The Impact of Cooperation

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Most of you have (or should have) read the recent article by STEPHEN J. DUBNER and STEVEN D. LEVITT (Freakonomics) in the NY Times. As may be expected, there were plenty comments on the Freakonomics Blog. As I was reading the comments, one struck me. It was from a very sincere sounding broker who, in defending the broker’s role in the transaction, said:

“As an agent on the buyer side or the seller side, I have a fiduciary responsibility to prosecute the interests and goals of my clients……If you want to succeed in this business, become a fierce advocate for your clients, give them all the data they can handle, use your sales, negotiating, and analysis skills to their advantage.”

I pondered this a bit as it sounded like a legitimate strategy for success. I then recalled an article on Inman the other day about a company called RealtyLegacy. The company promotes a program where it will connect buyers and sellers with agents from other companies and those agents will agree to rebate a portion of their commission to their client after closing. The story was interesting from several angles but it surprised me that one such agent did not want to disclose her name because of fear of reprisal to her and to her clients (i.e. other agents would not show her listings if they knew she was discounting).

I then thought back to the NY Times story and the analogy of the real estate brokerage world to stock brokers and travel agents and the author’s forecast of the impending doom to the industry. The real estate brokerage industry has a major advantage that the stock traders and travel agents did not have. To buy a stock for a client or to purchase an airline ticket, there is no need to cooperate with another stock broker or travel agent. Those brokers deal with the principal to put the deal together. In real estate, cooperation is at the heart of the industry (some (the DOJ?) would say that this cooperation has artificially upheld commission rates and traditional business models).

I then remembered the above quote from the broker. He believes that diligent representation of his buyer will preserve his relevance. What happens, however, when he comes to a home that he knows his buyer client will love and he looks at the SOC (selling office commission) in the MLS and sees 1%. If I understand the theory, do what is best for your client and you will have value. It is without argument that this buyer client will value this “perfect” home over and above the amount of commission that the broker will receive? However, it is commonly understood in the industry that if a seller wants their home shown, they will pay the “going rate.” They are told that if they don’t, other agents will not show it. If this was not an issue, why did the RealtyLegacy agent have to hide her identity? Why was she so scared to let people know that she was discounting? If buyer agents in fact act this way, what does this have to do with “prosecuting the interests and goals of the client.” Why should a buyer get short-changed on seeing available inventory when the seller has refused to pay the standard SOC?

It then hit me like a brick upside the head: A major strength of the real estate brokerage industry is at its core a major weakness.

The Zillow Conspiracy

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Zillow seems to inspire one of three questions in people:

  1. How did Zillow do such a good job zestimating the value of my home?
  2. How did Zillow do such a bad job zestimating the value of my home?
  3. Did they really hire people to digitize that many public records?

The answer to these questions:

  1. They hired some darn smart people
  2. Apparently not smart enough
  3. A smell a conspiracy!

To understand how Zillow could possible get their hands on that many government records, it is important to understand that they must have had someone on the inside. I’ve suspected for a while that they had someone on the inside at one of the lesser government agencies, like the Department of Housing and Urban Development, but today I found proof that they have an insider at an even higher level of the government: The Treasury Department.

It seems that they’ve worked some type of advertising deal with the Treasury Department, and I’ve searched the web, but I think I’m going to be the one to break this story.

Zillow is now advertising on the one-dollar bill!

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Talk about prime real estate! Not even Microsoft has that kind of reach!

On a more serious note, if you were the Zillow employee who defaced the dollar bill and then used it to buy a lunch at Planet Java, you are welcome to contact me to reclaim the evidence of illegal activity (no questions asked!) before it falls into the wrong hands.

10 Things You Should Know Before Moving to Seattle

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Where do you find inspiration?

Out of all the places to find inspiration for a blog post, my current favorite is deep within the RCG stats where I can find the search terms that people use to reach this site. Today, someone came to RCG looking for: [things+you+should+know+before+moving+to+Seattle], and while we likely disappointed that particular visitor, I would like to make amends by offering up this list of ten things you should know before moving to Seattle:

rain in Seattle1) It rains.

2) No really, it rains a lot here. Despite what they say about it raining more in Atlanta, Boston, or D.C., the rain in Seattle can be like a slow trickle that never turns off. But the rain is okay… really… because one day… some day… it stops. And on those first few warm, sunny spring days, all of life is good in a way that Californians will never understand (unless they move to Seattle).

