I Have Seen the Future of Real Estate and the Future is…

Quill Realty. This company gets it. This is how all brokerages will function in the future. It is just a matter of time. Regrettably they are only available in Seattle right now. If I were selling a home there it is the only company I would consider using.

What is Quill doing that is so unique? They are actually pulling out of their local MLS (Multiple Listing Service), which is unheard of today. And why are they doing that when every other brokerage in the country belongs to an MLS? Because Quill understands that today MLSs exist ONLY to serve real estate brokers, and do almost nothing to help home sellers. And apparently Quill has this crazy notion that they want to serve home sellers more than they want to serve other brokers.

But you cannot sell a home without listing it on the MLS. Of course you can. When buyers shop for homes they do not go to the MLS to search for them, they go to Zillow or Trulia or Reatlor.com. And while it is true that those sites get their listings from the MLSs, anyone, including real estate brokers (like Quill), can send their listing directly to these sites and bypass the MLSs altogether. And that is exactly what Quill intends to do. And why do they want to do that? To save home sellers money. A lot of money.

When you list a home on the MLS you are expected to pay the cooperating broker. That is a fancy way of saying the seller has to pay for the buyer’s agent, a practice which is unfair to both buyers and sellers. By not using the MLS, Quill’s clients can forgo paying the 2.5% to 3% commission to the buyer’s agent.

By leveraging technology and NOT using the MLS, Quill will charge their home sellers just a 1% commission. That will save home sellers $25,000 on the sale of a 500,000 home (compared to the customary 6% commission). I would think that might get home sellers excited.

Naturally the other brokers in the area will be none too happy with this and will try to keep their buyers away from Quill’s home sellers, but with buyers seeing the homes on the Internet, it will be very difficult to do, and Quill knows that. A properly priced home in a seller’s market is going to get purchased, no matter how little the seller pays to the cooperating broker. Kudos to Quill for recognizing that AND doing something about it.

This is the future of real estate: listing brokers charging home sellers a fair price and home buyers paying for their own agents, if they feel they need one. I have seen the future of real estate and the future is…

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.

Do the MLSs Need to Exist Anymore?

Ask 100 real estate agents and 100 will answer that question yes. That is because MLSs exist to serve agents, not buyers and sellers. But what if you posed that question to a home seller? The chances are they do not know the answer to that question, and more importantly, they do not care. They just want to sell their home.

But wait, you cannot possibly sell a home without putting on the MLS, right? Oh yeah, ask any real estate agent who has ever done a pocket listing if that is true. The frightening truth for the real estate industry is that the MLSs are no longer needed to market homes for sale. Buyers do not go to the “MLS” to find homes to buy. They go to Zillow and Trulia and Redfin and Realtor.com and Homes.com and… The MLSs exist primarily as a channel of communications between brokers and agents. How does that benefit sellers? It doesn’t.

Now it is true that all those websites mentioned above get their information either directly or indirectly from the MLSs. But that is just an artifact of a bygone era. When you market a home today, you take photos, a description and a price and upload it to a web server. That web server could belong to an MLS, or it could just as easily belong to Zillow. Every buyer who uses Zillow to search for homes—and that is a big number—will see the home either way. The MLS is just a relay point in a communication link.

If you want to sell your home today and you take some beautiful photographs, figure out an entice asking price and post it to Zillow directly (which is free), buyers will see it, they will want to view it and they will want to buy it. And all of that will happen outside the confines of the MLS. So, again I ask: Do MLSs need to exist anymore?

In a hot seller’s market it is not uncommon to hear about a lot of pocket listings. Sellers are few and far between while buyers are easy to find. And a pocket listing is the fasted route to the double dip. Clearly agents have no problem “bypassing” the MLS when buyers are easy to find so they can get both commissions. That poses an interesting dilemma: If agents can keep it off the MLS to get both commissions, then sellers can keep it off the MLS to SAVE both commissions. You have to ask yourself of what use is a real estate agent in marketing a home when their primary benefit is access to the MLS and they do not use it to market the home?

Even at a time when there is talk about creating a nation-wide MLS, it would not surprise me to see the MLSs begin to slowly fade away. The only thing keeping that from happening is buyer and seller education, and that is about to get a big shot in the arm. Stay tuned.

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 Root of all Happiness (and Unhappiness) When You Sell Your Home

Imagine you need to sell your home, and after doing all of your pricing homework, you fully expect it to sell for $500,000. After a few weeks on the market, you end up selling it for $490,000. How do you feel? If you are like most people, you are a little disappointed. You were really expecting $500,000.

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Now imagine you have to sell that same home, and after doing all of your pricing homework, you expect it to sell for $480,000. After a few weeks on the market, you end up selling it for $490,000. How do you feel? You are probably ecstatic—with an extra ten grand in your pocket.

