Robot Outperforms Realtors Finding Homes Buyers Prefer

In the “nothing can take the place of an experienced realtor” category comes this story from Inman News. Over three days a robot (aka a computer algorithm) competed head-to-head with three highly experienced Denver real estate brokers to see who recommended homes a buyer most preferred. The buyer consistently ranked the homes suggested by the algorithm as their first-choice favorites all three days.

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When the robot can open the door, what will be left for the buyer’s agent to do but collect the commission?

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Rarely is the Hypocrisy this Transparent

I have been calling for greater transparency in the real estate industry for years now, with little success. So, you can imagine how happy I was to see this article (paid) on Inman News a few weeks ago: Some brokers learning to live without Zillow and Trulia.

Apparently, Crye-Leike Realtors, one of the largest firms in the country, is pulling their listings from Zillow and Trulia in Nashville, TN. According to the article, the company claimed that “After testing life without the two popular portals in a handful of markets, the firm says that its business was unharmed.” Hooray for their business. But what about the home sellers they represent? Were they harmed? Most definitely.

You get top dollar when selling a home by getting every interested buyer to see that it is for sale. And since most home shoppers now look for homes to buy on Zillow and Trulia, the single best thing a home seller can do to market their home is to advertise it there. Purposely keeping a home for sale off those two sites without question reduces the number of buyers who see it. Not even a hypocritical Realtor can argue that more buyers will see a home for sale by keeping it off Zillow and Trulia.

So, why would Crye-Leike keep their listings off the two powerhouse real estate sites? Because advertising a home for sale there benefits agents who do not work for Crye-Leike. It would follow then that keeping it off those sites benefits Crye-Leike agents at the expense of their competition. So, this little stunt is all about putting Crye-Leike agents first. Go Crye-Leike. You’re number one.

The agents who work for Crye-Leike are “Realtors”. I know that because I see that word in their corporate name. And Realtors have a code of ethics that basically says they must put the interests of their clients before everyone else’s, even their own. Pulling listings from Zillow and Trulia would seem to me to be a clear violation of their code of ethics. Eh, no biggie.

I bet whenever a Crye-Leike agent sits down to do a listing presentation they explain to the naïve home seller that they should choose a Crye-Leike agent to list their home because Crye-Leike agents are Realtors and Realtors have a code of ethics. Oh the hypocrisy.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

What is Better Than Really Sticking it to the Seller?

Sticking it to another agent at the same time.

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I have written here on many occasions about the unscrupulous activities of some real estate agents who choose to benefit themselves at the expense of their seller. Most home sellers are too naïve and too uniformed to even know when it happens to them, so it tends to make for a pretty clean getaway for the perpetrating agents.

So, you can imagine how happy I was to read the article Real estate ‘turf wars’ lead to lost sales, leave seller money on the table on Inman this week. In the article, the author details the experience of a real estate agent whose buyer got his offer rejected, ostensibly because it was not the best offer. But after following up when the deal closed, the agent discovered that the accepted offer was for less than what his buyer had offered, thereby leaving money on the table for the seller.

The reason presumed for the rejection was that the buyer’s agent was an “out of town” agent and the listing agent preferred to work with a “local” agent. Apparently this type of behavior is not that uncommon. In the article, the author laments…<\br>

I’ve personally experienced some rather questionable territorial agent behavior in this area in years past, as have several other agents I know. But I surely thought most agents have moved beyond any semblance of a turf war after the recent real estate meltdown.

Now, it may or may not be true that buyer’s offer was rejected because their agent was not a local agent. Ultimately it is irrelevant. What is relevant is did the seller know about the higher offer and did they objectively decided to “leave money on the table?”<

Most seller do not knowingly (or willingly) choose an offer other than the highest offer. Therefore, I think it is fair to assume that they either did not know about the higher offer or the listing agent convinced them not to take it. So, you have to ask yourself, what the heck is going on in the real estate industry and when will home sellers wake up and stop being such patsies?<

The greatest crime of all is the one that goes undetected. And in an industry that fights tooth and nail to prevent transparency, we can expect the crime wave to continue.

If you are home seller who does not want to be a patsy, visit ReaListing.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Someone Agrees With Me About the Future of the MLS

Having just written the article Do the MLSs Need to Exist Anymore? ten days ago, I was delighted, and a little surprised, by the article that just appeared on Inman: The sun is setting on the era of the MLS. Make a note that there are now at least two people who believe the days are numbered for the MLS.