3) Seattle isn’t always comfortable being a high-tech town. Sure we design operating systems, sell stuff online, try to appraise every home in America and stream lots of music and movies, but a substantial portion of the population relates much more to the art of building airplanes.

4) Consensus Rules. Just agree with me on this one or I’ll never be able to get to #5.

5) Traffic Rules. People in Seattle talk a lot more about traffic than the weather. Depending on where you are moving from, traffic will either be horrible or a non-issue. Most blue-state people will laugh at Seattle traffic because you can normally get between any two points in the City in under a half-hour at all times of the day. Red-state people see the parking lot known as SR 520 and wonder why we haven’t build another bridge yet (see #4 for a hint at the answer).

6) Seattle is not that big. We have all the stuff associated with life in a major city: Theaters, traffic, ballets, sports teams, traffic, skyscrapers, music, etc., but you really don’t have to travel far to feel like you are in rural America.

7) Seattle is closer to Asia than Mexico. If one of the staples of your diet consists of cheap and tasty Mexican food, then you will eventually replace that staple with Pho. The sooner you accept this (and the sooner you stop saying “The Mexican food is so much better in California”), the sooner Seattleites will let you know about the good Asian restaurants. (And by the way, since we’re talking about good food, I feel obliged to mention that the Mexican food I remember growing up with in California was so much better than anything you can find in Seattle…)

8) The intersection of NE 50th St and 40th Ave NE is about a mile away from 50th Ave NE and NE 40th St. In the Seattle area, all the street names are numbered and given one of nine directions (NW, N, NE, SW, S, SE, E, W or blank). The numbers begin at 1 in downtown Seattle and radiate out wards. The directions also radiate out, but are city specific, unless, of course, they aren’t… Like at the intersection of 244th St SW, 100th Ave W, N 205th St and 8th Ave NW. There is logic to the entire street system and if you live here long enough, you will understand. Until then, you will be confused and miss appointments, meetings, birthdays, etc.. On a related real estate note, if you are new to Seattle, do not attempt to search for a home without a real estate agent. The street system was designed by a committee of real estate agents who wanted to ensure that you need their help to locate a home. 😉 Also on a related note, Redfin has proposed new street names (featuring real names) for all streets in a effort to ensure the viability of their business model, but at this point, they are still very far from getting consensus on their proposed naming convention.

9) Paul Allen.

10) Despite what you might have read in Wired, Fremont is the Center of the Universe.

Have I covered everything?

"Flip This House" is looking for YOU

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I received an email today from the casting firm of A&E’s “Flip This House” requesting my assistance in locating persons who have flipped at least ten properties in a year. I know a few people who might be qualified and interested.

I haven’t seen the show. I expect that each week there may be a different host from a different area.

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I doubt that it is a “Seattle Area” only request, so if anyone knows of anyone who has done at least 10 flips in 2005, or 10 a year for a few years, shoot me an email.

Thanks. Have no clue what “tag” to put on this one!

ShackPrices is Filling in the Blank…

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The ShackPrices’ blog (run by RCG contributor Galen) just announced some slick new features for their site:

  • Permalinks. Makes it possible to email/link to specific results
  • Address Search. Easier to zoom into a specific property
  • Condo Information. Not just homes anymore…

So what is ShackPrices? ShackPrices is a King County specific Home Price Evaluation site. Operating in true Web2.0 spirit, these guys have taken King County sold home data and mixed it with Google Maps to create a map-based home valuation tool. By focusing on the Seattle area, locals might find that ShackPrices is a more useful tool than the obvious huge white elephant in the room. It is also worth nothing that others have had online home valuation tools for a while (and we recently released our own!), so it is nice to see that Galen takes stuff in perspective:

So is this the future of real estate search? I sincerely doubt it. I believe that online real estate search is a sliver of what it could be today, let alone what it could be tomorrow. We’re in the “glorified book

Closing Today

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There are a thousand stories in the Naked City….this is just one of them.

I was working on my computer one day when I saw some emails coming from Realtor.com

I stopped what I was doing and opened the emails. The emails were from clients of mine whose son purchased a condo from me several months ago. The emails had no messages, just property. Vacant lots out on the coast in Washington that were really cheap $25,000 to $90,000.

I called the clients and arranged for an agent on the coast to take them out to look at those lots and others. They returned here having found a fabulous lot that backed to a canal, one house from the ocean, with an easement access to the ocean directly across the street. It already had septic, water and electric hooked up.