So, the same home sells for the same price in the same time frame and in one case you are happy and in the other not so much. What changed? Your expectations.

When you sell your home, you can, to a great degree, dictate your satisfaction with the outcome simply by managing your expectations. In other words, selling your home is a really good time to be a pessimist.

Go ahead, assume the worst. It will never sell; I am going to take a bath; I am going down with the ship; I am going to be homeless; Nobody loves me. Really get into it.

Now that you have set your expectations properly, go ahead and do everything you can to sell it for top dollar. Clean it, paint it, stage it. Take beautiful, professional photographs. Price it a little below the appraised value. Put it on the MLS and every third party site you can think of (i.e., Zillow, Trulia, Realtor, Homes, Craigslist). Really market the hell out of it.

When listing day comes remember, it is okay hope for the best, just make sure to expect the worst.

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.

Is This The Beginning Of The End Of Real Estate Agents?

There is a new real estate service called Allre that, according to media reports, lets you buy and sell you home online without a real estate agent. Will this one company put an end to the real estate agent? Not anytime soon.

AllreBut that does not mean this idea is not a shot across the bow of the real estate industry. The way that Allre is conceived, it is nothing more than an advanced-technology FSBO (For Sale By Owner) service that lets you conduct the entire transaction online (without the aid of an agent). Twenty years from now, when the millennials are doing most of the buying and selling of homes, I predict most home sales will be FSBO. Millennials live online and expect everything of importance to occur online. But until then, the world of boomers has spoken loud and clear: we hate the thought of selling our own home.

Without finding some way of partnering with, or leveraging a relationship with, services like Trulia and Zillow, who own most of the buyer eyeballs, Allre will be relegated to an inconsequential service in the near term. But that does not mean that they have not hit on something important.

With Allre, the entire transaction takes place online, including loan approval, title, escrow, etc. This use of technology to make the transaction seamless reduces—but does not eliminate—the need for real estate agents. And that is how it begins. Over time, buyers and sellers will come to realize they need agents less and less to buy and sell a home. And they sure as heck will not want to pay them thousands or tens of thousands of dollars for their reduced roll. This will not happen over night, but it is inevitable. Technology will slowly erode the importance of the real estate agents and their commissions. Trying to maintain the status quo is nothing morning than milking a cash cow. Eventually the cow runs out of milk.

What will real estate services of the future look like? I predict there will be two main services. There will be showing services—that let buyers into the home to see it—and there will be transaction management services, that make sure the transaction proceeds smoothly and that neither side gets hurt.

While Allre certainly will not have a meaningful impact on the real estate industry in the short term, it does serve as a pretty good crystal ball for what it will look like in the long term. There were a lot of search engines before Google and there were a lot of social sites before Facebook. The tipping point in the real estate industry is coming. Get ready.

 

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.

What Drives Real Estate Agents Crazy and Makes Home Sellers Stupid?

I do not know what makes me laugh more, the home seller who auctions off their listing to the agent who promises to get them the highest price, or the agent that takes their listing. There is no bigger hot button in all of real estate than establishing a home’s listing price, and the stupid way some sellers act drives real estate agents crazy.

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Let us agree to a simple fact up front: every home seller that has ever sold a home in the history of home sales wanted to get the most money they could for their home. The sellers know it and the agents know it. And I am sure you have heard many times that what the seller wants (or needs) for their home is irrelevant. It turns out that what the agent tells you they can get for your home is also irrelevant. You might as well choose an agent based on their astrological sign.

Home sellers listen up. Here is the cold, hard truth. For most homes, there is a maximum a home can sell for and it is not determined by what you want or the real estate agent’s genius marketing plan. No, the maximum your home can sell for is determined by…drum roll please…the bank lending money to the buyer.

Before they lend any money, the bank is going to get a professional (and impartial) home appraisal. In fact, they may get more than one appraisal just to be sure. And that is the amount that becomes the maximum price for your home. In a standard mortgage with 20% down, they will lend 80% of that maximum amount to the buyer, and no more.

The only mathematical way you can get over the maximum price is to find a buyer who can put down more than 20% or can purchase your home for cash. Now, if you happen to have one of those homes that people with lots of cash just have to have, then yes, you may get over the maximum. But for most of us with the three bedroom, two bath ranch house smack dab in the middle of suburbia, it is a long shot.

Now, to be sure, just because your home has a maximum price (as determined by the lending institution) does not mean your real estate agent can get it for you. That is what you are paying the agent for: to get you the appraised value of your home.

So, if you want to know what the maximum amount your home is worth, pay a couple hundred dollars for an appraisal. (Do not use those online services like Zillow and Trulia. Research shows their estimates are just not that accurate.) That should be your sales goal when selling your home: to get the appraised value. Any real estate agent that promises you more than that is just being crazy, and there is no reason for you to be stupid and believe them.

To find out how ReaListing takes the guesswork out of selling your home, 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.