46 thoughts on “Corporate Personalities on Display at the MIT Forum…”

1. I thought Niki was the bright spot of the evening. Very sharp dude. Excellent presenter. I was impressed.

   I thought Redfin’s presentation was terrible. He should have brought Marcus with him the way that Rascoff brought Stephenson.

   Major gaffs for me were when David said”

   “When the buyer is worried about getting the property we recommend that the 2% savings be stacked on top of the asking price turning a $700,000 full price offer into an offer of $714,000” I almost fell out of my chair! Where’s the escalator claue so that if the highest offer was $680,000, or if he was the ONLY offer, the buyer wouldn’t pay a penny more than needed? Offer $714,000 against a $700,000 asking price? What a waste of money.

   Also, when he said they call the listing agent to ask what the listing agent wants. Buyer offer says 45 days but listing agent wants 30 days. Buyer offers X but listing agent says seller won’t take less than X. Is Redfin really taking dictation from the listing agent when they review the offer for the buyer? I sure hope they call me one day. I’ll tell them what to put in there LOL

   Clearly David needed someone with real estate knowledge up there with him. The rest of the Redfin gaffs were predictable and not worth mentioning.

   In his defense, he was definitely the guy on the hotseat in that room.

   Niki tripped on the issue of women planning for and seeking out the next home while the poor slob husband hasn’t a clue they might be moving. I thought it was funny and likely came from a personal experience of his own. But then I thought the guy walked on water, so even though you all know how I feel about bottom feeder sites…I gave him an A plus.

   We learned nothing new about Zillow, and I was very disappointed that they just spouted the same statistics from before they unveiled, which are obviously incorrect. Then he said improving accuracy was priority 1, 2 and 3…so I guess they do know what we all know, even if they are pretending otherwise.

   I’m glad I went and had a great conversation with the guy next to me.

   Thanks Robert for telling us about it. Were you there? I thought I saw your redhead floating by…were you wearing a white shirt?

   Enjoyed meeting Russ. We interacted in person the same as we do here…blog emulates life. And of course, enjoyed meeting Chuck and seeing Dustin. For those who haven’t met Dustin, you should. His auora is amazing!

2. I liked how Zillow stated there variance in Home Appraisals, I actually thought it was a good start. Anyone have any idea what the variance is for Real Estate Agents?

3. Michael,

   No idea on the variance in home valuation by real estate agents, but I’m sure that this would be quite high, especially since agents often list a home at a number that is not necessarily their estimate of the “value” for a variety of reasons.

4. Barbara over at the Open House blog had a nice summary of tonight’s event.

5. In markets where agents perform in a manner consistent with appraisal standards, appreciation is lower. In markets where agents use a standard of the highest price they think they can achieve, appreciation skyrockets.

   When an agent knows they can obtain a price for the seller higher than an appraisal will support, we also take on the responsibility to assist the seller in selecting the offer that can close. A smart agent is never surprised by the fact that the property doesn’t appraise and has a “plan B” ready for that event.

   I submitted an offer for a buyer last weekend in that exact scenario. The listing agent and I both knew that the appraisal was going to be “an issue”. The listing agent counseled the seller to take the buyer who had 30% down vs. the zero down buyer, as she should.

   It is the seller’s agent’s job to assist the seller in accepting the highest offer that CAN close, not just the highest offer. Appraisers use hindsight and what “has been” to detrmine value, with some modest flexibility. Agents need to focus on what “can be”.

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7. Dustin, nice overview of the event. I too wished that Zillow was more forthcoming their plans. While they are sticking to the script of merely being a media play,I find it hard to believe that their ambitions are solely confined to selling banner ads. However, I cant fault them not wanting to make their business plan public.

   Spencers body language and calm demeanor during Davids and Nikeshs musings suggested to me that Zillow perceives themselves to be in an entirely different league than Redfin and HouseValues. I would concur.

