You don't know the power of the dark side

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vaderAfter playing with Zillow for the past couple of days, the first words that come to mind are “Impressive, but you are not a Jedi yet”. I have a hunch the guys at HouseValues are going to get “Netscaped” if they don’t take their game to next level.

The Good
The UI is slick. The mapping isn’t quite Virtual Earth / Google maps slick but it’s close (if you add mouse wheel zoom, arrow key navigation support and resizeable maps, I’d put it in that league). Seeing all the lot boundaries displayed on the map is something that I haven’t seen done well before and is a feature that will be expensive or difficult for Zillow’s competitors to match. I like the fact that they partnered with GlobeXplorer, since I believe that will enable them to out map RedFin.

The Ugly
I find all the trash talk about uptime and availability amusing. As any experienced software engineer will tell you, the first days for any web based service that has had the anticipation & hype of Zillow are going be rough. After all, if the mighty Microsoft had troubles with X-Box Live when Halo 2 was launched a few years ago, the fact that Zillow’s first day had some minor troubles is hardly surprising. Besides, I’m sure Rich Barton and the boys will buy a few AMD Dual Core Athlons CPUs with the new WD Raptor drives during the next few days and cure that problem.

The Bad
I suspect biggest problem with Zestimates is the current lack of high quality data. (Gee, the same issue I keep complaining about). Any realtor will point out, doing an accurate completive market analysis house is a problem that involves many, many variables. I understand it’s a hard problem, but the fact that the Zetimates are so far off for my house (which I thought should be an easy case) is disappointing. I don’t expect accurate estimates for waterfront, hilltop views, high rise condos, Bill Gate’s house or rural properties. But my house is a cookie cutter house is suburbia (with lots of similar houses for sale). I would think my house would be an easy one to get right.

Just for kicks, I implemented a quick & dirty Compeitive Market Analysis feature for the Rain City Guide home search. I found it to be more accurate than Zillow for my house, and Dustin thought my estimate was right on the money for his home (after he entered the correct square footage). Anyway, play around with it and let us know how close to the “right” price it is for your area.

BTW – My version just goes against active NWMLS listings (so forget about trying it if don’t live in Washington). It’s pretty crude and it’s not as cool as Zillow, but then again, I hardly have $32 in venture capital (much less $32 million), so cut me some slack!

I think the nay sayer would be wise to recall the words my former boss once said, “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don’t let yourself be lulled into inaction.” Zillow’s Zestimates may be off in Safeco Field right now, but I have no doubt they will get much better over time. And when they do get better (not if), you better be ready.

Well, I’m going to shut up now and let my code do the talking. I’m sure the engineers at Zillow are following suit.

Robbie
Caffeinated Software

Updates – NAR and Zillovania

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I suggested a while back that the National Association of Realtors start a PR campaign because they were looking so bad. Well, the $25 million campaign has begun.

As for Zillow (a company with $25 million in investment thus far), my take is this: predicting real estate values is a clever and successful (and expensive!) starting point for them. When they say that their model will be entirely based on advertisements (zads?), I predict a very broad interpretation of advertisement. You could say that homevalues is all advertisements, right? What if Zillow charged $10 (initially) to list a home and $200 to make it a “featured home” – those would be advertisements, right? Same goes for advertising agents (a la this very promising site). All they’re saying is, for now, they aren’t going to take on RedFin for the 0.5% of the market that wants to buy a house entirely unaided.

It’s a clever model because consumers will go to the site to check the value of their home before they sell and to check the estimated value of a home when they buy (even for a laugh if it’s wrong) – this was money very well spent and is worth 10 times more than advertising. If (when) Zillow starts showing listings on their site, that seller will go to an agent to list it (until they find one through Zillow) and they’ll say “lets list it on Zillow for $10,” or, “I’ll list it on Zillow for $10 if you don’t want to.” Zillow will not make it in the long run without houses that are for sale on the site. According to Rich Barton, CEO and founder, working with the approximately 900 MLS in the United States would be “a Herculean task” that they’re not willing to take on. So they get the eyeballs that every MLS-alternative has been clamoring for now, and they get the revenues in the future. See? Clever.

I think Keith Castonguay (perhaps melodramatically) hit the nail on the head, but he was wrong about the eyeballs: they will come from features and word of mouth, not primarily advertising. He’s also wrong about the absolute nature of Zillow; just as there are competitors for online travel booking, there will be competitors for this. Don’t think Zillow’s undertaking is without risk; they have to get a lot of listings (and features) on there before someone with an alternate model gets computer generated house values next to MLS listings. It’s a pain to search for property when only half of what’s available shows up. If Zillow prices listings too high or people just don’t sign up fast enough, other giants will stomp on it.

I also expect Zillow to make money from other ventures too – mortgage ads, home staging recommendations, what-have-you.

Galen
ShackPrices.com

Who Benefits from a Buyer's Agreement?

