by Brian Brady
Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL
AREBOT.com, which stands for the American Real Estate Board of Trade, is the name of the company that intends to open up the demand-side statistics, by voluntary submission of properties, to an online NASDAQ-like market.
DISCLOSURE: From this point forward, my opinion may be considered biased. I have a verbal agreement to receive site advertising in exchange for publicity.
The intention of my post about the “big idea” was to “smoke AREBOT out”. I knew they were getting ready for a site launch and wanted to have it revealed to the Bloodhound Blog community first. C. Aaron Bruce, the founder, was happy to explain the site and encouraged me to explain it to you ahead of the official press releases. This “exclusive”, if you will, is available to all, Wednesday June 24, 2009 at 1PM (PDT), on a conference call. If you’re interested in the call, raise your hand below and I’ll email you the details.
AREBOT.com is not intended to be an “auction”. It is an open, transparent, real-time market. Each zip code will have a live “ticker” moving across the screen, displaying actual offers on homes. Each listed property will display a time-dated offer history. Entries are voluntary and cost nothing to the sellers of the home. The “price”, if you will, is that they offer the property on this transparent market.
Buyers offer on the properties by entering the terms . The bid is then considered to be “unverified”, signified by it’s yellow color, until verified and submitted by a licensed real estate agent. Licensed real estate agents may offer their buyer brokerage services, at no cost, on the site. Listing agents are protected by their listing agreements and may voluntarily display listings on the site, at no cost to them or the seller. Verified offers turn green and stay that way for 24 hours (or longer if both agents are negotiating); offers are still accepted until the property is withdrawn from the system. Rejected offers turn red and are displayed with the property, in perpetuity. Final terms are not disclosed as most states publicly disclose sales information. I have no idea how AREBOT.com intends to handle the five non-disclosure states, at this point.
AREBOT.com believes sellers benefit because they will see all offers on their properties without interference or redirection. Sellers are not “forced” to accept any offers like an auction.
AREBOT.com believes that buyers will benefit because they’ll see history of legitimate demand for that subject property. Buyers can make offers on properties not available on AREBOT.com; the Company will send the seller an invitation to respond.
The Company intends to monetize the site through advertising and possibly the sale of the granular property data to secondary loan market participants.
The site launch is scheduled for Independence Day, July 4th, 2009. Press releases go out next week.
PS: Future potential of conflicts of interest preclude me from future posts about AREBOT on Bloodhound Blog. The news is so compelling that I want to release it to the Bloodhound community, exclusively.
Cheryl Johnson says:
OK. Let’s see if I’ve got this.
There is an online database of homes. A prospective buyer browses the database, finds something interesting, and submits an unverified offer online.
The offer shows up in the ticker. The offer does not become verified until it is actually presented by a real estate agent.
Offers that are not made through the AREBOT system will not show up in the ticker at all … unless … what? The seller or listing agent would need to input them just for the record?
Just asking.
June 19, 2009 — 4:58 am
Joe Loomer says:
Brian – will be on the road at the conference call time. I assume there will be some kind of first-come, first-served basis by zip code? Or will multiple agents be able to offer their buyer agent services in each zip code?
June 19, 2009 — 5:17 am
Tony Arko says:
Here is a site that already does something similar but the seller signs up and buyers submit offers online.
http://n-play.com/
June 19, 2009 — 5:25 am
sabra mcneill says:
Hmmmmmm…more moving parts than a Swiss watch. I would love to be on the conference call. Please send details.
June 19, 2009 — 6:05 am
Patrick Mahony says:
Hey scoop Brady it is a start, and just what the industry needs. This system may or may not work today, however I can remember when the Eurodollar pit opened at the CME in the early 80`s, and then the Libor in the 90`s. We all new it would take off, the question was when?
In my opinion the AREBOT needs to set the bar higher for their Buyer & Listing Agents.
They should require a AREBOT Certification. You just can`t open the mayhem to anyone.
