trulia

This article was originally published on the Seattle Homes Blog:

I talk with home buyers and sellers every day.  Most are in the initial stages of deciding if the market is right for them.  They’re searching on Google for real estate sites with local home listings and prices.  The first search results they receive are often big, national websites that aggregate listings and look great.

These usually include sites like Zillow and Trulia.  While consumers gravitate to these sites because of the high-end user experience, very few realize that they’re missing a huge portion of the market.  It seems counter-intuitive, but for all of the programming horsepower of the largest nationwide sites, there are actually far more timely and accurate listings on the average real estate agent’s site than there are on these monstrous property portals.

Zillow Trulia Seattle HomesBig Portals Have Fewer Real Listings, More Duplicates and Expireds

To cite just one example, a recent study compared agent websites to portals in the Seattle market.  While agent websites with a regular MLS feed had 100% of the agent-listed homes available, on that same day, Zillow had just 72% available on their website.  Trulia only had 63% of those same homes.  Consumers searching on these sites for homes were literally missing out on 30% or more of the market.

How can this be?  It all comes down to where real estate listings are created and how they’re distributed.

Agent Websites Receive Direct Feeds While Portals Patch Together Secondary Sources

Real estate agents create and enter their “for sale” listings into the local MLS database.  Those listings are available for the public to see, the very same day, on the website of every real estate agent that signs up for the listing feed.  It’s fairly simple.  The day the listing goes live, it shows up on the agents’ websites, and the day it’s sold, it goes away.  There are no outdated listings or duplicates, just the raw list of homes for sale, straight from the MLS.

With a big property portal, on the other hand, there are a multitude of different sources being pulled in to attempt to construct a full market picture.  Some agents send their listings directly to the portal, some brokers do it for them, some indirect feeds are pulled in, and some listings are just never submitted to the portal at all.

The inefficient process creates delays in the display of new home listings, and a backlog of sold and expired listings that remain on the portal websites long after they should be gone.  The inventory of listings on a portal site balloons with outdated listings, while the newest homes often show up days or weeks after they’ve already been on the market.

Serious Home Buyers And Sellers Are Using Their Agents’ Websites For Listings

While it’s clear why a consumer would enjoy browsing homes on a beautifully-designed portal website, it’s also important that real home buyers and sellers are informed about their choices.  If you’re truly looking to buy a home, or to assess your chances of selling, you need to see the entire market picture to make a good decision.  Portal websites’ beautiful graphics and charts notwithstanding, inaccurate data in an attractive format will not overcome missing out on that perfect home, nor will it help you find the right set of comparable homes to make a good decision for your sale.

So, if you enjoy browsing real estate on a national portal’s website, just remember that while the local information and statistics are interesting, the listing portion of the site is merely an advertising platform, not the full picture of homes for sale.  If you’re a serious buyer or seller, use an agent’s website.  Whether it’sSeattleHome.com, SeattleCondo.com, or your favorite local REALTOR®’s site, you’ll feel much more secure knowing you can see that perfect home on the first day it’s available.  In a market where many homes are selling within a week, you’ll never miss out because you were looking in the wrong location.

The Case for a REALTOR® to Lead Realtor.com®

This article was originally published on Realtor.org:

Realtor.com®’s president, Errol Samuelson, has been hired away by Zillow. I’ve met Errol and he’s a nice guy, very smart, and very successful. Business is business. But, naive as it might be, there’s plenty of disappointment from the REALTOR® community. It comes from a belief that we have a common cause greater than just our businesses. Whether we’re aligned with NAR or realtor.com®, we believe in unified goals that are good for the country as a whole, and create significant loyalty to our brand.

Like I said, it sounds silly to an outsider. Why wouldn’t a top executive, who clearly received a more lucrative employment offer for a position he saw as a step up, take that proposal? In the world of publicly-traded real estate ventures, you could be selling soda ads one day, and interviewing the president the next. The landscape changes drastically every year, and when your skills are in business management and strategy, you’re always looking for the next challenge.

And still, there’s a bit of an empty feeling from the REALTOR® masses when an exit like this happens. It’s just another day at the office when your insurance company’s CEO changes companies, or your old business partner switches brokerages. But when someone leaves the REALTOR® fold to work for a direct competitor, it ignites much stronger emotions from the membership. A quick scan of discussions online makes it clear that this isn’t just some job change. Reactions range from frustration to outright anger. This is someone who did a good job and likely had no direct contact with most of the commenters, but many take his departure so personally as to feel betrayed.