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(Editor’s Note: I’m happy to introduce Russ Cofano as a new contributor on Rain City Guide. He is a practicing real estate lawyer in Seattle with a tremendous amount of legal and business experience. Among his many roles and accomplishments, Russ is the former retained General Counsel for the Washington Assn of REALTORS (“WAR”), Seattle-King County Assn of REALTORS and Tacoma-Pierce County Assn of REALTORS; he was a key contributor/drafter of important real estate legislation in the State of Washington such as the Real Estate Brokerage Relationships Act and the Residential Transfer Disclosure Act; and he is an expert on MLS and Intellectual Property issues having been invited to speak at national real estate conferences including Inman’s Connect in San Francisco and MLS Connection. Russ can be reached at Russ@cofanolaw.com)

In the 90’s (sounds so long ago, doesn’t it), the concept of buyer agency entered the real estate brokerage world. For years, buyers working with agents were always surprised to find out that the agent typically was a sub-agent of the listing agent and legally represented the seller, not the buyer. This was true even though that agent almost never had any contact with the seller and usually had a much more significant relationship with the buyer. For a variety of reason (mostly because it made sense), the historical concept of sub-agency went away and agents working with buyers actually started representing those buyers.

As this concept took hold, folks like me would tour around far and wide and talk about the virtues of getting an agreement in place with buyers. This seemed to make sense because, heck, listing agents got sellers to sign listing agreements so why wouldn’t a buyer sign something similar. Well, if it wasn’t for my quick feet and years on the basketball court, I would have had many a projectile hit me in the head when I would suggest to agents this new way of dealing with buyers. The response was usually based on the fact that most agents felt that buyer’s would never be willing to commit themselves to a single agent like seller’s do in the listing agreement. In the same breath, those same agents would curse about those cheating buyers who would use them for days, weeks and months and then leave them at the last minute to work with someone else or (egads!) work without representation.

Fast forward to 2006. In Washington (as well as many states around the country), we have agency laws that define both seller and buyer agency roles. In Washington, if an agent is working with a buyer and is not the listing agent on the property that buyer wants to purchase, that agent will be the buyer’s agent (unless they have an agreement otherwise).

So what do buyers legally get from buyer agents. Well, look behind door number 2, and you will see the following duties:

  1. To be loyal to the buyer by taking no action that is adverse or detrimental to the buyer’s interest in a transaction;
  2. To timely disclose to the buyer any conflicts of interest;
  3. To advise the buyer to seek expert advice on matters relating to the transaction that are beyond the agent’s expertise;
  4. Not to disclose any confidential information from or about the buyer, except under subpoena or court order, even after termination of the agency relationship; and
  5. Unless otherwise agreed to in writing after the buyer’s agent has delivered the Agency Law Pamphlet, to make a good faith and continuous effort to find a property for the buyer; except that a buyer’s agent is not obligated to: (i) Seek additional properties to purchase while the buyer is a party to an existing contract to purchase; or (ii) show properties as to which there is no written agreement to pay compensation to the buyer’s agent.

My question is this: Doesn’t a good buyer’s agent deliver significantly more value to a buyer than those measly duties outlined above? If so, why would a buyer not be willing to sign an agreement that requires the agent to deliver all those “extras

Zillow's Impact On Day 1

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Despite the fact that the Zillow site spent most of the day gasping and sighing, a ton of digital ink was spilled discussing their service (or lack thereof). Here are the articles I found most interesting from Day 1:

By the way, if you scrol through this Technorati search, you’ll notice that not only was I the first blogger to break the story, but I announced Zillowblog an hour before it went live!)

Who is the "BEST" lender?

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There are three separate and distinct functions of a lender in the home buying process.

 

1.  Determining the cash needs and monthly payment in advance of house hunting.

     a)  Dollar amount of Closing Costs

     b)  Montly payment including estimated taxes, insurance and codo fees

2.   Providing a “Pre-Approval” letter to submit with an offer to purchase.

3.  Providing the actual loan to be used in the home purchase.

*************************************************************************************************

The “BEST” lender to use for Step 1. will be the lender

 that most accurately predicts your eventual closing costs

(and monthly payment) BEFORE you make an offer. 

*************************************************************************************************Variances Inaccurate predictions can be costly, and even cause the escrow to “fail”.  If you do not have enough money to close escrow, you can lose your Earnest Money, as the Finance Contingency only covers loan approval.  It does not cover “not having enough cash to close”.  I have not in 15 years personally had the experience where my buyer client has needed to find money at the last minute to close, but I have seen many who have had that experience when working with other agents.

If you do not have a lot of cash to play with, or if it is your goal to close escrow spending as little of your own money as possible, you should try to narrow down your choice of lender in Step 1. to the one you will likely be using by Step 3.  Very important if you are planning to fold your closing costs into your offer.  If the  lender you speak with at Step 1. says your closing costs will be $4,000 and by Step 3. you choose a lender with actual closing costs of $8,000, you will need to dig up an extra $4,000 if you only wrote “$4,000 toward closing costs” into the contract.  Lender costs are sometimes “credit score driven”, same as rate, so the lower your credit score, the more important this will be for you.  Costs can also change dramatically from one lender to another and from one loan program to another.