Patrick
June 19, 2009 — 7:21 am
daniel says:
Sounds like taking the long around to get sellers/buyers to be real about the price of the property. Hook me up for the conference call.
June 19, 2009 — 8:12 am
Brian Brady says:
CJ: AREBOT market is completely opt-in; the seller or listing agent must place the property on AREBOT for buyers to bid on it. If a buyer wanted to bid on a property not listed, the Company would invite the seller to list on AREBOT (with the incentive of a verified offer pending)
JOE: The call will be recorded. A podcast will be available
PATRICK: certification is certainly a consideration. I’ll pass along the input (thanks)
June 19, 2009 — 9:09 am
Darrel Cunningham says:
I would like the information on the conference call Brian.
June 19, 2009 — 10:08 am
Don Reedy says:
Brian (The Trojan Horse),
Hand raised.
June 19, 2009 — 10:53 am
Thomas A B Johnson says:
Brian: I am in the biggest non-disclosure state. Please hook me up.
This could put MLS and by logical consequence, give NAR consternation. Step 1 of divorcing commissions?
June 19, 2009 — 11:03 am
Al Lorenz says:
Brian,
I am always looking for ways to monetize my business;, put me on the list please.
June 19, 2009 — 11:09 am
Brian Brady says:
Step 1 of divorcing commissions?
Steps 1-5. See y’all Wednesday. Emails out Tuesday
June 19, 2009 — 4:14 pm
Cheryl Johnson says:
Can’t do the conference call, will be eagerly awaiting the podcast.
But, I keep coming back to this sentence: “AREBOT.com believes sellers benefit because they will see all offers on their properties without interference or redirection. ”
Do the guys at AREBOT believe that agents are not currently revealing all offers to sellers? Maybe I’m naive, but I would find it hard to believe that agents anywhere in the country right now are holding back offers.
And then “the AREBOT market is completely opt-in;” But if the only data is that from a few opted-in participants, won’t your picture of the over-all market be skewed?
Just sayin’.
June 19, 2009 — 6:36 pm
Don Reedy says:
CJ,
I, too, have more questions than answers about the “hows” of this. The long-term concept that Brian describes in his previous post, coupled with this post, make for an interesting concept, but I must say that I very much want to find out how they will actually address your last comment and question.
I, too, am not aware of any offers not being presented to sellers….so what AREBOT means by this is a big ? in my mind.
But your last question: “And then “the AREBOT market is completely opt-in;” But if the only data is that from a few opted-in participants, won’t your picture of the over-all market be skewed?” seems to be the big gotcha in this market rollout.
Unless you have very complete data, the data is not good. It’s the Zillow effect. We get, for example, data directly and weekly from sales here in San Diego County from our Realtor Board. The numbers are interesting, present fodder for statistical analysis and debate, but do nothing much to tell homeowner A what home buyer B will pay for his/her home. If the data were very local, very complete, and very well organized, then we’d have the holy grail of real estate data.
Should AREBOT not be able to bring pretty much everybody to the table, well, to get a response from the ex-financial guy himself, Brian, how would having a NYSE work if only a percentage of the member companies shared their data? The system works because (at least on paper) there should be full disclosure by all.
Anyway, perhaps these will all be answered in the call, and certainly by the rollout, and I’m going to be open minded about hearing how these issues, and others, are resolved or addressed.
Just sayin.
June 19, 2009 — 7:26 pm
Brian Brady says:
@Don and @CJ: Agreed. Critical mass is important.
I think all offers aren’t necessarily presented because buyers agents dissuade after conversations with listing agents. This kind of technology allows for easy offers.
June 19, 2009 — 7:43 pm
Joshua Hanoud says:
I have to be honest – I don’t see the value in it unless your listing is overpriced and stagnating on the market to begin with (in which case you’re scrounging for every bit of visibility you can find to make up for your bad judgment in taking the listing to begin with). It seems like a really big stretch to me from what’s been written so far.
