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Random Musings: FSBO and the MLS, NAR Mandates Syndication, and Googlicious Horror

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I’m packing for a two-day road trip, after which I will be in the mountains of North Carolina as opposed to the swamps of Houston for a couple of weeks. But I wanted to share a couple of random semi-amusing thoughts I’ve had in the last couple of days. Maybe you’ll find them amusing as well as thought provoking.

Here we go.

How "fixing" the Zestimate isn't just math

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I recently amused myself – and a few others – when I Facebook trolled the CEO of Zillow, Spencer Rascoff for offering a million dollars to anyone who could fix their “Zestimate” algorithm.  My solution was simple –

“Hire a REALTOR®”

Then I suggested he send the million dollars to the Beverly Hills/ Greater Los Angeles Association of REALTORS® – where yes, I am the CEO, and yes I am technically a paid cheerleader for the industry.

Despite all of that – as well as my nature to be a smartass – I stand by my statement.

Every Property Is Different

Every property – be it a space in a building, or a stand alone home – is different.  From the orientation of the lot which can be affected by wind and rain patterns that wear differently on a property to the maintenance of a given room in a given unit, the smallest differences can vastly affect the valuation of that unit or property.

Take, for example, a small crack on a wall. Some questions that arise are:

  • What side of the property is oriented for stormwater drainage?
  • Is the crack in the upper corner of a room likely to indicate a broken slab from drainage or just poor maintenance/ installation of drywall?
  • Does that same crack run a higher or lower risk of letting moisture seep into the walls?
  • Does that moisture leak indicate a likely mold problem?
  • Is that likely mold problem a small problem, or one that could require major remediation?

And that represents just one crack on one wall in one room of one unit on one property that can not be seen from a plot map and a satellite picture taken some time in the last six or so months.

How Exposed Do Consumers Want To Be?

Even the most complex algorithm can not bring into account what a professional intuitively knows about the conditions of a property.  They’ve gained this expertise by spending time in countless properties, and being able to identify similarities to conditions found in recently closed comparable properties.

That isn’t to say that an algorithm can not be devised to get closer than what the Zestimate currently produces, but accuracy that consumers can rely on would require either:

  • A serious inspection of the property by an accomplished, trained, and experienced professional; or
  • A truly invasive collection and association of consumer data, data available through APIs with as many other property related apps as possible, collecting all available government recorded information, recent photography/ video evidence, complex scenario modeling and AI to address concerns – and then local service market information to factor repair costs.

Stay Focused On Your Success

While I applaud Mr. Rascoff and the Zillow team for trying to deliver a better product to the consumer, Zillow should focus on their core value is in the marketplace – connecting the consumers with reliable information and qualified professionals to serve their needs.

Attempts to replicate or replace expertise with an impossibly incomplete picture of a property only serves to further create confusion and distrust with consumers by giving them unreliable and inaccurate information that contradicts thorough and adequate evaluation.

When it comes to the largest purchase that the average person makes in their life – that is an irresponsible if not dangerous course to chart.

How “fixing” the Zestimate isn’t just math

13

I recently amused myself – and a few others – when I Facebook trolled the CEO of Zillow, Spencer Rascoff for offering a million dollars to anyone who could fix their “Zestimate” algorithm.  My solution was simple –

“Hire a REALTOR®”

Then I suggested he send the million dollars to the Beverly Hills/ Greater Los Angeles Association of REALTORS® – where yes, I am the CEO, and yes I am technically a paid cheerleader for the industry.

Despite all of that – as well as my nature to be a smartass – I stand by my statement.

Every Property Is Different

Every property – be it a space in a building, or a stand alone home – is different.  From the orientation of the lot which can be affected by wind and rain patterns that wear differently on a property to the maintenance of a given room in a given unit, the smallest differences can vastly affect the valuation of that unit or property.