   Many successful VCs strongly believe that when investing in new ventures it is better to bet on A teams with B ideas verses the other way around. Zillow has an A team and their first innovation was clearly an A idea. I suspect that their media play strategy will eventually evolve or transform itself into being the largest discount brokerage in the country. Media companies make money based on eye balls, and if you have the eye balls there are a lot of ways to monetize them in the online world. We will all have to wait and see how big is Zillows appetite.

8. It was a good event although I agree that there was nothing earth-shattering that came out of it. Couple of comments;

   I agree that Niki did a bit too much promoting and Jim did a good job of cutting him off at times.

   I chuckled when Jim stated that Sellers would be upset if they knew that some of “their” money was being given back to the buyers who used the Redfin model. He went on to say that Sellers really want to make sure the Buyer’s agent is well compensated so that they provide good representation to the Buyer. This is counter to my own personal experience as a 3 time home seller and seemed a bit defensive to Redfin’s new model.

   There was some “interesting” questions, especially the one from the guy who asked if Zillow’s analytics took into account mold. Hmmmm

9. I was also at the event last night and I am not in the real estate industry. I have two questions triggered from the talk and this blog; neither of which are intended to be derogatory.

   1. In regards to Redfin, you ponder the question: “What if a listing agent refuses to show one of your buyers a property?” Shouldn’t your listing agent show your home to ALL interested parties? I would think the primary role of a listing agent was to sell my home. If they were refusing some potential buyers, how would that be helping me?

   2. Someone in the discussion panel last night stated that technology and the internet had cut the average broker/client transaction time down from 8 weeks to 2 weeks. Shouldn’t these efficiencies be passed along to the consumer in the form of reduced commissions? I find it hard to swallow a commission structure that has no correlation to actual work performed.

   Again, I mean no disrespect to agents, I had an excellent experience with mine when I sold my home. However, the discussion last night got me thinking that the current model is broken and needs change.

10. Jason,

    You bring up some really good points. In terms of showing a property, most listing agents consider themselves a buyer’s agent the second they start showing a property to a potential buyer. Sure they have a duty to show off their listing to anyone interested, but my experience is that many agents REALLY appreciate that they can often get a buyer or two out of each of their listings.

    In terms of efficiencies not being passed onto the consumer, I would totally agree with you. Based on a bunch of issues (many of them raised in the comments of this post), I’m not sure that anyone has developed the right business model that best serves buyers in sellers in most scenarios.

11. Dustin, nice to meet you last night and enjoyed your summary here, as well as the comments. Although the “elder broker” reference? Maybe I deserve that because I’ve been doing real estate for nearly half my life, and not because of my only slightly graying hairline.

    I thought the forum was interesting and I enjoyed being a part of it. Despite a long tenure in this business, I like to think that what we do as agents and brokers at Real Property Associates is progressive, and not “old school.” There were some old school graduates in that audience last night, gasping at Dave’s comments, and applauding Jim’s funny remark about “maybe commissions should change…I’m going to increase my asking price to 7 or 8%!”

    My remarks last night about commission structure were brief, but with regards to the “buyer spends less time with agent” (2 weeks for the internet buyer, 8 weeks for the “conventional” buyer) stat that I quoted from the CA/NAR study — it is true that in many cases today, we’re spending less time to conclude a sale with a buyer than we were even three years ago. That, coupled with the increase in commissions, in real dollars terms (due to the increase in house values) seems to me to be a violation of a basic economic rule — that in a competitive market, services are provided at marginal cost basis so that we earn enough to cover costs, and earn a fair profit.

    So yes, to some extent – as Jason noted above — the “commission structure … has no correlation to actual work performed.” I would note that sometimes we’re underpaid (as when we work for months with a buyer, missing out in multiple offer situations, only to have the buyer lose interest or buy from another agent or FSBO), and sometimes we’re overpaid (client calls, haven’t talked to him for two years, he’s sitting in front of the View Ridge house he wants to buyer for $700k and we make our $21,000 fee). On the whole, on the buy side, I think it evens out…although there is a question of equity when the successful sale has to subsidize the costs of the failed sale.

