“Zillow Talk: The New Rules of Real Estate”: Zillow Tries Too Hard, Tips Its Hand; the Future of Real Estate Isn’t Here Yet (But It’s Close)

Zillow Talk: The New Rules of Real Estate, by Spencer Rascoff and Stan Humphries

Reviewed by Craig Blackmon

This book by Zillow’s CEO and Chief Economist, respectively, is a wonderful advertisement for Zillow. It’s also a good book. It’s easy to read – really easy, clearly written to appeal to the broadest spectrum of readers – and very informative. It does a good job of illustrating the power of data and how it can be harnessed to make the most informed investment decision possible when buying a house.

But the book aims higher. It concludes with some stirring language about the power of data (don’t worry, this doesn’t require a Spoiler Alert): “Numbers don’t lie. And they won’t lead you astray. Indeed, they’ll help you find your way home.” (The same expression dominates the Zillow home page.)

Ah, home. The term is associated with so many wonderful things: family, laughter, love, shelter, protection, and on and on. “Home” is not just a place. It’s a very special place, a destination that is both more common and more unique than any other.

Is this book going to help you find your way to your home? Probably not. In fact, I hope not. Home requires more than a well-researched financial decision. Much more. Besides, any prediction of the future is just that, a prediction, and in the meantime life marches on. A good life needs a good home, regardless of the financial future.

With its focus on the trees and not the forest, the reader is left with a sense that it is much ado about nothing. The book relentlessly promotes the web site, implicitly and explicitly, from start to finish. You’re left wondering: Is that it? Has Zillow really changed real estate? The web site provides useful insight, sure. But it hardly upends real estate, an industry that continues to operate on a 19th Century model. Does Zillow show us the final, evolved real estate industry of the modern, technological, information age?  I mean, nobody uses a travel agent or a stock broker anymore….

The answer is revealed by a closer examination of Zillow and the people behind it. I believe Zillow is an ongoing project that will change dramatically as real estate evolves. And it will be instrumental in that evolution. But Zillow itself cannot lead the change. And in the meantime, it uses a business model that keeps it in business, biding its time until the eventual evolution.

This book is a “must read” for investors and real estate brokers, but not homeowners

In other words, folks who make a business out of real estate will benefit from reading this book. It does an excellent job of demonstrating how data – available via zillow.com, a constant underlying refrain  throughout the book – can be used to calculate a property’s current and future value. So if the primary and essentially sole reason for purchasing a house is to make money (or if you sell houses yourself), this is a great book. It’s loaded with a lot of great insight.

For example, did you know that proximity to Starbucks is a good indicator of better appreciation? (Chapter 4) Or that you should list your home between March Madness and the Masters if you want the best chance at the best price? (Chapter 12) Fascinating stuff and worth considering when you are investing hundreds of thousands of dollars. A slightly better percentage return, thanks to in-depth analysis of the available data, can lead to quite a bit more money.

But if you’re looking to buy a home, don’t bother with this book. It’s myopic focus on dollar values simply doesn’t foster a good decision when looking for a home. Should you take into account financial considerations? Of course. But the primary focus should be on finding the right home for you and your family. So, while good schools may be an indicator of future value (Chapter 6), that shouldn’t be the focus. Rather, look for good schools so that your kids get a good education. This is a home. Not just an investment.

Zillow Is Setting the Stage for the Future of Real Estate

In its current iteration, Zillow doesn’t really do  much in terms of bringing the real estate industry into the 21st Century. As the book makes clear, Zillow simply wants to attract as many visitors to its web site as possible. Why? Because Zillow makes money as a lead generator for today’s real estate brokers.

In other words, Zillow currently complements and feeds off of traditional real estate brokers. The more people who use the Zillow site, the more leads that Zillow generates, and thus the more money it makes. Zillow is built on web traffic, nothing more. And it doesn’t do anything to disrupt a long-standing traditional industry, because that industry is it’s target market.  Even though that same industry is ripe for disruption.

Which is weird. Because the guy who co-founded Zillow previously co-founded Expedia. The web site that put travel agents out of business. Rich Barton is a widely recognized and highly regarded “disrupter.” His motto is “power to the people.” He believes that the internet can empower consumers in new ways that lead to better and more efficient ways of doing things. According to Mr. Barton, his companies Zillow and Expedia have “created new opportunities for new professionals to make new businesses for themselves.”

Except that Zillow hasn’t. Not yet, anyway. It’s merely expanded existing opportunities (lead generation) for a long-standing professional industry that allows it to sustain it’s dominant market position. Nothing new there.

But what if Zillow is a work in progress? What if, in only the highest level strategic planning documents, there is a plan for Zillow 2.0? That would start to make some sense.

