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Category: Disintermediation (page 42 of 43)

July 26, 2006

If you can’t tell the truth, tell a Big Lie . . .

by

Suburban Phoenix Real Estate Broker

Author website

Zillow.com cannot tell the truth about home values, so it is releasing an Application Programmer Interface to spread its misinformation far and wide.

Who do they hope to enlist with their API? Working Realtors, the people who know best that Zillow.com’s property evaluations are necessarily and unavoidably false.

Could the strategy work? Hide and watch.

Here’s a better question: Could this be the fifth column of a triumphalist Web 2.0, where obvious falsehoods are so widely propagated as to be accepted as truth?

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July 26, 2006

How dare you object that the Little Red Fin wants to eat the bread it didn’t bother to bake?!?

by

Suburban Phoenix Real Estate Broker

Author website

Snipped from the speech Redfin.com CEO Glenn Kelman made yesterday to a Congressional subcommittee:

that we must register our users

He said a lot more than this, of course, and you might go read it all. But much of what he said sounded to me like complaints that Redfin has been expected to hew to the same real estate laws as every other brokerage in Washington or California. The quoted matter in particular, “that we must register our users”, sounds as if Kelman is objecting to even the most minimal interpretation of procuring cause. Too late, we learn the unhappy consequences of not teaching The Little Red Hen in the schools…

Marlow Harris at 360Digest.com has much, much more.

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July 25, 2006

Debunking Zillow.com . . .

by

Suburban Phoenix Real Estate Broker

Author website

Zillow.com got itself a ton of new venture capital yesterday, so today seems like a fine time to deconstruct its praxis.

When Zillow was brand new, Catherine Reagor, the dippy local real estate reporter for the Arizona Republic wrote:

Want a reality check? Go to zillow.com, a new Web site with a program that calculates a home’s value for free. It values several Valley homes for tens of thousands less than the price listed on them.

At the time, I said this in response:

If you want to know what your house is worth, do not go to Zillow.com, which delivers completely useless estimates of value for free. Even Net Value Central, a tool used by professionals, lags the market by a month or more. The only way to price a house is to work as rigorously as possible from current and recently-sold listings for extremely similar properties. If you price your house to sell from sources like zillow.com, you will give thousands of dollars away. If you rely on zillow.com to tell you how much to offer on a home, you will see it sold to someone else.

(You can prove all this to your own satisfaction, if you like. Most of Ms. Reagor’s mistakes seem to come from falling in love with ideas she doesn’t check out. Here she tells us that she ran Zillow.com on live listings and found it came in much lower than the listed prices. How did it do against sold listings? She didn’t check, but you can. Run Zillow.com on the sold homes documented in your local section of the Republic. You’ll see that, time after time, Zillow.com is substantially under real-life market results. It’s a useless toy, which Ms. Reagor might have discovered on her own had she bothered to test it properly.)

Just lately, I needled the Zillowites a little more:

All right, here’s the deal with Zillow.com:

I decide I’m going to buy you a pair of designer jeans, nothing but the best for you. I know that fit is important, so I go to three of your best friends to get their sizes. Not yours, theirs. I strike Read more

July 21, 2006

If it’s a heat map, why does it look so cool?

by

Suburban Phoenix Real Estate Broker

Author website

All right, here’s the deal with Zillow.com:

I decide I’m going to buy you a pair of designer jeans, nothing but the best for you. I know that fit is important, so I go to three of your best friends to get their sizes. Not yours, theirs. I strike a happy medium amidst the diversity, reckoning that — what the heck! — you can’t be that different from your friends.

If the jeans I buy for you actually happen to fit, this will be a happy accident. More likely, the jeans will be a close but not perfect fit.

You understand why, of course. Epistemological error was built into my sizing algorithm. I chose a method that might have been convenient, but which cannot possibly produce objectively accurate results with any degree of confidence. Arguably, the more of your friends I measure, the smaller my margin of error. But I am still pursuing an inherently erroneous sizing methodology.

For Realtors, a perusal of the tax records, the equivalent of a Zillow Zestimate, is the first step in comping, the step known to be least accurate. The next step is comping the house one-for-one with recent past sales and currently-marketed (competitive) listings. The last step is working all those numbers against the subject property in its current state of upkeep and upgrades.