If a listing is priced well, marketed well, and is something people want, it gets offers – usually more than 2 and within a few days it’s off the market. This system (to me, based on what’s been said so far) seems like it creates work and doesn’t really add much to the process.
Buyer’s agents only dissuade offers after conversations with listing agents if the buyer’s agent is a putz who doesn’t know any better than to filter 90% of what comes out of the listing agents mouth (note to buyer – if you’re working with a putz of an agent, stop and take the time/make the effort to find a better agent)…if that’s the premise for sellers to convince their agents to utilize the site it seems pretty weak to me…and I’m not saying it is weak…I’m saying “maybe I’m just really not getting it…?”
I just don’t get why it’s of any consequence that a seller rejected an offer 2 weeks ago and what the terms of that offer were…situations change over time and what a seller might accept today could have absolutely nothing to do with what they would accept, reject, or counter the week before. There are just too many variables in a situation for this to do anything other than give a false sense of justification to whatever a buyer is thinking about offering, and could even dissuade a buyer from making the effort to begin with… “well, the seller rejected this offer last week, so we shouldn’t even bother”… no? It doesn’t catalog that the seller just got let go yesterday and so might consider that offer today just to be done with it…or any other myriad of potential situations that affect the market of a particular property.
I applaud the creative thinking but I’m not understanding the value that it’s going to bring to the table.
June 19, 2009 — 8:36 pm
Teri Lussier says:
I’m kind of digging this idea for one simple reason:
The agents who sign up for this are going to have to be master communicators, right? Their clients are going to have to understand everything about how real estate is conducted for this to work. Imagine the conversations that are going to have to take place, that may or may not take place for more traditional real estate transactions.
Most of the questions we have raised, so far, can be solved with more communication between all the parties involved. Or this that just wishful thinking on my part? Or. Maybe I don’t get it either. Conference call should be interesting.
June 20, 2009 — 5:32 am
Mitchell Hall says:
Perhaps because the NYC real estate market doesn’t sell real estate the same way as the rest of the country I can’t help thinking this idea sounds like another “dot com” gimmick. In NYS offers, accepted offers and counter offers mean nothing so I don’t see the relevance. Closed sales, current contracts and available comprable properties give a better indication than “so-called offers”. In NYC there are several websites that provide consumers with comprehensive listing data such as Street Easy, Property Shark, Online Residential and ACRIS @nyc.gov) The major brokers in NYC do not belong to an MLS or NAR. Brokers cooperate with listings that are shared but there is no central dasta base. I don’t believe real estate can be purchased the same way as NASDAQ stocks. Thousands of investors can buy shares of the same stock. Only one buyer can buy a property. Just like investment banks pump up shares of their clients stock an agressive listing agent can pump up their listing with bogus offers. I believe the price one gets for their home is a function of the marketing they choose.
June 20, 2009 — 7:10 am
Gary Frimann says:
I don’t see how this would work, and my reason being that it would have already been thought of.
I agree with the post that there is only one house, and that can only go to one buyer. Most people seem to forget this, but if you think about it, that is why the law offers the remedy of “specific performance” only to real estate and original pieces of art. Ah ha,some of you might be thinking now…
Ral estate cannot be commoditized.
There is more to an offer than just price, as every agent knows, but it is the toughest thing to make our clients aware of (both buyers and sellers).
Quickly, off the top of my head, I can think of many, many things that go into an offer:
1) Will it close?
2) When will it close?
3) does seller need to carry back a note?
4) How much down payment?
5) Concessions assked for, or will be needed to make (for repairs) by the Seller.
6) What if it doesn’t close on time?
7) What if it doesn’t appraise?
8.) Who pays for what?
9) What personal property may remain?
10) What if there is a lot lot line dispute?
11) What if buyer backs out?
Etc., etc. etc… (I could go on to about 100 items btw)
So, for those who know, there is so much more than price than what goes into an offer.