Take, for example, a small crack on a wall. Some questions that arise are:

  • What side of the property is oriented for stormwater drainage?
  • Is the crack in the upper corner of a room likely to indicate a broken slab from drainage or just poor maintenance/ installation of drywall?
  • Does that same crack run a higher or lower risk of letting moisture seep into the walls?
  • Does that moisture leak indicate a likely mold problem?
  • Is that likely mold problem a small problem, or one that could require major remediation?

And that represents just one crack on one wall in one room of one unit on one property that can not be seen from a plot map and a satellite picture taken some time in the last six or so months.

How Exposed Do Consumers Want To Be?

Even the most complex algorithm can not bring into account what a professional intuitively knows about the conditions of a property.  They’ve gained this expertise by spending time in countless properties, and being able to identify similarities to conditions found in recently closed comparable properties.

That isn’t to say that an algorithm can not be devised to get closer than what the Zestimate currently produces, but accuracy that consumers can rely on would require either:

  • A serious inspection of the property by an accomplished, trained, and experienced professional; or
  • A truly invasive collection and association of consumer data, data available through APIs with as many other property related apps as possible, collecting all available government recorded information, recent photography/ video evidence, complex scenario modeling and AI to address concerns – and then local service market information to factor repair costs.

Stay Focused On Your Success

While I applaud Mr. Rascoff and the Zillow team for trying to deliver a better product to the consumer, Zillow should focus on their core value is in the marketplace – connecting the consumers with reliable information and qualified professionals to serve their needs.

Attempts to replicate or replace expertise with an impossibly incomplete picture of a property only serves to further create confusion and distrust with consumers by giving them unreliable and inaccurate information that contradicts thorough and adequate evaluation.

When it comes to the largest purchase that the average person makes in their life – that is an irresponsible if not dangerous course to chart.

Question of Trust: A Response to Tni Leblanc

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I do love me some good meaty debates on industry issues, even if it can be passionate. Especially if it is passionate, as long as the debate doesn’t descend into irrational ranting or rudeness. I get to enjoy that with many of my friends, like Sam Debord and Andrew Flachner. I hope Tni Leblanc, with whom I will engage in this post, will be someone I get to call a friend in the future.

A bit of background: my post on Zillow’s Instant Offer was crossposted (with permission) to Inman. Tni left a lengthy comment, and I invited her to do a guest post here on Notorious. She declined, and left even more thoughts. I figured I’d respond to them all here so Facebook doesn’t just lose them as time goes by.

Go ahead and check out the original comments here. I will reproduce big chunks of them here on this post because I’m going to engage in a bit of fisking, which I haven’t done in quite some time.

For the TL;DR crowd: go ahead and skip this post. It’s gonna get lengthy and may not be all that interesting to you. 🙂

Zillow Fever Strikes Again! Instant Offer Triggers Insecure Agents

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One of the more amusing things about the real estate industry in the 21st century is the extent to which Zillow triggers some folks to heights of lunacy otherwise seen only in the more extreme social justice warrior types. If Zillow bought Coca-Cola tomorrow, some people would immediately switch to Pepsi.

The latest fracas involving Zillow’s Instant Offer test is a good example. Inman News reported on it yesterday:

The new Zillow product allows prospective homesellers to receive all-cash offers from a hand-selected group of 15 large private investors along with a side-by-side comparative market analysis (CMA) from a local Zillow Premier Agent.

The way it works seems pretty straightforward. Some homeowner surfing Zillow fills out a form. That form is sent to well-heeled (institutional) investors. It is also sent to some agents who are asked to provide a valuation (CMA) and try to get the homeowner to list the home with them instead of selling to an investor. The homeowner can choose to (a) sell to an investor, (b) sell to an investor, but pay an agent to help, or (c) list with an agent.

Doesn’t strike me as being all that different from all of those “What’s Your Home Worth?” type of things we have seen on the real estate web since… well… the start of the real estate web. I distinctly remember Homegain doing that back in the day, and doesn’t anybody remember HouseValues.com?

