Category Archives: Investing

Even more on-line real estate tools in the works…

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trampolineJohn Cook’s Venture Blog had an update to the Zillow story… and this time it has to do with the relationship between Zillow’s founder (Rich Barton) and the man (Barry Diller) who bought his company, Expedia, who just happens to be developing a new real estate brokerage that will begin operations in the Pacific Northwest.

My guess is that Barry Diller wouldn’t be venturing into the real estate brokerage business unless he felt he could use his Internet empire to create something of unique value. (Otherwise, if he really wanted to own a traditional real estate company, he could just buy one of the many local firms!) My guess is that he (and the people at realestate.com that work for him) are developing a home search tool that they feel would really benefit consumers. From what I’ve read of Zillow, they are definitely building some type of system that will simplify (or at least improve) the home buying/selling experience. My guess is that Barry Diller up to something similar?

On a side note, I really like Tom Dozier’s insight that we are quite possibly seeing a bubble of local real estate sites! With each passing day, I feel more confident that the real estate search landscape will look completely different one year from now… With the only people guaranteed to win in this situation being the home buying/selling public!

Also of interest, I received an email today from someone of the big real estate firms here in the Northwest where the writer let me know that they have already developed a home search site based on one of the on-line mapping services, and that they will likely be rolling the site out in the near future. This confirms my suspicions that sites like MLSMapsOnline and ShackPrices will really have to develop some major innovations (and this doesn’t just mean more or less pull down menus!) or they can expect to be quickly forgotten. From what I’ve seen so far, any major player (Microsoft, Windermere, RealEstate.com, etc) could build a comparable site for less than $50,000, and while $50K might mean something to these start-ups, it is almost inconsequential to the larger firms.

More real estate mapping: MLS Maps Online

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South Lake UnionThanks to a tip from a reader, I found out about a new home search site (MLS search) that is worth highlighting:
http://www.mlsmapsonline.com

The site uses Microsoft’s Virtual Earth technology to plot MLS listings. The idea is great, but the implementation is definitely lacking some key features. For starters, if you are a Firefox user (like me), you’ll be presented with this message when entering the site:

“We’re sorry. MLSMapsOnline.com is an IE only application. Please download the latest version of Internet Explorer to continue to this website.”

What a bummer! I’m surprised that people still write programs that only work with IE. Under most circumstances, I just ignore sites that don’t support Firefox, but in this case, my curiosity for new map-related MLS searching was greater than my dislike of IE. By the way, don’t even bother to try to view this site with a Mac, I had to use my work computer (as oppose to my home computer) just to test-drive the site!. Now that I’ve acknowledged this major drawback, I’ll move on with my review…

Some things I like:

  • The mixing of flash technology and Microsoft’s mapping technology makes for some really smooth visual searching. It is extremely intuitive to navigate the site. The future of home search is definitely visual, and this site is getting us one step closer.
  • The ability to search by “Listed Date“. The rest of the search controls will be pretty familiar to anyone who has used an MLS search.
  • The ability to log-in and save search results is nice, especially since they do not require it to use the site.

Some things I dislike:

  • It is worth repeating that an IE-only tool is really pathetic, especially when it doesn’t even work on the IE version for a mac!
  • The site design really encourages the user to define a city and/or county to search, when the best way to get to an interesting area would be to zoom in on that city. In other words, if I’m searching for homes in north Seattle, why limit me to the city limits. If I scroll north of Seattle, I want to see the homes that are for sale in Shoreline.
  • The search options are pretty minimal. A user should have access to more advanced search options.

At this point in time, it is one of the better home search options for people in the State of Washington (assuming you’re working on a PC and willing to use IE). However, I happen to know that there are a few more MLS search sites that will come on-line soon that will be using similar technology, but won’t have as many of the limitations. The layout they’ve created is not all that different from the standard MLS search and would be pretty easy to duplicate, which leaves me still waiting for a break-out search site.

It’s worth repeating that I’m definitely interested in hearing about more of these technologies. (I find this topic much more interesting than bubble talk 🙂 ) If you know of another interesting home search site available for Seattle residents, I’d love to hear about it!

UPDATE:
1) MLSMapsOnline went live with a version that works well with Firefox! (that was a really fast update!)
2) The VP of Technology for Windemere emailed me to let me know that Windemere also offers a map for viewing homes for sale via their PropertyPoint software. I’ve played around with their mapping software before and it definitely impressed me a year or two ago when it came out. However, I’m pretty sure they are using an ESRI ArcServer backend and that technology seems dated. I definitely think that the future is in running a backend using Google Maps, Yahoo Maps or Microsoft’s Virtual Earth. Besides being extremely expensive to run, ESRI server-side software is way too difficult to implement for there to be much innovation using this software. Leave it to the big companies (like Windemere) and governments (like MTC) to run ESRI software, while the rest of us take advantage of the mapping wars that the big internet companies are waging!