    Redfin, the “mls only” brokers, and even the conventional brokers are clearly thinking through this carefully.

    More to come, I’m sure.

12. Gordon,

    Thanks for your comments. The “elder” part was a mistake on my part… You definitely didn’t come off as “old” by any means… In my first draft, I think I wrote elder statesman, and somewhere along the line I meant to say experienced!!! It’s been changed!

    Best!

13. Ardell
    I was working with my client (a buyer) until 9:30PM last night and missed the MIT forum dinner — for which I had already paid. Bummer.

    Hmm…let’s compare that to Redfin’s hours which are 10AM – 6PM (they don’t indicate a time zone though they are here in Pacific Time zone). They may be the right fit for many buyers but don’t think the full-service agent is going to disappear anytime soon.

    Good to see everyone’s comments

14. This was a great event, more so for the people there than the actual presenters. It was great to see the company’s subtly poking at each other.

    Gordon played off the traditional broker well. I think now that he is involved with the Zillow guys, that he has a better understanding of the tech side than he lets on.

    I laughed a few times at Nikesh’s HouseValues speech. It was such a sales speech and failed to address many of the questions asked, instead constantly referring to “local area experts”.

    Overall it was a really interesting presentation, I liked Spencer’s poker face.

15. Disclosure: I’m not in the biz, I don’t work for any of the companies that spoke, and I sold my last two homes FSBO using just a real-estate attorney and paid a 1% commission to the buyer’s agent each time. If you’re still reading, here’s my 2 cents worth…

    In the travel industry, the real winner was the consumer. The consumer won two ways. First the information asymmetry (the heart of any economic engine) was severely leveled. For example, offline travel agents can no longer get away with pushing American Airline flights all day to meet override levels (kickbacks) when lower priced flights exist on other airlines. Travel agents used to profit from people’s ignorance about travel pricing, but pricing transparency made the market competitive (efficient) and price dropped. The second way consumers benefited was that technology drove down the price of fulfilling and supporting a travel purchase by an order of magnitude ($70+ off the top of a pre-internet ticket).

    The real-estate industry is facing the same two facts:
    – A rapidly declining information asymmetry
    – Technology enabled efficiencies that will get passed on to the consumer eventually

    Spencer was right in that most travel agents were order takers. Are there less order takers overall? Not really, the jobs migrated to the call centers of Expedia, Orbitz, and the suppliers.

    Real-estate agents have two sustainable competitive advantages as far as I can see and they should start figuring out how to work with the new world rather than fight it. Those advantages are that they are local and that these are still negotiated transactions.

    Who cares if the z-estimates are wrong: two things are going to happen – they are going to improve and they are going to be close enough, often enough to create a fire hose of demand that will change the game. People will not stop looking because it cost nothing to look.

    Guys, come on – I can’t think of any business where the whole industry believes it is entitled to a flat 6% of such a large and significant transaction. On a $1.5M home that is a 90K service fee! I know incredibly smart people with masters degrees in technology that do not make that much money for a whole year’s worth of hard work. If the industry can’t see that consumers are about to be empowered (see http://www.fsbomadison.com/) then it’s in for a rough ride. People just are not going to continue to subsidize the profitless sales.

16. Excellent comment Charles. I agree on all points. Especially that last sentence. I have never perceived that one buyer should pay more because another pays less. I find it hard to believe that anyone thinks that rationale is palatable.

17. It may not be palatable, Ardell, but as you know, that inequity is the reality of our business right now. And on the buy side of the transaction, it’s not clear to the buyer that they are subsidizing anything when we make our full 3% fee.

    There are ways to change this inequity– the most obvious being to lock a buyer into a buyer’s agency contract, to ensure that when they buy, their agent gets paid. Would love to hear your position, and whether you obligate your clients to sign them.

