The Best Use for “Coming Soon” – Doing Away With Agents

The “Coming Soon” feature is all the rage. Ever since Zillow announced the feature, all I see now are Coming Soon notices on top of For Sale signs in my neighborhood.

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If you are not aware, last year Zillow announced a new feature available on its website called Coming Soon. This allows homes to be pre-advertised for sale, before they can actually be purchased.

In theory this is a good idea. It can help build excitement for a home soon to come on the market, as well as provide an opportunity for the home seller to get feedback on their asking price without spending any days on the market. If you are getting ready to price your home too high, it would be nice to know before you actually listed it. The problem is that Coming Soon has nothing to do with building excitement or getting pricing feedback. Coming Soon is about pocket listings. Coming Soon is about dual agency. Coming Soon is about double ending.

Most home sellers are too naïve to understand the subtle trick the real estate industry is playing on them with the Coming Soon feature. Most probably think it is a good idea, but nothing could be further from the truth.

Imagine you are a home buyer and you see a Coming Soon home that you are excited about. You want to get in to see it. You want to make an offer. But you can’t. The only thing you can do is contact the listing agent. And that is the key to the scam.

The listing agent gets to identify interested buyers WITHOUT having to put the home up for sale. And if they can identify enough interested buyers, they can convince their seller there is no need to list the home on the MLS because they already have a buyer for them. And if they can keep it off the MLS, then they can keep the buyer’s agent’s commission too. And while most home sellers would view keeping it off the MLS as a good thing, most home sellers also do not realize that they probably just got screwed out of several thousand dollars. Any marketing approach that limits a home’s exposure (e.g., pocket listing) tends to limit its sale price.

It got me to thinking. If an agent can identify buyers without actually putting a home up for sale, so too can the home seller. It is simply a matter of taking some nice photos, writing a description, coming up with an asking price and posting it to Zillow (which is free). Then, when an interested buyer calls, rather than speaking to the agent, they will be speaking to the seller. And if the seller can find a buyer interested in paying the asking price, then they truly can keep it off the MLS, and thereby save the entire agent commission altogether. All they would need is a few hours of a real estate attorney to help with the paperwork. Now that is a good use of Coming Soon.

To learn how to make sure Coming Soon works for you and not against you, visit ReaLising. ReaListing helps home sellers keep more of their hard-earned equity.

 

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.

Will 2015 Bring Meaningful Change to the Real Estate Industry?

2014 saw a lot of new technologies and “aps” hit the residential real estate market with much excitement and fanfare. Some of them were even purported to help buyers and sellers. But when all was said and done, not much has changed.

problemHere is a list of problems in the real estate industry that all that technology did not do a damn thing to solve last year:

• We still have pocket listings
• We still have dual agency
• Lousy agents still expect the same compensation as good agents
• Commissions are still tied to the price of the home
• Sellers are still expected to pay for buyer’s agents
• There are still too many real estate agents
• It is still too easy to become a real estate agent
• There are still too many conflicts of interest between buyer/sellers and agents
• Sellers are still asked to pay for the buyer’s home warranty
• There is still buyer steering
• Agents still push their affiliated service providers onto their clients
• Contracts are still too difficult for the average consumer to understand
• Some MLSs still delay listings to the portals, limit the information, or do not send it all
• We still have minimum service laws

So, the question I want an answer to is this: will anything change in 2015? Probably not. All those problems cited above result in some pretty well-off operators in the industry, and none of them want to see anything change.

No, 2015 will be the same as 2014 and every year before that. Nothing meaningful will change in the residential real estate industry until the one group that can actually affect change does something about it. When buyers and sellers decide to stop being uninformed, lazy and fearful about the home buying and selling process, then we will see meaningful change. Until then, meet the new year. Same as the old year.

If you are a home seller and you are ready to sell your home a more intelligent way, that leaves more of your hard-earned equity in your bank account, visit ReaListing and help change the industry one informed consumer at a time.

 

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.

Another Home Seller Gets Screwed by the Real Estate Industry

I was driving through my neighborhood in Southern California last weekend when I came across this sign leaning up against a stop sign pole.

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I am guessing that these houses sell for around $800,000. Is this how you want your $800,000 home marketed…on a piece of cardboard? More importantly, is this how the home owner wants their home marketed? And do they even know about it? I assure you there is not a real estate agent in America that does not know why this home was kept off the MLS.

It is true that most home owners know little about the process of selling their home. I would bet a majority do not know what a pocket listing is, let alone that it can unknowingly cost them thousands (or hundreds of thousands) of dollars when they sell their home.

Yes, I know. Every industry has some bad people, it is not just the real estate industry. But it is the real estate industry that has, in twenty states, passed minimum service requirements laws that even the Department of Justice declares harm consumers. And why, ostensibly, do these minimum service requirements states have such laws? To protect consumers from themselves.

The justification must be that consumers are so dumb when it comes to selling their home with a real estate agent, that they could be financially harmed if they were given a choice about which of the agent’s services to choose. So, rather than giving consumers a choice, they let the state choose for them. Because they are just too stupid to know any better.

Let’s assume I go along with the notion that consumers are so uninformed in the home sale process that they have to be protected from themselves. Why not make pocket listings illegal? You know, to protect consumers from themselves. I do not know of a single legitimate study that shows consumers benefit from pocket listing, but I can sure as hell point to some that show by how much they are harmed.

The industry claims there are legitimate uses for pocket listing, like when rich, famous people sell their home. Apparently they do not want the common folk to know they are ditching their digs, so they have to keep it off the MLS. Fine. You do not want to make it illegal, then just add a disclosure to the listing agreement. You know, to protect consumers from themselves.

The disclosure should declare that the use of a pocket listing primarily benefits the agent by enabling them to avoid paying a buyer’s agent’s fee, and that it will most likely result in a lower sale price for the home. Then, if a home seller wants to sacrifice their home equity for the sake of the agent’s commission, they can do so with a full understanding.

Unfortunately, this change will never happen, because the only thing the real estate industry wants to protect more than consumers, is their opportunity to double-end the commission. To see how ReaListing  puts and end to pocket listings by educating home owners, click here.

 

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.