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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

Star Trek, Star Wars, and Real Estate: Failure of the Imagination

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I was stuck at the airport last week with the fifth flight delay in two days (courtesy of United Airlines). The upside to all that downtime? I got a chance to think through something swirling in my subconscious for a while – the parallels that exist between technology in science fiction and technology in the real estate industry. So I figured, what the hell! Let me entertain myself and hopefully some of you.

The problem with science fiction is that it assumes human behavior will remain static, even as the technology around them changes. Star Trek and Star Wars are two great examples of this bad sci-fi thinking.

It’s also why I dislike most of technology futurism in the real estate industry.

So much of what technology enthusiasts put forth imagines the real estate process as static. There’s this belief that society will remain the same – despite the advent of massive technological change. Like, “AI will change real estate, because it makes finding a home easier to do!”

Something as fundamentally disruptive as AI would change the whole world around us, which means the last thing on any of our minds would be how easy or difficult it is to find a home. Technology doesn’t exist in a vacuum; human behavior and human reactions must be taken into account.

Let me explain.

What If the MLS Were A Service Company?

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The Agony and the Ecstasy…

Just about every single MLS in the country has mandatory training for all new members that’s in the 3-5 hour range. Add in other courses ranging from how to use the tax data system to creating CMAs to whatever else the MLS offers and you’re looking at tens of hours of training in order to use the MLS effectively.

Let’s leave to side the issue of why it takes 3-1/2 hours just to learn the basic essentials of how to use the MLS. Instead, let’s explore a different take altogether on this.

Here’s my question: What if the MLS were to become a service company instead of a software and data company? What if, instead of offering training to subscribers, the MLS offered to do it for you?

Would you sign up for that? How much more would you be willing to pay for that kind of a MLS?

Local Expert: What Is Required?

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It’s been a while since posting, because I’m in the process of some big design changes here and elsewhere. Plus, life on the road — you know the deal….

But I wanted to drop this quick post, which is really more of a set of questions to you, the best informed readers in the industry. It’s interesting and all kinds of (potentially) controversial. I love both interesting and the controversial, so… here we go.

In my last Industry Relations podcast, with Greg(s) Robertson and Fischer, I brought up a point that got me wondering. The episode is embedded below.

The point is around the 29 minute mark and it is this:

What pisses off brokers and agents about portals like Zillow is that they resent a buyer agent who doesn’t know the area/neighborhood/building being able to buy leads from the portals for properties in that area.

The most prominent example with this Streeteasy deal was Ryan Serhant, the star of Millionaire Real Estate Agent, who posted this on Instagram:

This is about the seller whose single largest investment – their home – is being mishandled, mistreated, and misrepresented. This is about the consumer who is nervous about the home-buying process already, and who will now be lead to contact an agent that knows nothing about the property they are interested in, for no other purpose than for StreetEasy to make money. There is no vetting process for agents who pay to get into the Premiere Agent program other than a credit card number. [Emphasis mine]

As Greg Robertson points out, this “unqualified agents buying leads” thing has been an issue with portals forever. At the same time, there is no clear consensus on what does qualify an agent to hold herself out as an expert. If there were a vetting process, as Ryan Serhant seems to want, what would that look like? What would the person or company doing the vetting look at?

I don’t know Ryan at all. I assume he’s an amazing guy, being incredibly successful and a TV star besides. I’m just using him as an example because (a) he has a high profile and is well-known, (b) he has taken a stance in the Streeteasy issue, and (c) he has clearly articulated the issue of “unqualified agents” getting leads.

So when he protests Streeteasy’s Premier Agent program because it means that the “seller whose single largest investment – their home – is being mishandled, mistreated, and misrepresented” then I’m curious what being properly handled, properly treated, and properly represented looks like. Because on his Streeteasy Profile, I see that Ryan is the listing agent on 128 properties in New York City from the Upper East Side to Tribeca to Brooklyn. If you know NYC, you know that neighborhoods in NYC are more akin to city-states than to just neighborhoods. There is no way in hell that any person could be a local expert in Soho and the Upper East Side; those areas inhabit not just different zip codes, but different social galaxies.

Outside of NYC’s weirdly compacted universes-within-20-city-blocks environment, we have very similar issues around the country. Here in my home city of Houston, you cannot convince me that an agent who is a local expert in Katy (my west-side, outside-the-beltway suburban neighborhood) is also an expert in Montrose and in Pearland and also in the Woodlands. It’s not possible. Might as well claim that you’re a local expert in Dallas and San Antonio while you’re at it — which you can do, legally speaking, since your real estate license is from the state of Texas.

So this issue is endemic and fundamental to the industry, and therefore, here are my questions to you all:

  • What should be required before an agent could legitimately be considered an expert in an area, neighborhood, or town?
  • What should that vetting process look like?
  • If you run a brokerage or a team, do you have a vetting process? What does it look like?
  • If I were a consumer, what would you advise me to look for/ask a prospective (a) listing agent, and (b) buyer agent to determine whether she is a legitimate local expert or a faker who doesn’t know squat?

Would love to know your thoughts!

-rsh

Understanding Opendoor’s Mortgage Brokerage Move

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Regular readers know that I have said that Opendoor could be the most important company in real estate. My reasoning was that Opendoor looked to be trying to revolutionize the single biggest painful aspect of buying a home: the mortgage. Here’s what I wrote:

So yeah, I think Opendoor is about revolutionizing the entire culture around how homes get bought and sold in the United States by replacing the broken mortgage financing system with an institutional market maker system. Do that, and you can’t help but impact the pain-in-the-ass homebuying and selling system since the latter rides on the shoulders of the former.

If it pulls this off, Opendoor will become the single most important company in real estate. Hell, it could become the single most important company in banking, in much the same way that Uber has become the single most important company in transportation and logistics, not just in taxi and black car industries.

Well, yesterday, Inman reported that Opendoor is launching a mortgage brokerage division:

Opendoor, the property-exchange platform that’s raised $320 million, is launching a mortgage brokerage that could connect buyers with loans to purchase its homes.

The operation could help the company offload its property acquisitions at a faster clip while opening up a new revenue source. It also highlights a strategy real estate brokerages are increasingly using to streamline the transaction process.

I was interviewed for the article by the reporter, Teke Wiggins. But afterwards, and even after the article was posted, I got to thinking about Opendoor even more. I think I’ve figured out what they’re doing, but not in time for it to be helpful to Teke.

So let me at least do it here for the best informed audience in real estate.