Shack Prices

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Picture of Homes on RiverShack Prices (which I mentioned a few days ago in the comments section of this post) just went live. Their site gives the sale price of King County homes (including Seattle!). Their reason to be:

Shack Prices was created with the hope of giving people as much information about home values as possible. We realized that there were many websites that show you prices of homes on the market (i.e. homes that haven’t yet sold) and some websites that would sell you information about comparable houses nearby, but no sites that let you pick the comparables and the area. The difference between Shack Prices and realtor web sites is that Shack Prices shows the actual price that each house sold for versus the price that someone hopes their house is worth. You can use it to virtually appraise your home or a neighborhood. We hope it helps you as buyer or seller.

In playing around a little, the site seemed pretty darn intuitive. If you are interested in getting a rough idea of how much your home would be worth on the open market, just insert your bedrooms, bathrooms and square feet. If there is not a lot of data in your area, extend the time-frame out a year, instead of the default three months.

If I had to give a critique of the site, it is that they borrowed a little too heavily from the typical home search websites instead of re-thinking how an “appraisal” site might work. For example, if I’m going to appraise my home, I know precisely how many bedrooms and bathrooms are in the home. Why do they have the option for a range? Also, my experience in estimating a home’s value is that some other data fields within the County’s home sales database (like the home’s style code) is much better than the number of bedrooms at indicating the estimated value of a home. The number of bathrooms plays a minor role at best, so I wouldn’t have even bothered with that field. Granted, some of my suggestions might take some user training if they are used to the more traditional home search, but it would be a more valuable tool.

With that said, if you are living in King County and interested in an estimated value of your home, Shack Prices is a great place to start. However, if you want something a little more robust just ask any real estate agent. ANY agent looking for more business will prepare a “Comparative Market Analysis” for free and the agent will likely be more experienced at weeding through the appropriate data fields to develop a better estimate of your home’s value.

Congratulations to Galen for making this happen and check out Seattle Real Estate Talk’s post on Shack Prices…

more on real estate search technologies

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[photopress:Ballard_RR_Bridge.JPG,thumb,alignright]In researching the options for different real estate search tools, I came across an interesting site called NeighborhoodScout. The idea behind the site is that it would help people moving to a new area find an appropriate neighborhood. I think that the idea is great, but my brief investigation came across some serious flaws in their implementation. For starters, I couldn’t get their algorithms to recommend a neighborhood in Seattle despite my effort to tweak my entries to things I thought would cause their algorithms to recommend Seattle. Instead the site kept recommending Bothell, which is a nice place to live, but not the neighborhoods I was looking for… Another major flaw is their pricing mechanism. The $20 fee to use the interesting parts of their tool seems like a major momentum killer for any website. As I alluded to yesterday, data wants to be free!

I have found a few other neighborhood sites, but they tend to be pretty focused on a local market. For example, Sustainable Seattle has an excellent site that maps demographic and environmental data for Seattle neighborhoods, but my current interest is in sites that have attempted to analyze real estate demographics on a neighborhood level based on national data.

Does anyone have any experience with NeighborhoodScout? Do you know of another neighborhood finders? I’d be very interested to hear about it!

One good faith estimate isn’t good enough…

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[photopress:Cats.JPG,thumb,alignright]In reading Elizabeth Rhodes response to an interest-only loan question, I realized that it has been a while since I talked about my uncomfort with interest only mortgages… I think way too many people are using them as a last resort to get into a house. When interest rates start rising, a lot of people could find out that they have bitten off more than they can chew.

The particular question Elizabeth was answering was in regards to whether or not someone should stick with a mortgage broker that made them feel uncomfortable… She gave an appropriate response (concluding that the client should walk away from this broker) but missed out on giving some truly useful advice that could really minimize this issue. What she could have said: “Get more than one quote!” or “You’re making a mistake by using only one broker anyway.”

In practical terms, “getting more than one quote” means getting at least two good faith estimates. At a minimum, you should get an estimate from at least one on-line banks and one local broker. If I ever create my own set of top 10 rules for a home buyer, getting two good faith estimates would be at the very top. No one has to tell you that you’re making a huge investment when you buy your home. By making loan brokers compete, it is entirely possible to get a much lower rate. Even saving just two-tenths of a percent on your loan can add up to thousands of dollars in the long run.

If you want some more detail, I wrote a bunch more on getting a home loan last March that stills seems relevant.