Creed Smith, the article’s author, summed up things succinctly with the article’s subtitle: Buyer’s don’t need it, so why would the seller? That is the question that would scare the heck out of me if I were in the industry.

MLSs have always facilitated broker-to-broker cooperation, but when the MLSs were first created, they also benefited buyers and sellers. In the absence of anything else, a central repository for home information was an excellent way for sellers to get the word out that their home was for sale and it was an excellent way for prospective buyers to find out about it.

Unfortunately for the industry, buyers and sellers no longer need the “central repository” feature offered by the MLS because they have Zillow and Trulia and Redfin and… The MLS still facilitates broker-to-broker cooperation, but at what cost?

Once enough home sellers figure out that they do not need the MLS to attract buyers, they will cut it out of the home marketing process completely and solicit brokerage services only after they have attracted buyers. What will be left for the brokerages at that point is transaction management. That is still a very important part of the home selling process, it is just not 6% important. It is more like $3,000 important. And the more expensive the home, the faster you can expect sellers to adopt this approach.

How much longer can we expect the MLS to be around? After all, something that is paid for by someone who does not need it cannot expect to survive forever. It is difficult to answer that question because at the end of the day it depends on sellers believing they no longer need it. And that depends entirely on home sellers. If you are a home seller who believes they no longer need the MLS to attract buyers, visit ReaListing to find out how.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Why Redfin Will Be The Nation’s Biggest Brokerage

A recent article on Inman said Redfin may not be the nation’s biggest brokerage (yet). But it operates what’s by far the most popular real estate brokerage or franchise website. Why do so many consumers start with Redfin? CEO Glenn Kelman explains

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I remember not too long ago, when Trulia and Zillow were raising huge buckets of venture capital money, Redfin was struggling with cash flow. To the VC community, all Redfin was at that time was a discount broker with cool search capability. And discount brokers do not last. Boy were they wrong.

Redfin flat out gets it. Not only are they the absolute leader in technology and accuracy of real estate data for consumers, but they are taking the lead in the desperately needed area of transparency. While Trulia and Zillow (soon to be Zulia) serve agents as their customers, Redfin serves consumers. Why do consumers start with Redfin? Because it makes them the smartest home buyers and sellers.

Now, if that was the end of the story, Redfin would simply be a better version of Trulia and Zillow. But Redfin is not a marketing platform, it is brokerage. And in an industry where everyone is desperately trying to maintain the status quo, Redfin is doing something unheard of: passing the savings, that technology affords in real estate, onto the consumer. Their business model, which includes reduced seller’s agent’s commissions and treating their agents as employees (rather than contractors), is a glimpse of what the real estate industry will become. Today, Redfin is the irrational oddball. In the future, when most other brokerages are operating in a similar fashion, the industry will wonder why it ever operated any other way.

But Redfin’s transformation of an industry in desperate need of it is not yet complete. Offering discounted seller’s agent’s commissions and buyer rebates is a start, but it is not where the industry ultimately needs to go.

For the transformation to be complete, Redfin still has some work to do. First, it should establish a consumer’s bill of rights which eliminates all the dirty little secret behaviors in the real estate industry such as pocket listings, dual agency, minimum service requirements and controlled business arrangements. Even if Redfin itself does not condone these practices, a bill of rights can serve as an opportunity to educate consumers, who will see Redfin as being on their side.

Second, they need to further preserve home seller’s equity, not just from reduced seller’s agent’s commissions, but also from reduced buyer’s agent’s commissions. In the past, buyer steering, although highly unethical, was a real problem, which meant offering anything less than customary commission to the buyer’s agent risked a serve reduction in home buyer traffic. But today, Redfin has the ability to combat this using their own platform, to bypass the agents, and educate the buyers directly about this deceptive practice.

Finally, Redfin should become the industry leader in advocating a shift from seller pays for buyer’s agent to buyer pays for buyer’s agent. Sub agency legal relationships serve neither party particularly well. Ultimately, buyers will be better served by shopping around for, and paying for, their own agent to represent them. Only in the real estate industry is it considered a crazy idea for the person receiving the service to actually pay for it.

I like Redfin. I wish them luck. But, there is a $60 billion industry out there that is hoping they fail. After all, success for Redfin means that $60 billion number will go down (just like everything else technology benefits). But if it sticks to its guns, there is no doubt in my mind that someday Redfin will be the nation’s biggest brokerage. Fight on.