And yet… the response from some (though not all) people has been… ah… striking. Y’all need to chill out. This isn’t anything more than Zillow trying to fend off real threats looming on the horizon in the form of Opendoor and its copycats. Yet, some of the same people who were pooh-poohing Opendoor as a We Buy Ugly Houses with fancier office furniture are losing their ever-loving minds when Zillow does something similar but with a benefit for agents.

If that’s not a symptom of Zillow Fever, I don’t know what is. Let’s explore this like rational people.

[Note: I have a business relationship with Zillow, but as I have mentioned many times before, they don’t even know that I’m writing this. But, you make up your own mind, y’hear?]

Pivot? Or Reveal? Upstream Decides to Go Downstream

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A few of you have already asked for my opinions on The Pivot, as it is now being called. At the NAR Midyear meetings that took place last week, Upstream’s CEO Alex Lange told the attendees at CMLS Brings It to the Table event that going forward, Upstream will take a data feed from the MLS instead of requiring that participating brokers enter listings into Upstream, which will then provide a feed to the MLS.

Greg Robertson, with whom I record the Industry Relations podcast, half-joked in response that maybe Upstream should change its name to Downstream or Midstream.

Inman News has coverage on the issue here, and also additional insight in this article where it reports that NAR has approved an additional $9 million in funding for its subsidiary RPR to continue pursuing Project Upstream.

Based on what I’ve heard, conversations I’ve had, and the public reporting by Inman, I can’t help but feel that this isn’t a pivot, but a reveal. It looks now that the entire Upstream project has always been about syndication, an issue that I had sincerely hoped had died an unnatural death years ago.

That makes me incredibly depressed about the state of the industry. I understand it, but seriously, we have got to move on. Not only has that horse left the barn, but the barn itself has burned down and the whole farm paved over and made into a strip mall with a Palais Royal as its anchor tenant.

The Difference Between Business and a Profession

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I’ve been traveling almost nonstop for a few weeks, so things have been light in the blogging department. My latest stop was Stefan Swanepoel’s T3 Summit in Los Angeles last week, a fabulous event made even more fabulous this year because of agent Eric Boyenga of the Silicon Valley Real Estate Team.

T3 attracts  the most powerful people in the industry, such as Spencer Rascoff, Dale Stinton, CEOs of major brokerages, and MLS CEOs. There were amazing speakers, including the Co-CEO of Whole Foods. Yet, Eric was one of my favorites. Not only is he extremely successful, he’s also an agent pounding the pavement every day, driving buyers around, and going to listing appointments. That made his opinions and descriptions of problems invaluable.  The ultimate job of every CEO in that room is to solve problems for people like Eric — the agent on the ground.

That’s why when Eric talked about the industry’s epidemic of incompetence, it really resonated with me. Brokerages that recruit anybody who can fog a mirror, supply little training,  provide no guidance, and offer almost no oversight make Eric’s job more difficult — and make his clients more miserable. While Eric said NAR is not responsible for these “fly-by-night brokerages,” he would like to see NAR focus on the quality of agents over the quantity of agents.

If that sounds familiar to you,  it should. We’ve been talking about professionalism and raising the bar for years. But it’s really difficult to pin down what people want to change and why. I believe that we, as an industry, no longer understand the difference between a business and a profession; in doing so, we confuse the two.

Allow me to explain.

Destroy Your Illusions

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Last week the well-known real estate author/speaker/consultant Stefan Swanepoel wrote on Facebook that money is flowing into real estate technology. That observation sparked a heated discussion; many argued that real estate doesn’t scale, it’s too complicated, transactions are too difficult, too expensive, and too emotional for technology to disrupt, and so on.

To paraphrase Darth Vader: I find your lack of paranoia disturbing.

The great Mark Steyn wrote “The assumption of permanence is the illusion of every age.” He wasn’t talking about real estate, but he might as well have been. Because this assumption is widespread throughout society at large, it is also deeply embedded in the real estate industry at large. So I thought it was worth meditating on.