Flipping Responsibly

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lambsThe Las Vegas Review Journal reports that some flippers (people who buy and then quickly sell a property with the goal of making a large profit) have filed a class-action lawsuit against a home builder (Pulte) because they’ve lost money!

The crux of the story is that Pulte lowered the price on many of their homes across Las Vegas a few weeks after the flippers purchased homes from Pulte. The result is that the resale value of the homes the flippers had purchased dropped considerably.

Jason Beaver of San Francisco followed some untimely advice from a friend who’d made a hefty profit flipping homes in Las Vegas.

He paid $350,000 for a three-bedroom, 1,500-square-foot new home in the Solera subdivision of Anthem last September, just weeks before the builder, Bloomfield Hills, Mich.-based Pulte Homes, lowered prices in several communities across Las Vegas Valley.

It’s ridiculous of the people to sue Pulte or any of the other home builders. These people bought homes in a highly speculative market. They obviously didn’t do their research to find out a glut of homes were on the market and so they lost a lot of money. It is really hard for me to feel sorry for them.

Via The Housing Bubble 2 (which is currently the most active real estate blog for people anticipating a large correction in housing prices at some point in the future.)

Fannie Mae Sees Mortgage Risks

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sasha flying in yosemiteIf you are interested in more blogs with a real estate focus, BusinessWeek has put together a new blog called Hot Property. The concept is great, and so far, the articles have been quite informative.

Today, they had an interesting article describing a Fannie Mae’s analysis of how many individuals could be hit hard when “adjustable-rate mortgages do what they were born to do–i.e., adjust.”

When taken to the extreme in the form of interest-only loans, adjustable-rate mortgages seem downright dangerous for the novice investor. As I’ve said in the past, I’d be very careful and do my research before getting an interest-only loan…

Preapproval financing letter may not be worth much

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homelessThe Seattle Times ran an interesting article on how on-line preapproval letters. It should serve as a warning to sellers to make sure that you are getting a pre-approval letter that is actually worth the paper it is printed on.

The agents said 39 percent of preapprovals issued by Internet-based lenders are faulty or invalid. Nearly 30 percent of mortgage broker-issued preapprovals are in the same category, along with one out of every five preapprovals from national lenders.”
A faulty preapproval letter may say something to the effect that “We have preapproved Mr. and Mrs. Flanagan for a 30-year fixed-rate mortgage at 5.5 percent in an amount not to exceed $500,000.” That allows the Flanagans to look at — and bid on — homes without anybody seeing proof of their actual qualifications.

But what happens when the lender simply relies on Mr. and Mrs. Flanagan’s statements about their income, assets and credit, and issues a preapproval without verifying the information?

“That’s where you can get into deep trouble,” says John Marcell Jr., a real-estate broker who is the incoming president of the California Association of Mortgage Brokers. He runs Compass Realty and Better Mortgage Brokers, both based in Upland, Calif.

Marcell’s loan brokerage does not issue preapprovals for buyers whose credit files, assets and income have not been verified, and his realty firm won’t accept preapproval letters if the information has not been confirmed by the lender or broker issuing the letter.

“In those cases [functioning as Realtor] we go to the [mortgage] broker and say, ‘Look, we’ve got to see the credit reports. We’ve got to see the W-2s. We’ve got to see the bank statements.’ ”

Compass Realty also warns the seller on homes it lists whenever preapprovals look dubious.

mortgage update…

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Turtle on RockMortgage rates are still quite competitive:

Mortgage rates fell across the board over the past week, mortgage finance firm Freddie Mac said Thursday, suggesting the housing market still has room to grow.

The rate on 30-year, fixed-rate loans averaged 5.57 percent for the week ending Thursday, with an average 0.6 point payable upfront, down from the prior week’s average of 5.63 percent, according to the mortgage finance firm’s survey.

I guarantee you’re going to get this mortgage, I think.

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donna's homeWhy does the mortgage business seem so insane and unreliable?

Well, there are a couple of reasons. One reason is there are a tremendous number of loan officers who have no experience but who are pretending they do. As loan officers, our job is to make your loan work. When we look at a loan application, we examine all possible reasons we can find that could be a problem. These are things like properties under construction, borrowers who are out of work, too much debt, not enough income, complex income situations, low credit scores, title problems, and much more. Loan officers with lots of experience have seen so many different situations with such complex problems they know how to evaluate a new loan and spot potential problems. Where we run into trouble is with the underwriters. These folks work for the lenders and they review all of the information sent to them from the loan officer. They have guidelines and matrices which tell them what’s acceptable and what’s not. Underwriters will ask, or what we call “condition