The owners were a couple who owned it for many years and enjoyed it and needed to sell it because the wife was dying of cancer. To make a long story short, the woman left her hospital bed and her husband drove her two hours and the listing agent drove two hours and they met at midnight under the bridge to sign the offer. The woman felt a huge weight lifitng knowing that her husband would have this money toward her hospital bills. She died before it closed with that peace of mind.

It is closing today and I received this message from the listing agent “Mr (XXX) says he hopes they find as much happiness there as he and his wife had throughout the years…”

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This area was never on the mls, and so not on the internet, until they joined NWMLS this summer. Had the area not joined the mls, my clients would never have seen the lots on Realtor.com and emailed me. A chain of events started and ends today when it closes.

We are in a business of people. Buyer people and Seller people. We do not sell property, we help people buy and sell property. The people are important. Let’s not forget that.

Revolutionize Your Business in Only 3 Days with Blogging!

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Maybe I’m becoming a blog snob, but I’m seeing more and more BAD marketing advice about blogs as they relate to real estate agents. A lot of people simply don’t understand the marketing potential of blogs and rather than giving useful advice, a lot of marketing “gurus” are stepping up to deliver advice designed to keep them in business. A good real estate blog is extremely cheap and costs much more in time than money. If someone is trying to sell you a blogging service that replaces time with money, they are likely trying to sell you a website with blog-like features. If your goal is to increase your presence on the web, then a website with blog-like features will get you about the same benefits of a typical website except you’ll end up with all the formatting restrictions inherent in a blog.

What got me started thinking about bad marketing (at least today) was when I read a comment on my 8 Mistakes article from an internet marketing expert who completely misses the marketing potential of blogs:

Some of the things this blogger wrote about were insightful and probably very appropriate guidelines for creating a typical blog. But on the other hand, there were a couple points that I just couldn’t look past:

* Don’t put your real estate listings on your blog
* Don’t “spam” your own blog with self promotion

Now, I’ve experienced a good deal of success in the real estate marketing business by executing a blog strategy that is not focused on being a “typical blog”. I’m not terribly concerned with creating a forum for discussion about Chicago real estate, nor am I terribly concerned with generating a loyal readership who will return to my site over and over.

If you keep reading his post, you’ll notice that the writer goes on to say that many people want to see homes when they search the internet for real estate information. He is right on that point, which would help explain the current bubble in new home search tools. However, even if people do want to look for homes on the internet, designing a blog around this is missing out on a large slice of potential home buyers who are looking to learn about neighborhoods, find appropriate real estate professionals, and research home-purchase advice.

However, the real kicker is that while there are some great ways to display a home listing on the internet, a blog entry is not one of them. Compared with the stuff you can do with a simple website creation tool like Microsoft Frontpage, let alone more advanced website creation tools, a blog post is down-right ugly. Blog posts are really geared toward text and they simply have limited graphic capabilities (while my blog software is top-notch, I have to dive into HTML code just to change the color or size of the font within the post!)

The author mentions the great success he’s had blogging about home listings. But does this typical listing on his blog come anywhere close to comparing to this beautiful listing that Joe put together? If your aim is to advertise a listing, then a webpage (or an entire website for that matter) is a much better way to accomplish this task than a blog entry!

However, I suspect that the author (who consults as an internet marketing expert) is under the assumption that because the home listing is in a “blog”, there is some type of search engine optimization benefit over a standard website. Not only that, but I’ve heard this logic said enough that I suspect this notion is prevalent in the real estate community (i.e. blogs show up better than websites in search results!). But this is a myth. Search engines do not even try to tell the difference between a blog and a typical website (after all, they both just appear to be a collection of HTML code to a search engine).

The REASON blogs tend to perform better in search engine results than typical webpages is a direct result of the community that has created them. When done right, a community of bloggers share links with each other and not just any links, but deep links associated with quality content. To create a blog without the intention of creating community (or loyal readers for that matter) is to completely misunderstand the marketing potential of blogs.

I also believe the authenticity of the author when he says that he has had success marketing homes through his blog. However, I think the success has a lot more to do with the fact that the author has created a community around providing interesting advice for buyers despite his lack of care for these readers. When I said it was a mistake to put listing information on a blog, this is because there are better ways to display listings than in a blog post and too much self-promotion inhibits creating a community.

I actually remember noticing, and then unsubscribing, to the author’s blog a long time ago because of all the self-promotional stuff. Interestingly, I would never have even found out about his post or linked to him had he not linked to me! By linking to me and taking part in the larger real estate blogging community, he has earned some backlinks to his site that will help him score better in search engines! A blog without community is simply a website that is organized chronologically and will be treated as such by the search engines.