As simple-minded as it sounds, I can’t help but feel a bit of the same disappointment. Real estate agents hop between companies like mercenaries until we find the right fit. We don’t feel remorse for changing our workplaces, because it’s simply a business decision. At the same time, those of us who are advocates for the REALTOR® brand would be incredulous if our associates left the membership. Your career is your business, but your commitment to supporting REALTOR® causes is ours.

It’s in that spirit that I’d strongly advise that the next head of realtor.com® to be someone with REALTOR® experience. This wouldn’t be a current salesperson, of course, but there are countless REALTOR® practitioners and executives whose past or current careers include law, business management, technology, and marketing. Whether the candidates have been the head of a technology-driven brokerage or a forward-thinking MLS organization, they need to have spent their time, and their money, supporting the organization whose online brand they’ll be charged with leading. A REALTOR® who has volunteered their hours, and invested their own funds into our causes, will be someone who understands the crazy notion we have of a common mission.

Clearly, it’s not up to me, nor is it up to REALTOR® membership in general. The folks making these decisions at Move, Inc., have shareholders to answer to, and probably many worthy candidates within their current ranks. Still, we’ve just begun opening up the relationship between NAR and realtor.com® in a more significant way this past year than we’ve seen in a decade. It’s been a bit rocky, but strengthening that cooperation will require increasing the trust level that the general REALTOR® population has in the partnership itself. Hiring “one of us” would certainly shrink the mistrust hurdle in a significant way.

Saying it out loud, though, it’s probably just wishful thinking. The portals are in a marketing arms race, open advertising space for agents is increasingly scarce, and the market cap valuations of these companies point to a cutthroat struggle in the next few years to weed out a competitor or two. Most companies would look for the next technology executive with the greatest capacity to generate advertising revenue, while keeping those pesky agents just satisfied enough that they don’t complain too often.

Hopefully, this company isn’t just “most companies.” There’s an army of 1 million REALTORS® looking to spend their money in the most efficient way, but they also have a strong preference for the home team. It’s not impossible to garner that loyalty, and provide a superior product at the same time. REALTORS® love their brand. They want to love realtor.com®. They just hope that going forward, there’s not just a joint vision but a shared loyalty. When “our people” become their people, the entire organization will find more success, and the loyalty will be a two way street.

Strategic website development: avoiding squeaky-wheel engineering

This article was originally published on Inman News:

Whether you’re building your first website or re-engineering one that’s been live for years, it can be difficult to have a clear vision. The cacophony of advice from consumers, industry associates, and vendors makes for a confusing outlook on the path toward a valuable resource for your company and your customers.

Too often our attention is focused on the loudest voices — the proverbial “squeaky wheels.” Whether they’re pushing shiny new objects, preaching easy profits, or attempting to scare us away from purportedly dangerous avenues, they’re often doing so for their own short-term personal gain or satisfaction. The long-term success of our businesses, in most cases, isn’t a large part of the squeaky wheel’s focus.

To avoid squeaky wheel engineering in the development of a website, business owners need to be open-minded, but also analytical, about every new idea or strategy. Even more so, they need to be highly skeptical about the veracity and merit of the source of any advice they receive.

Unsolicited consumer comments

Consumers who contact your company with problems or suggestions about your website can be highly valuable. Technical problems that users are experiencing and non-intuitive navigation that impedes discovery are just a couple of the many issues that consumers can bring to light. Businesses should encourage their users to report suggestions and problems, as they’re clearly the same issues that many other users are facing.

At the same time, one user’s opinion does not necessarily carry across to the majority of users’ preferences. While a handful of your website’s visitors may really prefer the multi-field, complex search form that they’re comparing on your site and others’, there may be twice as many other users quietly using your simple search and loving it. Changing your website’s look, or functionality, to appease a minority of your users is the quickest way to send the majority off to someone else’s business.

So, how do you find the right advice, or at least the right starting point for making website development decisions?

Analytics

If you’ve got your own website, there is no greater truth about its effectiveness than analytics. How users get to your site, what they do on the site, and how long they stay will tell you almost everything you need to know about what is currently working, and what is not.