In the same way, if I don’t take a tape rule to your inseam, the chances of my getting jeans that fit your unique physique are very poor.

However: In email, my friend and client Richard Nikoley set me straight on the value of Zillow.com:

I still think it can be used as a valuable tool for getting an idea of the relative values between neighborhoods in places you’ve never been to. Of course, once you determine where you want to buy, based on a number of factors and Zillow being only one input, then you need to begin the real homework.

Plus which, it’s fun to play with. It would be even more fun in Safari.

The map to the right is a Zillow heat map for Greater Phoenix, reflecting not the ambient temperature (115!) but the (approximate!) Read more

July 18, 2006

Are traditional Realtors being undercut? There’s always room at the top . . .

by

Suburban Phoenix Real Estate Broker

Author website

Let’s see… Our customers are leaving us in a steady march. They’ve found an alternative that is easier to use, more convenient, overall just a better fit to their lives — and to top it all off, it’s much cheaper than our product.

What should we do?

Here’s an idea. Our customers are telling us in no uncertain terms what they want: More! Newer! Better! Faster! Cheaper! So let’s do the same things we’ve been doing all along, only less!

From Reuters.com:

The New York Times Co. plans to narrow the size of its flagship newspaper and close a printing plant, resulting in the loss of 250 jobs, the company said in a story posted on its Web site late on Monday.

The changes, set to take place in April 2008, include the closure of a printing plant in Edison, New Jersey. The company will sublet the plant and consolidate its regional printing facilities at a plant in Queens, the paper said.

The newspaper will be narrower by 1 1/2 inches. The redesign will result in the loss of 250 production jobs, the company said.

The New York Times said it expected the changes to result in savings of $42 million.

The narrower format, offset by some additional pages, will reduce the space the paper has for news by 5 percent, Executive Editor Bill Keller said in the article.

The Times will join a list of several other papers from The Washington Post to the Los Angeles Times that have reduced their size as they cut newsprint and other production costs and try to stem a loss of readers and advertising to the Internet and other media.

It might be fun to chortle about someone else’s troubles — and who doesn’t love seeing the New York Times get it good and hard?

But what they are doing is what the real estate industry, in general, is doing. In both cases, the consequences are likely to be unhappy. The Times would argue that theirs is strictly a financial decision, but it’s one that is likely to be repeated over time, a persistent policy of retrenchment. And even if its customers are not consciously Read more

July 14, 2006

In the 21st century world of real estate, nothing says ‘roadkill’ like a dead dinosaur . . .

by

Realtor, Staging Consultant

Author website

Why do velociraptors no longer roam the earth? Because they couldn’t change. For all their ferocity and intelligence, they were not able to adapt to their changing world. Not able because they were not blessed with the human triumph of will, they couldn’t want to change, and so they became extinct.

What’s a Realtor’s excuse?

In today’s world of Web 2.0, disintermediation, and DOJ scrutiny, anyone in this industry who doesn’t believe the real estate business in the 21st Century is going to be dramatically different from the last century is going to be in a world of hurt. The only way to survive will be to embrace that change.

Ardell DellaLoggia started an excellent thread on Seattle’s Rain City Real Estate Guide, where she has a conversation about buyers’ reps changing their worldview on buyer compensation.

Clearly, the Buyer Agent truly treating the buyer as a client, is the key to the future of our industry. As long as agents continue to think that the seller is paying their commission, when they are representing a buyer, they will continue to treat the buyer as a second class citizen in the real estate transaction.

Be sure to read the entire thread to get the most out of it.

But, closer to my own heart is Allen Wright’s post on RealBlogging, which also recommends we re-evaluate the method of Realtor compensation. Closer to my heart because he asks the essential question:

As a real estate professional maybe we should take a step back and ask a more serious question, “What value-added-service am I providing?”

I like being in a commission based industry. I like being paid for my results, not just my efforts. There are 1,200,000 of us all expending some type of effort, a consumer might assume. But who is actually creating value for his clients through that effort?