If you want to see this bad idea taken a step further, check Ubertor’s latest product where they sell a self-updating blog of featured listings. What could possibly be the benefit of a blog (with all it’s ugly formatting restrictions) if it is self-updating? If an agent doesn’t think it is worth their time to select a few featured listings for their blog, do they really think it will be worth anyone’s time to read it? Let alone comment and link to these posts? Sometimes understanding whether or not an idea is a good marketing strategy takes little more than common sense.

Talking about common sense marketing… In putting together this post, I came across this great video featuring Seth Godin where he discusses with Google employees how much of their amazing success is related to how they have marketed their products (Thank you Grow-a-Brain!). The 48 minute video is so darn instructive for understanding how marketing should be done (and I believe that real estate agents are either in marketing or broke) that I’m going to experiment with including the video below so you can watch it directly from this site:

What exactly IS a townhome?

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First, let’s all agree that a townhome usually has at least two stories, but you can have a “ranch style townhome” or “rambler style townhome”. Usually there is no one over or under you in a townhome, except sometimes, like in Sixty-01, they occasionally stuff a condo under the two story townhome. In the Seattle area a townhome usually has a garage on the first level, main living areas on the second level and bedrooms on the third level. When there is a view involved, especially a water view, it is better to but the main living areas at the top and the bedrooms on the lower levels.

But why is a townhome sometimes a condominium, and sometimes a single family dwelling? Why is it sometimes a single family dwelling when it is attached to other townhomes, and sometimes a condominium when it is not attached at all?

The phrase townhome was coined by the real estate industry to “upgrade” the term rowhome. Many major cities, like my Philadelphia, have had rowhomes for over a hundred years. As many as twenty five all attached together with no break until you get to the “end of row” or “breezeway”. When builders started building attached dwellings out in the suburbs, they didn’t want to call them “rowhomes” and so came up with the term “townhomes”. Very upscale areas started calling their rowhomes, townhomes, and so the term was created and expanded.

Very simply, if you own the land under the townhome all by yourself, meaning the lots are subdivided at every shared wall from the front of the lot to the back of the lot, then it is a single family townhome or “single family attached”, much like the original “rowhome”.

[photopress:townhomes.jpg,thumb,alignright]If the lot is not subdivided and you build two or more separately owned structures on one lot, whether they are attached or not, they are condominiums. As far as I know, condominiums are always built on land that is shared and not subdivided per each individual owner. So if you put two separate houses on one lot and sell them to two different people, they are condominium townhomes. If you attach 25 homes in a row, but subdivide the lots so that they own their front yard and back yard and the land under their house, they are single family dwellings.

I always say, when you are sitting in your house, if you own the land under your butt all by yourself, it is a single family dwelling. If the land under your butt is jointly owned with other people, then it is a condominium 🙂

Who is Trulia Serving?

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It was wonderful to have some quality time with the Trulia last night and I had a blast chatting about real estate search with them.

Sami and Kelly were great sports and the group ended up spending about an hour and a half discussing Trulia’s business plan and how others (like RCG!) might plug into their “platform”.

Seeing as how I posted the invite to the “chat” a few hours before the event, I didn’t expect too many people and was pleasantly surprised at the turn-out:

Interestingly, we dived into some questions I had about their business model pretty darn quickly and because I would completely fail if I tried to articulate the opinions of each of the participants. Instead I’ll only give my take on the Trulia’s place in future of real estate search (and welcome other participants to write up “meeting notes” if they are interested).

Most of my questions revolved around how Trulia planned to serve these four main groups (I’ve also included the ways they might serve these groups):

  • Brokerages: with (1) exclusive listings and/or (2) enhanced placement.
  • Agents: with (1) great branding opportunities and/or (2) tools to increase the agent’s internet “presence”.
  • Buyers: with (1) the most comprehensive listings, (2) the cleanest search interface, and/or (3) connections to the best real estate professionals.
  • Sellers: with (1) reasonably priced listings and/or the (2) widest possible exposure.

In talking with Trulia, it became clear that these guys have every intention of serving the brokerage community very well. They’ve opted to sign agreements with many of the largest real estate brokerage firms in order to get a live version of their feeds. In return, they’ve agreed to limit the type of listings they show (read: No FSBOs) and they’ve agreed to send people to the listing brokers website for detailed information on a home that is for sale. From what I can gather, they definitely have won over the largest brokerage firms and seem to be serving them well.