Remember also, since it appears that original poster is a lender, that by the time you get to act on the transaction, the house is under contract, so usually one does not see what went on to get to that point. I mention that as it was an eye opener for me when I left lending 8 years ago to sell real estate. I hire ex-lenders who want to try their hand at selling the dirt, and get blown away by this fact, even though I warn them well in advance it’s a totally different animal, beyond their wildest expectations.
BUT… Since we Realtors make so much money, and in my estimation, there will be 50% leaving the business this year solely due to the fact they are retiring (must be, right, because we all just rack in the big bucks because we overcharge– just read FREAKONOMICS).
No, real estate cannot be commoditized…
Many people have tried, many have failed. What remains however is the perception that price is the almighty indicator/motivator, which it clearly is not.
Just a last point… What if I bid really, really low, just to screw up my competitor. No intention of buying, perhaps don’t even have a client… Where is the policing (read: fining/sanctions) mechanism that tries to keep the MLS “honest”.
Good luck, however, with your new venture.
June 20, 2009 — 10:12 am
Tom Vanderwell says:
*raises hand*
June 20, 2009 — 10:49 am
Bunny Carringham says:
Dear Brian Brady,
I am certain the AREBOT idea cannot possibly work because, after three solid minutes of scattered thought, I have come up with what seems to me to be an insuperable objection. That you or the company’s founder may have already thought of and dealt with this objection does not matter. Those three solid minutes of scattered thought have proved beyond all contest or doubt that nothing can work, not ever, not anywhere, no matter what.
This has been the overwhelming opinion of humanity everywhere, forever, of course. Who are you to go against a consensus like that? Sorry, pal. People who make no effort to learn about something before expressing an opinion are just plain smarter than you. That’s a natural law — it’s the one that makes newspapers possible.
Better luck next time. Oh, wait… There can’t be a next time, since whatever new idea you come up with will also be impossible. Dang…
Oh, well, back to selling caves.
Bunny
June 20, 2009 — 11:03 am
Gary Frimann says:
My hunch is that was directed at my post?
Well, whatever. ALl I know is that every time someone tried to re-invent the wheel, their new design always seems to come out round. However, there are solid wheels, wheels with spokes, graphite bicycle wheels with only four “spokes” but the wheel is still round.
June 20, 2009 — 11:08 am
sabra mcneill says:
Hello Bunny Cunningham. I am a neophyte to the RE business (was a physician for 35 years) and have alot to learn. I apologize for this, but I am afraid I do not understand what you are saying. Are you saying that it is futile to consider the AREBOT idea or that it may be “do-able” but only after extensive consideration and thought? BTW- I have no axe to grind- just trying to learn. I know too little to have a well thought out opinion on this.
June 20, 2009 — 11:25 am
Joshua Hanoud says:
Bunny – I wasn’t saying that it can’t work – I was saying that based on what’s been said so far, I’m not getting it.
The pitch to get me to go listen to the conference call isn’t working (for me).
Am I curious? Yup. Enough to go listen to a webinar/conference call? Nope, not at this point.
I’m sure I’ll read reactions, comments, and summaries from people much more educated than I after they listen in and I’ll continue to form thoughts and opinions based on those, and maybe I’ll be a late (and yet still early, thanks to BHB) adopter. 🙂
June 20, 2009 — 12:18 pm
Brian Brady says:
@Gary- You crack me up with the “he’s a lender”, red-herring fallacy.
“I don’t see how this would work, and my reason being that it would have already been thought of.”
Huh? Some of the greatest ideas…ahh, forget it, I’ll stick with “huh?”
“Ah ha,some of you might be thinking now…Real estate cannot be commoditized.”
…but the loans on properties are. The secret to cheap residential real estate capital is in the securitization of those loans. Quite the conundrum, hey? The only way to make a securitized loan market work (and you DO want loans to be securitized) it to try and “homogenize” properties as best as it can be done.
Wall Street doesn’t trust you, Gary and they don’t trust me, either.
June 20, 2009 — 12:51 pm
Gary Frimann says:
I am not discounting someone’s efforts to improve how real estate is marketed, it’s just that if one goes solely on price, they are foolish.