Some business models such as discount service brokers and the Redfins of the industry have answered this question by saying “we’re not going to give you added value, but we’ll give you what you have come to expect from Realtors for less than Realtors typically charge.” For some consumers, this Read more

July 14, 2006

On-line CMAs yield confusion

by

Suburban Phoenix Real Estate Broker

Author website

From RealEstateJournal.com:

After getting five estimates — four from online sites, and one from a professional appraiser who inspected the home in person. We were told the home might sell for anywhere from $291,000 to $375,000 — an $84,000, or 29%, spread.

The appraiser is probably closest to the mark, of course. Completely automated systems like Zillow.com can be accurate by accident, much as a gift-buyer might be accurate buying you clothes using measurements obtained from your friends. In many cases, I can tell practically to the dollar what a home will sell for. Other homes defy prediction. Certainty is never hard to find, though. If you want to know what your house is worth, sell it. The home’s value is what you got for it. Everything else is just a guess, no matter how well educated.

July 10, 2006

O, for a young and money-hungry web programmer…

by

Suburban Phoenix Real Estate Broker

Author website

Joel Burslem The Future of Real Estate Marketing cites ShackYack.com, but I don’t think we’re seeing the same thing. What he sees is another manifestation of what he calls Real Estate 2.0. What I’m seeing is a particularly user-friendly interface to an IDX system. In other words, this is not the disintermediation of a brick ‘n’ mortar broker, this is a competitive advantage built by one broker to use against all the others. It’s not perfect, mind you. If the buyer has no idea where they want to live — a relocating family, for instance — this tool won’t be of much help. But still, it’s very cool.

But the other end of this is that I’m thinking maybe Joel sees this as a very complicated application, whereas it seems to me to be just an integration of an IDX-like database with the Google Maps API. The beauty of the tool is in the user interface, but that’s really just a Cascading Style Sheets job.

In other words, a young and money-hungry web programmer could probably reverse-engineer this in no time, if the price was right…

July 8, 2006

Without the man in the middle, there might just be the void…

by

Suburban Phoenix Real Estate Broker

Author website

In The Fountainhead,the best novel ever written about the real estate industry, Ayn Rand said:

The shortest distance between two points is not a straight line — it’s a middleman.

Here’s Seth Godin on the same point:

Salespeople who sell properly sell stuff people wish they would have bought in the first place. It’s a huge service… I’m pretty sure we need more good salespeople, not less.

I actually don’t care too much for the kind of selling Godin’s talking about. It’s a thin line between helping people do something they should do and nudging them into doing something they should not do.

The salesmanship Rand is talking about is elemental in real estate, to be the source of and liaison with the many vendors involved in the sale of a home.

But the most important function for me, and the job I like the best, is addressed by neither: A good real estate salesperson helps people realize their dreams — and avoid potential nightmares. The first part is fairly easy. The second part requires real skill, especially with sellers. I don’t think these jobs can be done without.

July 6, 2006

Let’s go get sued one more time…

by

Suburban Phoenix Real Estate Broker

Author website

We looked at a house yesterday in Las Vegas. We’re loosely motivated buyers, so we didn’t waste an agent’s time. But we have this idea that we might buy a distinctive home in a choice location, trick it out in every possible way, then own it as a getaway vacation rental that we will rent ourselves from time to time, when we’re in town. We were looking yesterday in the allegedly ‘historic’ neighborhood of Downtown Las Vegas, which makes the historic neighborhoods of Phoenix look positively ancient.

Anyway, here’s what’s important in the present context: The lister of the home happened to be there as we drove by, and she offered to show it to us. She was eager and energetic, well-informed and enthusiastic, everything you might want in a Realtor, either as a broker or a seller. Except that in the course of about ten minutes, she committed at least two Federal Fair Housing law violations – religion and family status.

We can give the lady a break, I suppose. We weren’t offended, and I can’t image that even members of the two protected classes would have been offended. She was trying to be inclusive, even if unlawfully, not exclusive. All she really wanted to do was get the house sold, so she gave us information she thought we would want, even though doing so was in violation of the law, even though we had disclosed to her our status as Realtors from out of state, even though she should have known we would hear every violation of the law.