For agents, they offer some tools like one that allow agents to put a Trulia search on their site and another tool that allows real estate sites to list the most recently added homes. While the tools are interesting, I do not see anything that would make most agents jump at the opportunity to work with Trulia, especially since their search results will send potential buyers to the listing broker’s website if they find a home they are interested in. We discussed how a few forward thinking brokers realize that they best serve their clients when they give them the maximum amount of information, I don’t see that logic prevailing in the industry any time soon.

Trulia logo
Exmpl: “Palo Alto”, “94114”, (but not Seattle yet!) 🙂

It is with buyers that I’m seeing the largest weaknesses in their business model. They have no plans to get a complete listing of “MLS” data (actually, it sounds like they may have completely ruled out the opportunity through contracts they’ve signed with large brokerages). In somewhere like NY where there is no “one” MLS, this strategy allows them to include listing data from a majority of the brokers and will quite possibly allow them to have the largest database of listed homes. However, in somewhere like Washington (and Oregon, California, and I think most of the country), this strategy means that they will never have the most complete database of homes (at least not under the current MLS system). Maybe I’m missing something, but I simply cannot see how this is going to win buyers over… Even an ugly search interface is better than a snazzy Trulia search if it includes a larger selection of homes that are on the market. In other words, if I’m interested in a home in Sunset Hill and there are three homes available in my price range, I want to see all three, not just the two that are represented by brokers who have signed agreements with Trulia.

INSERT_YAHOO_MAP

So, that addresses the issue of the most comprehensive listings, but how do they fair in “(2) the cleanest search interface”, and “(3) connections to the best real estate professionals”?

They definitely have the cleanest home search interface around and considering they put a lot of effort into making their searches lightning fast, they definitely serve the buyers best interests in this respect!

In terms of the issue of connecting the buyers with the best real estate professionals, I think they are missing the boat. Sure the listing broker’s website may have the most information available about a listing, but if their set-up encourages buyers to contact the listing agent (as oppose to a buyer’s agent), I do not think they are serving the buyer very well. To give an example, imagine if Google sent everyone who was looking for information on a iPod to Apple’s website (it is an Apple product after all). Sure Apple might be the best source of information on an iPod (assuming they share all the good and bad that they know), but is Apple’s website really the best place to research (let alone buy) an iPod? To bring this back to real estate buyers, the best way they could serve buyers would be if they could hook them up with an agents who had their best interests in mind (as oppose to an agent who has the best interest of the seller in mind).

One of the weaknesses in my Apple example is that Trulia includes a vast amount of awesome stats available directly on their website so that a buyer can find out information like comparable homes on the market without ever turning to the listing agent’s site for more detailed information on the listing itself. However, that doesn’t change the fact that they don’t plan to have the most comprehensive database of homes (at least not in areas with one functioning MLS) and they do not offer a way for a buyer to hook up with a good agent, but rather, they guide them to the listing agent.

For Sellers, they mentioned that they do not offer much. They are focused on working with brokerages, so the best they offers sellers is that if they use a real estate professional, they will indirectly benefit from the exposure on Trulia.

In reading over my text, I can’t help but notice just how negative I sound on Trulia. In reality, they are a great group of people and I’ve enjoyed EVERY interaction I’ve ever had with them. Along those lines, I decided to go back and remind myself of why I found Trulia so inspiring when they launched:

  • The search interface is as simple as entering a city name or a zip code! The UI is beautiful.
  • The filtering by other features like Price, Bedrooms, Bathrooms and Price is fast and very intuitive!
  • When clicking on more detail for a listing, you get the VERY useful information like the price per square foot, the days on the market, as well as details for other recently sold homes and similar homes in the area!
  • The color coded recently sold homes is awesome!
  • I really like that the the location of my search is stored in the url. This allows me to easily save and or send an area of interest. For example, here are the homes for sale in the part of Los Angeles where I grew up: http://www.trulia.com/CA/Eagle_Rock/90041/. (Also notice that it has neighborhood facts on this page.)
  • It has RSS feeds so that I can subscribe to my zip code and be updated each time a listing comes on the market.

All of these points are still valid and represent reasons that I still think Trulia is a fascinating and innovative company. My hope is that my comments in this post, especially when negative, will provide some food for thought to the people I’ve grown to really like over at Trulia. Their UI (user-interface) is a beautiful thing and blows away the UI of any other home search tool that I’ve seen. It is Trulia beautiful thing! 😉