Once upon a time in my young career, I used to think about sending little notes to flailing sellers, telling them why their houses weren’t selling. Arguably, this would have been a violation of Article 15 of the NAR Code of (ahem) Ethics, but it would have been bad form regardless. Besides, I was making good money by picking off those mis-marketed listings for my buyers.
The terrible marketing errors of the REO listers is how we survived the downturn. I built software to predict how much I could underbid them and still snag the house. I wrote last Summer about how to apply those ideas to underbidding the iBuyers – who all seem to come from the REO world and who mis-market accordingly.
I confess: My current listing praxis is more than just a little informed by studying all the bonehead marketing mistakes I’ve seen over the years.
So for Daniel Morillo, newly hired by OpenDoor to convince Wall Street they’re not a joke, using just one listing, I will show you why OpenDoor’s houses sell slower and lower than they should – even in a market as hot as Suburban Phoenix at Peak 2020.
The first extracurricular research project I did for Zillow, when I was working as a pricing algorithm, concerned closing-cost concessions in their sales. They didn’t know what questions to ask, so I kept giving them incredibly-detailed technically-correct wrong answers.
What they actually wanted to know was this: “Why do so many of our transactions entail concessions?”
The answer? Because they’re mis-marketed. This is true of all listings: Discounted offers denote blood in the water. Since 2014 at the latest, in Metro Phoenix a properly-marketed bread-and-butter home should sell above, at or near fair-market-value in under 15 days, ideally under 5, to an all-cash or well-qualified conventional buyer. If you’re taking offers with closing cost concessions, you did something terribly wrong.
As it happens, the last research project I did for them, in June 2019, involved a much more direct question: “Why are a third of our listings over 90 Days-on-Market?”
The answer? They and all the other iBuyers were and are getting a lot wrong in their marketing, but the bottom-line reason, of course, is simple: Their listings were over-priced.
They overpay on the way in because they have to, especially now. They scheme to overcharge on the way out, planning to “beat” the market, having learned nothing from having been soundly beaten by the market literally thousands of times.
I think OpenDoor must manage offers poorly, too, given the listing we’re about to discuss. And what could be a greater marketing error than the actual failure to sell the home when you have buyers in front of you? Passive marketing doesn’t make the sale, y’all, not that OpenDoor has invested any effort in marketing, anyway.
Sometime soon, I want to write about a sign innovation I saw recently, but here’s another confession: I don’t do signs. We invented the custom listing sign, way back when, but I haven’t posted a sign on a listing in five years. They just announce vacancy, and I sell over the first weekend, typically, anyway. I don’t do flyers, web-sites, open houses – none of it. I may do more passive marketing when the market shifts, but, for now, every bit of my marketing is encapsulated in the MLS listing.
Why? Because that’s where the eyeballs are. Zillow and Redfin didn’t make real estate a smartphone-only market, Steve Jobs did. But because he did, the only hope I have of getting my marketing message across to the buyer – and to the buyer’s agent – is in the listing.
That’s fine by me. We have always taken maximum advantage of every public field in the MLS. We sell in the driving directions – prettiest route in, key landmarks, benefits of the location – but we sell in every available space on the listing. We sell with the photos, but we tell the story of the home with the photos, too. Whether buyers find my listing from an emailed search or by browsing from their phones, real estate listings have become a “wish book.” I work hard to make my page in that catalog as rewarding as possible.
Big duh, right? Buyers spend a lot more time on their phones than they will spend showing in any house. If they move in to my place in their minds, all you’re selling is disappointment.
If the last sentence took you by surprise, welcome to Marketing 101.
This link is a 30-day live look into ARMLS. This is a subset of a search I look at constantly right now: “Coldwater Springs, one story, no pool, no golf, one month.” I can run tighter searches in looser markets, but for now I have to look at everything to be able to see anything. And if those parameters already look tight to you, back when we were buying instead of selling our buy-box for investors was much tighter.
In all of Coldwater Springs, a vast master-planned community built around an 18-hole golf course, there are currently nine homes that satisfy that search – Active, Pending, Closed – ranging from 1,524 to 2,084 square feet. Of those nine, four are in the floorplan we’re concerned with, the 1,524 sf homes.
This is Fulton Homes’ Lavender floorplan, and it punches above its weight: It’s a great 3/2 layout, almost no wasted space, and it feels roomy and private on skinny lots. Do you need to know that to price a Lavender? No, but you do need to know that the pricing matrix – here and everywhere – is most-comparable/most-proximate/most-recent.
Of the four listings in our selection, Adams was priced to market and Pended in 2 DOM. Madison was priced stupidly but sold close to market – in 29 agonizing DOM. Sherman is priced stupidly – the lister favored proximity over comparability. It Pended in 2 DOM, so I expect it to finish at or near market – all to the credit of frenzied buyer’s agents.
The house we’re concerned with is Jefferson, OpenDoor’s listing. The price is stupid, of course. All of their prices are stupid. What does $276,000 mean? $275,000? Or $280,000? They comp very stupidly, so it’s plausible they thought they were gouging the market, and they accidentally almost got the price right. In any case, if you want buyers to entertain stupid questions – if you want to start one down, best-foot-in-your-mouth – start with a stupid price.
What’s the big deal? The Jefferson house is at 9 DOM as I write this (note that the MLS link, if it’s still working, may have been updated by subsequent events). A house that any weak lister could have sold at market in two days is languishing at nine days in the seething inferno that is Suburban Phoenix after the riots.
The price is not all that’s wrong, but it’s dispositive, clearly. Nothing can last in this market, and yet this house is lingering over its second weekend – and it’s not even over-priced, just priced stupidly – and, I’m guessing, with the offers having been mis-managed.
But: So what? Of the four listings, I only actually like one of them. Show me a hundred listings, I’ll flunk ninety for bonehead errors. There are two big differences, though: First, unlike other listers, OpenDoor bears the carrying costs of its listing errors. And second, OpenDoor makes its bonehead errors on hundreds or thousands of listings a year.
The idea that iBuyers are optimizing performance by stealing from buyer’s agents is absurd. They’re nicking buyer’s agents because they are bleeding themselves white by making the same stupid buying and selling errors over and over again.
Truly, they are too clueless to breathe without a manual: The Jefferson listing has no driving directions at all – with a brand new freeway exit about to open a mile away and the best Charter School in the state on the way to it – and this is the entirety of the sales copy:
This Avondale one-story home offers a two-car garage. This home is vacant and cleaned regularly.
“You want fries with that?” Amazingly, the lackluster effort in the MLS is duplicated on their own app. They can’t even be bothered to sell when they have a captive audience.
In a LinkedIn discussion defending the iBuyers for “optimizing” stupidly, just like they do everything else, the question arose: “What do buyer’s agents do?”
They risk their lives starving for many huge disappointments, but what they do, as a matter of added economic value, is two things: They literally broker the deal by introducing the buyer to the seller. That’s called “procuring cause,” and it’s how all brokerage fees are negotiated. But more importantly, they close on the buyer. The incentives are askew, in the way things are done now, but it remains that closers close and losers lose – plaintively but incessantly.
Why does “The Incumbent” think it’s great that befuddled buyers come back to a Zillow listing fifteen times? Because he doesn’t know the first frolicking thing about selling real estate, that’s why.
The iBuyers’ biggest problem is that entrepreneurs sell and employees do not. But even settling for the best that wage-slaves can manage to get done, you will know that OpenDoor has gotten serious when it learns how to price and sell to optimize DOM – and manages to optimize every timeline in its ownership of its “investments.”
Until then, everything they and the other iBuyers say about their Deep Science is a lie devised to hide their financial ineptitude.