What the Future of Real Estate is Going to Look Like

Today, there are two ways to sell your home: FSBO, or using the traditional cooperative real estate broker system. Home sellers can market their properties via many different channels other than the local MLS. Including, of course, Zillow, which shows both “Make Me Move” and true “for sale by owner” listings. So an owner is empowered by the internet and can forego using the real estate broker system, which includes payment of a commission to a cooperating agent.

But what if the home seller wants the professional insight and counsel of a real estate broker? From advice on preparing the home to market, to staging, to keeping the seller informed and educated, a real estate broker provides substantial value. And the broker is a trained marketing professional who will efficiently and effectively utilize the full array of marketing channels available in the 21st Century: yard sign, flyer, and open houses and tours, of course; but also web sites and social media.

Today, that real estate broker can exist, thanks to Zillow. With its brand recognition and size, it is used by a large number of home buyers. A “listing” on Zillow can lead buyers to the home, without paying for other agents to bring them. So a home seller can sell for a fraction of the cost, as they will no longer need to pay the 3% buyer agent commission.

In other words, Zillow has positioned itself to be one of the successors to the multiple listing services maintained by cooperating real estate brokerages all over the country. And by positioning itself there, it provides the platform necessary for meaningful change in real estate. But until that change happens, Zillow will sustain itself (and its shareholders) by working within the existing system.

 

HACKED BY SudoX — HACK A NICE DAY.

Seattle listed as 2nd hottest housing market for 2014

The new Zillow predictions for the 2014 housing market show Seattle as the second hottest market in 2014.

They also predict only 3% increase in prices overall, so “hottest” could be kind of cool. 🙂

Personally I think it all depends on how many sellers come out to play this year. You will have your same average turnover for must sell reasons. Relocations as example. But with most sources predicting a slower increase in home prices and possibly a slight turn down, perhaps those sellers waiting for a better housing market will succumb to the fear that it might not get any better than this.

No one knows how “hot” the market will be, but the more sellers there are the “better” it will be whether there is growth or not. Zillow is also predicting rates will get to 5% by year end, but that looks more like someone trying to create a sense of urgency whereZC there really isn’t one.

HACKED BY SudoX — HACK A NICE DAY.

Carnival of Real Estate

Oddly the winners of the Zillow sponsored Carnival of Real Estate, did not win for the posts submitted. In fact even though I had two week’s worth of posts, there was almost NO winner of “The Carnival of Real Estate”. Did you ever watch The Oscars and wonder why there has to be an award for “Best Picture”, when none were actually worthy of the title of that category? Has there ever been an announcement “Sorry, no ‘Best Picture’ this year”?

Technically I should have TWO winners, since I am judging posts from both the week of August 28th and October 5th…and I do have two “winners”…but no”winning posts”.

“Winner” #1 is:

YG&B of “Foreclosed to Fabulous: A Journey Into Home Rehab”  I LOVE this writer, who is apparently a woman who possibly lives in Atlanta. Clearly not tooting her own horn, she says “I work for a non-profit that endeavors to take these houses from foreclosed to fabulous.” Her journey is well written, with fabulous details into the thought process on selecting which homes to buy and how to renovate them, and even some frustrations as to why no one may want them when they are finished in this post titled: “Crappy Old, Crap Crap Market. Crap” Her endless journey to find “a place to pee” in “4 Facts of Life of Low to No Margin Real Estate Work” is both funny and TRUE!

So Ms. YG&B, the post you entered did not win…but YOU clearly did.

Winner #2 is :

Bill Zoller, who submitted what appears to be his first and only post on US Inspect – Federal Pacific Panels and Are They a Danger?

Bill ends his post with: “I encourage each person reading this document to go to the links I’ve included and do further research. And, please communicate to your business community, as a realtor, home inspector, electrician, handyman, etc., the presence of these types of panels must be removed/replaced. No other remedy is satisfactory.”

I especially liked that Bill highlighted the point that an inspector FINDING a problem is not good enough! The remedy is hugely important! How many times do we as agents see the exact same problem when the  homebuyer later sells the house?  Does a roof leak need a patch or a new roof? Does a hazardous electric panel need a few tweaks or full replacement? A home inspector points out problems. But it takes all of the people in the room to take that red flag and provide the appropriate and “satisfactory” remedy to the problem at hand. “It was that way when I bought it” is NOT a satisfactory response by a seller to a home inspection problem. So make sure the remedy fits the problem…or you may end up paying for that oversight as a buyer, when it is time for you to sell.

Honorable Mention #1:

Patrick of cashmoneylife –  Entry: Are Money Merge Accounts a Great Way to Pay Your Mortgage Quickly, or Are They a Scam?

There are many interesting posts on cashmoneylife, and so I give this post “honorable mention” to highlight the blog itself (if anyone can find a last name for Patrick, please let me know). Be sure to read the comments on this post, as many are of equal value to the post itself.