There is a difference, as we all know (hopefully) between Price and Value.
Price term is not the only “thing” (read: term) that makes up an offer…
Some people think that it is. Realtors do not determine price. That is determined by a meeting of the minds between a buyer and a seller.
A 5.75% loan is the same, or is it? Let’s look at other loan costs as well, which vary from lender to lender, brokerage to brokerage. That’s why we have APR.
I don’t know too many people that shop APR, or even ask, or even understand it…
I also know that not every loan program works for every buyer. Different loan programs have different parameters, i.e. FNMA underwriting guidelines for a condo, or is it portfolio (in reference to O/O minimums). FHA has minimum building standards. VA requires other stuff. Does 80% LTV apply to loans over $3M? A loan agent will not know that the house sits on a mudsill until the appraisal comes in, correct? That might knock out half of one’s funding sources. How about an unpermitted addition or structure?
Keeping that in mind, Why would anybody buy a house based solely on the fact that the price looks good?
Wall St. used to trust retail and wholesale lenders…
“Breath on a mirror…” The only loan product missing was a stated FICO/stated income/stated asset loan! I’m sure that was probably next.
I don’t trust Wall St.–Everybody’s a financial genius in a rising market.
The highest price is not always the best offer.
Here is a truism: Every Seller thinks they could’ve gotten more, and every Buyer thinks they should’ve paid less.
That was an eye-opener for me when I switched over to sales of real estate after leaving lending… I did have clients (when I was a lender) mention that they hope they did not pay too much for the house! I used to respond that we’d know when the appraisal came in.
I also know that there are quite a few agents out there who list homes that will never, ever appraise, unless the appraiser’s clock is stuck in 2006 (or gets bought off, which I don’t think can happen with HVCC) BUT that agent DID get the listing (Yippee! Pick me! Pick Me!), and the sign will grow roots, and they got a nice little plaque to hang on the wall that reads “Top Listing Agent” which they hang next to their “Top Reducer” plaque they got last month…
Not to get off topic, but dealing with people who look at cost per sq.ft. are not using the right measuring stick, which I hope does not come as a surprise to the professionals who read this blog. Again, in property law, real estate is deemed unique, and for a reason.
Lastly: no conundrum. When Freddie and Fannie were the predominant secondary market sources, real estate was a lot cheaper.
June 20, 2009 — 1:37 pm
Brian Brady says:
“When Freddie and Fannie were the predominant secondary market sources, real estate was a lot cheaper.”
Because mortgage financing was a lot less plentiful.
You did get off track, Gary but I’m going to try to get you back on. You said:
“Realtors do not determine price. That is determined by a meeting of the minds between a buyer and a seller.”
If you really believe that, you should love the idea of AREBOT. It makes your job a helluva lot easier
June 20, 2009 — 3:10 pm
Gary Frimann says:
“If you really believe that, you should love the idea of AREBOT. It makes your job a helluva lot easier”
I guess it would, like Zillow did with their silly Zestimates… Same model house, one backs up to the golf course, the other backs up to the golf course maintainance yard. According to Zillow,and their “for fun only” Zestimate, they are priced the same. My goodness, they are on the same street, and only 10 houses apart! Even a condo in a 500 unit building would be given a equal value if one overlooks the dumpsters and the other overlooks the ocean.
I’m sure a house in Beverly Hills will fetch more than a house down the block outside the Beverly Hills city limits.
Again, what is the value, which is subjective, and what price one is willing to pay, for the “thing” desired. Price is easy. It is the amount, usually in US dollars, stated on the HUD-1 as Sales Price. Cost is the TOTAL cost: escrow fees, transfer taxes,loan fees, Section 1 repairs (paid by whom?) etc.
Meeting of the minds refers to a valid contract which then becomes becomes binding.
Quite frankly, I am an open source person. I just believe most people buying a house should use the advice of someone in the business.
That someone should be a person with a fiduciary duty owed to the client, only because it gives the client something actionable. No, I am not begging for lawsuits.