Realtors and Class: An Interesting Tidbit

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The happiest holiday of the year (that would be Easter, not St. Patrick’s Day) is behind us, and I do hope all of you had a wonderful Easter (and Passover for my friends of the Tribe). Just a quick little interesting note from some research I’ve been doing of late to share this morning.

According to the 2016 NAR Member Profile, Realtors are making bank, yo! It kind of goes against what I’ve been hearing ever since I started in the real estate industry, so figured I’d discuss it with you all. Check this out:

Now, according to that, half of all Realtors are making $100K or more in gross household income. Add in the 31% who are making at least $50K per year and we have 81% of Realtors making a solid middle-class or upper middle-class income.

In fact, if we go by common definitions of income classes in the United States, here’s how things break down:

So roughly speaking, maybe half of the Realtors are in that “middle class” bucket from $41,869 to $125,609. And we know that more than 29% are over the $125,609 line since 29% are over $150,000. Think about that. Nearly a third of all Realtors can be classified as Upper Income!

What’s even more amazing is that 38% of new agents (under 2 years of experience) are making $100K or more. One out of twenty is in the Over $250K category, and almost one in ten are making over $200K per year.

Now, keep in mind that this is Gross Household Income — not what the Realtor made from real estate sales. And only 48% of Realtors say that real estate is the primary source of income for the household. So in the vast majority of the above, we’re talking about Realtors married to or living with someone else who makes a bunch of money too.

When I saw this, I immediately thought of the “80/20” rule, that says that 80% of the business is done by 20% of the Realtors. Maybe that’s true — and that 20% are the top two tiers making at least $200K a year plus a few from the $150,000-$199,999 range. But the 31% that are in the $75K -$150K range? That’s actually kind of an incredible stat. Almost suggests that even those who aren’t really producing very much are still very much in the upper middle class….

There are some dark-side worries to have about this, but I’ll keep those to myself for now while I look into a few things. For now, let’s just let the numbers speak for themselves.

-rsh

HouseCanary, Predictive Analytics and TEOTWAWKI

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&nbsBrian Boero’s Friday Flash today is particularly interesting. He talks about the growth of predictive analytics, and writes this:

It’s two years from now. Pretty much every agent in America has some sort of predictive analytics tool available to them, either through their broker, franchise, MLS or by buying it directly. They’re all looking at the same geographies with the same lens.

And you’re a homeowner that has been flagged as likely to move.

Hordes of agents have your address. Your phone number. Maybe your email address. The steady drip of agent postcards you got in the past will seem quaint compared to the, um, “focused” attention you’re getting now.

It sucks to be you.

He then mentions a company called HouseCanary:

HouseCanary, a startup backed by ex-Google CEO Eric Schmidt and former NBA star Kobe Bryant that claims to “see into the future of real estate”, closed a $33 million funding round back in January.

HouseCanary does pro-level real estate data analytics for investors, mortgage companies, appraisers and (at least in theory) real estate brokers and agents.

It’s heavy duty, big-brained stuff. Graduate level Zestimates. Predictive market forecasts.

It’s $1,000 per month for a “Pro” subscription, which, unfortunately, will probably be considered too expensive by most real estate brokerage companies. I wish this wasn’t the case. Brokers could benefit from tools like HouseCanary, which give them an opportunity to preserve their place as local market authorities.

In fact, a real estate brokerage could build an entire marketing campaign around the insights derived from an investment in high-end analytics.

I read that and thought, huh, TEOTWAWKI….

Why?

HouseCanary + Opendoor = ?

Maybe it wouldn’t suck that much to be the homeowner flagged as someone likely to sell. Because the hordes of real estate brokers and agents doing an entire marketing campaign “focused” on you based on high-end analytics can’t do the one thing the homeowner really wants: write a check. Opendoor and its competitors like OfferPad, Amne and zHome (and more soon to come!) can.

Who wins that fight for hearts and minds?

-rsh