As it happens, we are very, very careful about this stuff. Not because we believe all people are individuals, equal in every metaphysical respect. Not because we find prejudice and exclusion abhorrent, repulsive, nauseating. Not because we want to spread the social, emotional and financial benefits of homeownership as far and as wide as possible. We uphold every one of those noble ideals. But here is the reason we are so serious about Fair Housing laws: Because the fines at the Federal level are $11,000 – per violation. Add to that state, county Read more

July 6, 2006

Let’s go get sued some more…

by

Suburban Phoenix Real Estate Broker

Author website

At 360 Digest, an exceptionally fine real estate weblog, Marlow Harris weighs in with this idea about an incipient on-line real estate start-up:

Blue Roof, like Redfin and Zip Realty, misrepresents their status as “Realtor” and claims to be a member of the National Association of Realtors and adhere to its strict Code of Ethics, while actually NOT being a Realtor subject to their rules, regulations and ethical code.

I don’t know if this is true or not, with respect to any of the vendors named, but, if it is, it seems to invite considerable exposure to litigation. No, not a trademark infringement suit from the NAR. A judge might reasonably hold the RealtyBot sites to the claims they are making, even if those claims are untrue. A mere real estate licensee is answerable only to the statute law of the licensing jurisdiction. Realtors are held to much higher standards, both because of the NAR Code of Ethics and because of the presumption that the aspiration to professional status implies greater education and more rigorous care and diligence. Real estate brokers, whether or not they are Realtors, are held to the highest standards. Ignorance of the law is not only not an excuse, it is not even a mitigating factor.

For all its virtues, the internet has always been driven by an ‘aw shucks, we’re just having some fun’ attitude. Witness a major, multi-national communications conglomerate named ‘Yahoo’. But real estate is not an ‘aw shucks’ business. A real estate practitioner – licensee or not, Realtor or not – has the power to ruin his clients’ financial lives forever. We’re not talking about impersonating a Realtor, a funny idea. We’re talking about depersonalizing, deprofessionalizing – ultimately deligimating – the fiduciary relationship. If the agency law hammer ever drops on these practices, whether or not they are buttressed by lies, the damage awards are going to be collossal.

July 6, 2006

Let’s go get sued again…

by

Suburban Phoenix Real Estate Broker

Author website

Before we hopped our Southwest flight to Sin City, I had time to read but not comment upon this bit by Catherine Reagor of the Arizona Republic. The truth is, it gets hard to care after a while. Whether the Republic‘s real estate reporting is completely tendentious, completely uninformed or completely random, it is almost always completely wrong. Ms. Reagor, in particular, never once saw a cliff that she didn’t immediately jump off of, whether it’s the wonder and beauty of ‘affordable’ housing expropriated at gunpoint or the dream of a desert paradise master-planned in every particular by Locutus of Borg. If the Republic is singing the praises of an on-line real estate start-up, it might be wise to park your wealth anywhere else.

Even so, and harkening back to the idea of lawsuits against RealtyBots, I seized upon the opportunity to play my favorite game as a real estate broker: Name that violation. I summarized the article to Cathy, emphasizing this:

Some real estate Web sites make money on advertising.

Others, such as myfuturenet, try to make money on the back end by getting buyers and seller to close deals online using their mortgage and title firms.

In possession of that little bit of information, a mere 36 words, the challenge for you is to name that violation.

Cathy got it instantly, of course, as every skilled practitioner would. The law this business model is most likely to violate is RESPA, the Real Estate Settlement Procedures Act. Every vendor used in a real estate transaction should be chosen by the buyer. If a real estate licensee refers a vendor, he must disclose any ‘referral fees’ or other kickbacks received from that vendor. Our policy, of course, is no kickbacks of any kind, ever, since there should never be a doubt in our clients’ minds about our absolute fidelity to their interests. But a business model that binds buyers to certain third-party vendors seems to have a RESPA suit, an agency suit – or both – baked in the cake.