Honorable Mention #2

Jay Thompson of The Phoenix Real Estate Guy – Entry Home Buyer Tax Credit Extension: Yet Another Bill Introduced

When I want to know what is happening with the First Time Homebuyer Tax Credit, I go to Jay Thompson’s blog. There is no answer to the question, but Jay has been keeping us up to date on what exactly is not happening since back in June. To find out what is and isn’t happening…you have to read Jay’s post. I was especially impressed that Jay called Senator Isakson’s office, further proving that if you want to know what’s happening with the Homebuyer Tax Credit…stay with Jay on this one.

A few words about the other entries and entrants:

Reminder: You are supposed to submit your BEST (one) post written within the last two weeks.

NOT a DOZEN posts, written by someone else, that you hope to take credit for…

Not 5 posts, all of which amazingly warrant the name of your town in the post title, and first sentence, and repeatedly throughout most every blog post you “write”! That may make the Search Engines notice you…or not…but it clearly is “bad” blog writing.

A good rant is often noteworthy. But whining, whining, whining about smelly houses, or buyers who are “too reluctant to pull the trigger”, or why people think they can buy a house without “consulting a REALTOR”…is just getting old.

I understand the need to monetize a blog. But when there are FIVE ads between EVERY sentence of the post…well, I just give up on trying to find the post amid the sea of advertisements.

The winner is a gem of a writer, with so many excellent posts and observations that I couldn’t possibly highlight all of them. If she ever writes a book I’ll be the first one in line to buy it, and the first one in line to meet her and have it autographed. Mucho Kudos to Ms. YG&B!

New Rule on Home Blogging & Zillow

There’s a lot of talk going on about the new mls rules regarding blogging about homes for sale. The same new rule can prevent agents from posting their listings on Zillow, or any site that has Zillow or another “AVM” feature as a complement to the information available on the same site as the home listing. Basically sellers will now opt in or opt out of these categories separately, when they list their home for sale with an mls member.

Below are links to conversations already happening regarding the new rule that will shortly go into effect.  No one has answered my one question yet in any of these conversations. Does the “new” rule pre-empt the old rule 190? In other words, if a seller clicks “yes” to allow his home to be blogged about, does that “yes” apply to ALL bloggers OR only the listing agent. If I see in the mls a “yes” as to blogging allowed by the seller…do I still need the listing agent’s permission per rule 190, in addition to the seller’s permission?

Seems to me the rule should have more options like “yes MY agent CAN, but no other agents cannot”.

None of these changes impact me or the way I currently blog, but given there is so much being said on the topic, a simple re-direct to these online discussions via the links below, should give you the complete picture. My guess is large brokerages will choose FOR their sellers by company policy, and the actual seller making the opt in and opt out decision will not really come to pass. So much ado about nothing.

Zillow and the SeattlePI Partner-up for Property Searches

Zillow and SeattlePI business partnership

As is being widely announced in the news this morning, Zillow.com and the SeattlePI.com websites have partnered to offer co-branded website property searches. Ironically as of 8am you can find this story on Reuters, Inman News, and of course Twitter and Facebook. But Ironically it is still missing from the Homepage of SeattlePI.com.

The website will also offer Zillow’s other features such as home values, “just sold” data, local market data, etc.  As well as their custom real estate community content via Zillow Advice and mortgage rates from their Mortgage Marketplace function.

This raises some interesting issues for other companies, organizations, brokerages, and agents who  have property search functionality built into their blogs and websites in order to drive traffic to their sites, and ultimately derive business from it. Rain City Guide is a great example of a website that has recently added property search functionality through M Realty in hopes of garnering more viewers, and potentially a revenue stream as well. Many agents, including myself, have spent years developing websites that we use to attract potential buyers and sellers. Is Zillow now officially our competition?

Strategically this makes a lot of sense for both companies as the SeattlePI is struggling to re-create it’s business model after shutting down it’s printed newspaper version in March. And Zillow has recently been monetizing their searches through selling advertising to agent’s by zip codes.

I wonder what RCG’s readers and contributers think of this turn of events. It’s definately a “game changer”. The question is, what’s the new game going be like, and who’s going to get to play?

Zillow Blog:Tim Geithner says Rent vs. Sell

Very interesting article on the Zillow Blog about Tim Geithner’s home shown above.

I disagree with Whitney’s comment: “Treasury Secretary Tim Geithner claims to see signs of economic improvement for the nation, but the same does not appear to be true for his personal pocket book.”

Whitney, if Geithner thought the market was NOT currently improving and did NOT believe in the upward tend, he would be selling it now vs. renting it.  By taking it off the market and renting it, he is confirming his belief that he sees “signs of economic improvement”, not the other way around.

Zillow widens gap on Trulia, traffic soars to 7.5 million visitors

Thanks to John Cook at TechFlash for the article (and picture)zillow-month.  I overheard Rich Barton talking to some friends a couple weeks ago at a TechFlash Launch Party talking about the record number of hits they were receiving.

I guess using Zillow today, was like watching the NASDAQ 8 years ago.