 

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

Zillow’s Last Act of a Desperate Business Model

If you are not buried deep inside the residential real estate industry, you probably do not know that there is a heated debate going on over Zillow’s new “Coming Soon” feature. This new feature allows an agent to advertise their seller’s home on Zillow before it can actually be purchased. The purpose, ostensibly, is to gauge buyer interest for the home and make price corrections, as necessary, before the home is marketed for real (including posting it on the local MLS). Of course the truth is far different.

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Real estate agents will tell you that the real purpose of the “Coming Soon” feature is to generate pocket listings. Nothing in the real estate industry makes a broker happier than a pocket listing, because it enables the broker to get both sides of the commission (buyer’s agent and seller’s agent). These “dual agency” deals are so heinous, they are illegal in almost every industry except real estate. And almost without exception, pocket listings result in a lower price for the home seller. The good news for the brokers though is that most home sellers do not know that. Hell, even NAR (the National Association of Realtors own trade association) does not think it is such a good idea.

Zillow, the nations largest third-party real estate portal, makes most of its money from real estate agents advertising on its site. These agents advertise to attract new clients. In an effort to increase this advertising revenue, Zillow only offers this “Pocket Listing on Steroids” feature to, you guessed it, agents who advertise on its site. The message is clear: if you want both sides of the transaction, you are going to have to pay Zillow.

The idea of pre-marketing a home is not inherently bad, only the way it is being used by Zillow is it bad: to foster dual agency. The real problem though, for Zillow, is that the “Coming Soon” feature is the last act of a desperate business model.

The real estate advertising market is roughly $10 billion – $12 billion annually. Ironically, the information and marketing platform that Zillow (and others) make available to consumers will soon make home buying and selling an (almost) frictionless transaction. It follows then that this will ultimately reduce the number of agents, as well as drive down the average commission per transaction, just as it did in the travel industry and the stock brokerage industry. And the less the agents earn in commission, the less they can afford to spend on Zillow ads. In essence, Zillow’s success will eventually put them out of business, if they stick with their current business model. One real estate agent recently lamented that Zillow’s “Coming Soon” feature is so last year. So is trying to grow revenue through agent advertising. That number is going to go down over time, not up.

So, what will Zillow do? Will they continue to cling to their existing business model, desperately trying to squeeze dollars out of a shrinking pie, or will they do as Brad Inman suggests and become the company who fundamentally changes the old ways of doing business? Will they become “the company that controls the quality of the transaction from end to end, offering a connected, elegant and easy-to-use online place for buyers and sellers as they go through the rigorous 90-day workout.” Time will tell.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.

The Consumer is King in Real Estate, Except When it Really Counts

If you spend a lot of time trolling the real estate industry—which most consumers don’t—the buzzwords du jour are consumer-centric. “The consumer is king. Case closed. Period. There is no going back,” claimed an article on the Inman News website awhile back. Why this has not been true for the past fifty years is a mystery to anyone. I suppose it is a consequence of the universal unleashing of information in the real estate industry due to the prevalence of the internet. Perhaps it was easier to be agent-centric when they had a stranglehold on all the information. Not so much today.

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But for whatever reason, I am glad the industry has finally come around to putting the needs of the buyers and sellers first. They do, after all, pay everyone’s salary. So, I was a little disappointed to read last week that the California Association of Realtors (CAR) is going to out “Code of Ethics” violators to members only. In other words, which agents are in violation of their code of ethics will not be made available to consumers—the ones most harmed by the violations. That is the kind of information, if made available, that would be extremely helpful to buyers and sellers in vetting a real estate agent to represent them. But, it would be an even more powerful deterrent for agents, knowing that consumers can easily discover their dastardly deeds. If you want to eliminate unethical agent behavior, you have to make it costly to engage in it. Just outing them to other agents is an insufficient penalty.

I do not know whether to be grateful that the association is doing something more than nothing with regard to the violators, or disappointed that they did not take the more aggressive step of alerting consumers. But it is certainly not unexpected. They do, ultimately, represent real estate agents and not consumers. The association actually has a financial incentive to never out violators to consumers: they risk losing a dues-paying member.

Perhaps someday the real estate industry will embrace true transparency, put the needs of their customers ahead of their own (like it states in their code of ethics), and believe that buyers and sellers are best served by the quality of member agents and not the quantity of member agents. Now, that would be consumer-centric. Until then, all buyers and sellers will continue to be in the dark about which agents strictly adhere to their code of ethics and which ones just brag about it.

To learn how to keep more or your hard-earned equity when you sell your home, check out The Intelligent Home Seller eBook and The Intelligent Home Seller eCourse.