Whether you’re using Google, Moz, Bing, or some other webmaster/analytics tool, you need to take the time to study your analytics. Which on-page buttons get clicked, which links get selected, and which get ignored? Which pages are consumers landing on from search results? How quickly do they leave, or do they continue to other pages? Which is the most popular landing page, link, or piece of content that drives consumers to actually sign up/register/purchase?

Watching what consumers actually do on your website, as opposed to what they say they do, is the fastest shortcut to aligning your product with their preferences. Tracking 1,000 consumers’ actions anonymously yields far more valuable resources than listening to one of them rant.

Industry associates with analytics

If you’re starting a new website, you don’t have past analytics to review. There are certainly others in your industry doing the same things you are, however. While in most industries, competitors hide their analytics away from others, real estate is a rare breed where there are associated companies around the country who will lay out exactly what they are doing online. These are the people you can trust–they’re not pitching you a line, they’re showing you the proof.

Find the discussions online about successful companies that have analytics backing up their success, and you can learn from their experiences. See which vendors, strategies, navigation, content, etc. work for them. These are not people selling a product or asking for you to fix something to fit their preferences. They’re the crazy kind of people who believe that by laying their business blueprint out online for everyone to see, they’ll benefit in the long run. Take them up on the offer.

Surveys and focus groups can broaden input

If direct consumer feedback is your ultimate goal, make sure you’re receiving it from a statistically significant portion of your current or potential customers. There’s a lot to be gained from a broad sector of your customer base giving feedback and suggestions for your online direction.

Focus groups and surveys can allow you to hear from more than just the customers who send you unsolicited comments. They provide a more diverse group of consumers who you might not ever hear from without directly asking them for input.

Just be very careful that you keep the results of these kinds of programs in a separate bucket from your analytics. The results are purely qualitative, not quantitative, and the two don’t mix well. Surveys and focus groups are more useful in the idea generation stage of business planning, because of their skewed representation.

Every method has flaws, and some of your consumers are wrong

Surveys have plenty of flaws. Users have to opt-in to the process. The responses you receive will overwhelmingly come from customers who are unusually upset, happy, or bored. The consumers who are satisfied with your website, but busy, will likely not respond, and those are a very important segment of your base. Those who didn’t respond may, as an overall group, have very different opinions and habits.

The questions you pose in a survey will often lead consumers to answers they wouldn’t have supplied on their own. If you suggest potential changes to your website, a user will often decide that they are good ideas, even if they hadn’t previously felt the need for these changes. This can create the false sense of desire for a product or function from the overall customer base and create unnecessary development work for you.

Focus groups often exacerbate surveys’ problems. Your opt-in respondents are now not only a skewed sample based on their emotional pull to be involved, they’re also the kind of people who want to speak in public. The feedback received from a focus group can often be influenced by consumers’ need to make a point, to agree/disagree with others within the group, and to applaud or indict the business or services being discussed. In short, the results can include some great ideas, but can also create a wildly exaggerated picture of what your consumer population feels.

Don’t be a slave to analytics, either. While the truth buried in that data might be the most powerful tool in your arsenal, success isn’t purely traffic flow and conversion rates. You may find that a particular piece of content is wildly popular for brand recognition, but doesn’t drive a lot of customer sign-ups. Other parts of your website might be driving a higher conversion rate, but turning off a very high rate of the consumers who don’t sign up or register.

You’ll have to decide on your own what your business strategy is for these kinds of analytics questions. Short-term conversion might be the one and only goal. Driving long-term relationships at the expense of some short-term sales may be a more palatable direction for your business. Keeping an engaged, smaller core of users could be preferable to driving a wide range of traffic with less focus.

Choose a direction, find reliable comparison points, and verify your results

Developing your website requires you to have a strategy. Changing direction based on a comment from a colleague, a complaint by a customer, or a story about a new product is squeaky wheel engineering, and it will get you nowhere quickly. When you know the direction you’d like to go, find verifiable examples of others who are doing what you’d like to do. Plan your development to use tools that have a verified track record of success, and then monitor your own progress with analytics.

When you know exactly what you’re trying to achieve, your path is much clearer. Working toward that goal with confidence makes it easier to avoid distractions and the squeaky wheels.