We live in an age of more and more transparency…
We now have more transparency than ever before, do we not? Perhaps this is faulty logic, but why are we at record foreclosures? Is there such a thing as too much transparency? At what point should we stop? Should every house be sold using an auction model?
I have given a lot of thought to the various business models out there for selling homes. Some have gone up in flames. (forgot the name of the co. back east that was perceived as the next wave–before it ended up declaring bankruptcy).
June 20, 2009 — 4:23 pm
Brian Brady says:
“I just believe most people buying a house should use the advice of someone in the business.
That someone should be a person with a fiduciary duty owed to the client, only because it gives the client something actionable”
We agree-so does AREBOT. AREBOT only allows offers from buyers who are represented by licensed professionals.
“We now have more transparency than ever before, do we not? Perhaps this is faulty logic, but why are we at record foreclosures?”
That’s faulty logic. The reason we have so many foreclosures is because lenders encouraged the opposite of transparency (NINA, SISA, etc).
June 20, 2009 — 4:58 pm
Don Reedy says:
Brian and Gary,
Again, lots to potentially really grouse or rave about once there’s more information about how this would work, but at this point I have to say that one of Gary’s points, Brian, seems to be at least sobering at the onset of this new venture.
Gary’s point related to the “silly Zestimates” really hits home for me. I actually commented on your last post to David G. about this.
Here’s a very unusually short question and comment.
First the comment. I believe AREBOT faces the prospect of being an early Zillow (i.e. a product that was ridiculed by the real estate industry out of the box)based on the fact that there will be insufficient data (critical mass as you commented back to me, Brian), and also because it is perfectly clear to me that pricing, just pricing, isn’t going to cut it insofar as delivering anything more of value in the way of transparency.
Now the question: Wouldn’t it make immeasurably more sense to combine the features of an AREBOT type ticker, featuring only pricing information, with another robust and more mature offering such as (Yikes, I’m actually going to say it) Zillow?
Zillow, you see, is flawed from a valuation tool standpoint. Every real estate professional knows that. But, as I pointed out to David G., Zillow has progressed and appears to be growing wisely by incorporating other real estate services and information into their format.
Forget the talk about commodities versus real estate, one is, the other isn’t, etc. What could be the interesting outgrowth of this would be that AREBOT could become an arrow in the quiver of a more fully rounded offering.
It’s funny, because even with this “announcement” we seem to have fallen into the trap of marketing with the concept that an idea has to burst onto the scene with claims that the product is already “compelling”, when in fact it is not. It may become compelling, but let’s have the product get some dust on its sandals first, and save some of the hoopla for later.
June 20, 2009 — 5:20 pm
Esko Kiuru says:
Brian,
Another idea to make the real estate market more efficient. Regardless of what the inventor says, it sounds like an auction. It may not fly in the long term, but it spawns new ideas so that the next invention might stick for the good of the marketplace.
June 21, 2009 — 2:06 pm
Brian Brady says:
“Wouldn’t it make immeasurably more sense to combine the features of an AREBOT type ticker, featuring only pricing information, with another robust and more mature offering such as (Yikes, I’m actually going to say it) Zillow?”
Of course. One would think this idea would be Zillovian but alas, it isn’t. That’s not to say that AREBOT couldn’t replicate the property database Zillow created.
“It may become compelling, but let’s have the product get some dust on its sandals first, and save some of the hoopla for later.”
Chicken and egg, Don but I hear ya; people have to use it first. The concept is compelling because it’s unique (and needed). The product will become compelling when the sandals get dusty from a few miles of walking.
June 21, 2009 — 8:35 pm
Brian Brady says:
“It may not fly in the long term, but it spawns new ideas so that the next invention might stick for the good of the marketplace.”
True. Hopefully AREBOT will evolve like Zillow and Trulia did. Remember, we didn’t think much of those BOTs until they improved them. It’s starts with a big idea.
June 21, 2009 — 8:37 pm