18. First, Gordon, I would like to say that I was surprisingly impressed by your presentation at the Forum. I did not mention this in my initial comments, as I compared your comments more to the moderator, than the Big Three represented. I thought Zillow was very smart to have brought you, and thought Redfin should have brought Marcus in a like manner. I did not view you as a Zillow person on the panel, but rather as a means, and a very effective means, for the Zillow representative to avoid being tripped up on real estate issues, as Redfin was.

    Regarding your comment: “it is not clear to the buyer that they are subsidizing anything when we make our full 3% fee”. I am actively working on a business model that provides some sense of fairness in that regard. When speaking with agents, they have a reluctance to discount a buyer agent fee if the client doesn’t “ask” for that to be done. I personally offer the discount when warranted, and it is often most warranted when the client didn’t “ask”, rather than when the client “did” ask.

    When I worked in Manhattan Beach, CA, I met an agent who handled the “subsidizing” issue, by clearly identifying that his services were not available under a sale price of $450,000. He set his minimum fee by defining his services in that manner, and did not waiver from his policy. While that may seem “harsh”, every agent defines their service area, albeit usually in a geographic vs. monetary manner. While I have not done that, I am keeping the idea in my “toolbox” for future reference 🙂

    As to your question regarding buyer agency contracts, I have been actively involved in discussions regarding buyer agency contracts since they first appeared on the scene. There is a Buyer Agent Attorney in the Bay Area by the name of Leo Rodriguez, with whom I have in past years disected this issue ad nauseum, along with Tom Early the current President of NAEBA and Tom Hathaway, the owner of The Buyer Agent franchise and others on both sides of the fence.

    While I was one of the first agents to use a Buyer Agency Agreement, I have only used them when it was clearly in the buyer client’s best interest for me to do so. I continue to operate on that basis, meaning I use them rarely. Maybe 5 times since they first appeared into my then sub-agency world back in hmmmm 1993 or so. In my experience the minute a buyer is willing to sign one we have a “meeting of the minds” and so I don’t need one. I need them to clarify agency relationships when dealing with an unrepresented seller, and a few other instances, but not as a means of “getting paid” and I object to them as a “means of getting paid”.

    The yo-yo of NAR wanting to be a self governing body, and yet wanting the Courts to support the duplication of buyer agent fees in two separate contracts, has backfired on them. Case history to date, to the best of my knowledge, is that the Courts say “Don’t come crying to us when the PC panel does not award you the “co-op”, making the buyer agent agreement less than satisfactory as a means of getting paid. When CAR (CA)was not able to pass the “contract is a contract” legislation at the 11th hour due to interference from NAR (1999?), we started seeing a stronger placement of the Buyer Agency Contract in PC guidelines as an appeasement.

    My “seller’s are dogs and buyers are cats” theory is somewhere here in this blog, and has been my position since 1998. Agents do not “get it” or agree with me, but consumers do. In fact buyer client’s have indicated that my representation of them as cats makes them feel better about their natural tendencies in that regard.

    Having trained and mentored many new agents over the years, I tell them that the best way to insure that you will be paid is to be very, very good at what you do. You should not use a buyer agency agreement to lock people in to using you to compensate for your inadequacies.

    “Withdrawal” of the co-op in exchange for the fee in the buyer agency contract is a misnomer and an ineffective means to secure payment, and this fact has been proven by the best EBAs in the country. They continue to be angry with that fact. I not only do not see that changing in the near future in the Seattle Area, I do not support that change.

    “It takes a village” to educate and prepare a buyer. It is our duty to the industry, and to the consumer, to sometimes be a step in the right direction for the buyer consumer on their journey. It is part of our “giving back” and support of the “public interest” to let the “cats” roam and feed them a bit on their journey, without requiring that they “stay on a leash in our yard”.

19. A podcast of the event is available on the MIT Enterprise Forum web site. 60 minutes, 10 mb, MP3 format.

    http://www.mitwa.org/about/index.cfm?fuseaction=rssinfo

20. Denis, thanks for the heads-up!

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