June 30, 2006

Let’s go get sued . . .

by

Suburban Phoenix Real Estate Broker

Author website

In a comment below, Jon offers this:

What are you talking about? Lawsuits against emongoo, zillow and refin? None of them are doing anything wrong…sorry to say. I looked at emongoo, zillow and redfins sites and I don’t see anywhere where they say they give legal advice.

First, I only cited legal advice with respect to emongoo.com – and we’ll come back to that. We should exclude zillow.com from this discussion, because, for now at least, they are doing nothing but running a look-up service with no legal consequences that I know of.

But redfin.com has considerable legal exposure, as does buysiderealty.com and anyone emulating the general redfin.com business model. The first and most obvious problem is the legal doctrine known as procuring cause. These sites are a procuring cause lawsuit – or perhaps a procuring cause class action suit – waiting to happen. They go out of their way to flout the rights of cooperating brokers, openly advising buyers to see homes at open houses or by contacting the listing broker directly. The NAR Code of Ethics forbids brokers from letting a procuring cause dispute impede a transaction, but there is nothing to prevent the aggrieved broker from pursuing damages after the fact. I’m not saying this will happen, but their noses are wide open.

(As a side note, the way I read buysiderealty.com’s web site, their real business is loan origination. My guess is that the real estate brokerage side of the business will be one or more separate operating entities, with the broker being hung out to dry in the event of a lawsuit.)

The entire discount sector of the real estate industry – on-line and brick ‘n’ mortar – faces huge risks on the subject of agency law. It is difficult to argue that you did everything possible to advance your client’s interests when you did everything possible to avoid knowing what your client’s interests actually are. From the outside, you might want to shout caveat emptor! But the law of agency in real estate is by now much closer to caveat venditor.

There is actually added risk for the discounters, as Read more

June 29, 2006

Mapping a full-service real estate strategy…

by

Suburban Phoenix Real Estate Broker

Author website

The map above is a tiny slice of my week. My clients are buying the home that sits on lot 387 of that plat map. Their insurance underwriter deemed it vital that they know where the fire hydrants are with respect to that house. This is a job that can be delegated, but it is not a job that can be easily disintermediated. In anticipation of sputtering expostulations: I made another trip to that house to measure the exact dimensions of the cavities of space into which the appliances will be installed. These are but two of the dozens of little things that go into delivering the whole product…

June 29, 2006

Ten trillion times a tiny loss is a huge loss . . .

by

Suburban Phoenix Real Estate Broker

Author website

I have been devoting a lot of my time to some ascendant ideas in Real Estate loosely based on the Web 2.0 model of internet commerce. The ideas are ascendant, but they’re not necessarily good. I weigh in on the skeptical side for now, but I’m watching all this with interest. I’ve been wrong before.

Of all the fascinating things I’ve seen, the most impressive was the painstaking deconstruction of the redfin.com numbers. We can scale those results any way we want and they still stink. Any brick ‘n’ mortar accountant could do the math. As with Web 1.0, it doesn’t matter how many different ways you shout down the numerical analysis, ten trillion times a tiny loss is a huge loss.

So: One procuring cause lawsuit–and there are apt to be dozens… One negligence lawsuit–and the business model is proudly based on negligence… Emongoo.com is actually in worse shape, since they’re taking quite a bit less money but openly promising legal advice. The aggregators and sites like zillow.com are probably safe–though possibly not profitable. But sites attempting anything like agency have the same legal exposure as B&M brokers, but with a lot less money to cover the losses.

It’s an interesting problem…

Here’s another one:

The real estate industry has always been about seller representation. This was true historically, but it’s still a huge source of lawsuits among the old-timers. The idea of dual-agency–itself a huge fount of lawsuits–is an attempt to cling to double-commissions in the age of buyer agency.

But here is where we’re headed, at least for now: In the world of redfin.com, emongoo.com, HelpUSell, etc., buyers will have full representation, but many sellers will be essentially unrepresented.

The immediate knee-jerk answer to this would be to make buyers pay for their own representation, but, of course, now more than ever buyers arrive at the closing table with no cash at all. Good income, good credit, but little or no cash.

So why should sellers pay for the buyer’s agent? For the same reason they always have, agency law be damned: For the introduction.

So how does this shake out?

On the one hand, sellers might think Read more

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