*************************************************************************************************

The “BEST” lender you can use in Step 2.

is the lender that the SELLER, will value the highest. 

*************************************************************************************************

To determine who will be the “BEST” lender to use in Step 2., you need to understand the TRUE purpose of the “Pre-Approval” letter.  The quality and credibility of the pre-approval letter often plays a major role in the negotiating process.  The seller and the seller’s agent read a lot of things into that letter, especially in multiple offer situations.  Even when there is only one offer on the table, the seller will sometimes accept a lower price from a “highly qualified buyer” who is using a lender that the seller’s agent is certain will close on time.

 Often the Buyer Agent sells the lender and the buyer’s credentials when presenting the offer.  And many, many times I have seen a seller switch to a lower offer with a better “letter” and sales pitch by the Buyer’s Agent, regarding the buyer’s ability to close and to close on time.

Consequently, if you use a lender that the listing agent does not believe in or has had a previous bad experience with, it could cost you the house, or at the very least, raise the price the seller is willing to take from you, using that lender.   I have seen one too many pre-approval letters faxed crookedly on the paper, written with poor English and grammar, with many mis-spellings and two paragraphs of disclaimers.  The phrase I commonly use for that type of letter is “it might as well be written on toilet paper”.  Sorry if that offends someone, it’s that Philly.NY “in your face” honesty, I refuse to shed 🙂

*************************************************************************************************

The “BEST” lender to use for Step 3.

 is the one who has the very best rate and program for you

 within the first five days after you are “signed around”

and can LOCK you there with a “float down”.

 *************************************************************************************************

None of the rate quotes or program evaluations that you acquired prior to house hunting, is a true indicator of what exists in the marketplace the day you are ready to apply for your loan.  Generally, you do not truly apply for your loan, until after you have a Contract to Purchase a home.  Most lenders will not permit you to lock in the rate, until you have a contract in play. You can with some lenders apply for a loan with a locked in rate “subject to house”, a tool used when interest rates are expected to rise during the house hunting process.

One might say that the “moral” of the story is that you can “use” any lender you want to process your loan, without regard to whom you “used” in Step 1. or Step 2.   But, hopefully, by seeing in advance the three separate and distinct functions of the lender in the home buying process, you will be better able to choose the “BEST” lender from the beginning.  A lender that will excel at meeting all three of your lender needs in the home buying process.

 

How well does Zillow Zestimate your home?

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Since everyone’s doing it, I thought it would be fun to have one place where people discuss how good Zillow’s “Zestimator” is working!

The process is simple…

1) Go to Zillow.com
2) Type in your address
3) Record the Zestimate of your home
4) Return here, and let us know in the comments how well their tool stacks up to reality.


Here are the Zestimates I’ve gathered so far:

  • My home: The zestimate is probably $40 to 60K too high. The home next door to mine, (which is almost identical) sold this summer for $80K less than the Zestimate
  • Ardell’s home: $200K less than she just paid for it!
  • Robbie’s current home: He estimates that it is $220K too low!
  • Rich Barton’s home: He may have “overpaid a bit” on his $2.6M Madison Park home.

How well does Zillow Zestimate your home?

Zats really cool…

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Zillow has launched!

I just got an email from Zillow’s Director of Communications and she passed along the fact that not only is their blog live, but a beta version of their site is live as well… Rich and David flipped the switch!

So, what does Zillow do?

In two minutes of of a Skype conversation with my mom, we were able to find the “Zestimated” value of my home in Seattle, my mom’s home in Sacramento, and my grandmother’s home in Las Vegas… Very cool indeed, especially since my home value is zestimated to be worth $140K more than we paid for it two-and-half years ago!

From what I can tell, they’ve found a way to estimate the value of thousands upon thousands of homes (60,000,000+ homes by their count). For my neighborhood, they have lots of background information on each home… Not only does it tell you the size, square feet, lot size, etc. but it also gives information like a list of recently sold comparable homes. Very cool indeed.

zillow_screenshot_1

The site is loaded with tables, graphs, and charts for each home.

Probably the strongest selling point so far is that creating a set of comparables is so easy. I’ve worked a fair amount with Anna to develop comparable market analysis, and I can tell you that agents may have access to slightly better data on each home, but Zillow’s system is SO much easier to use that I imagine many agents will turn to Zillow from now on…

zillow_charts

Interesting, interesting stuff… It is interesting that the site has a complete lack of obtrusive ads and it will be really interesting to see how this plays out in the agent community. I’m not seeing a lot of negatives so far.

Here’s how Rich Barton explains their business model on the Zillow blog:

I’d like to make a comment on our business model, which I’ve found helps divine motives. Zillow.com will make revenues from advertisements on the site. We will always be crystal clear about what is content and what is advertising, just like any respectable content provider, and our advertising will not define our content. However, the beauty of “Web 2.0

Free Margaritas!!!*

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margaritaWho servers the best margarita in Seattle?

Apparently, I stirred up a little bit of a hornet’s nest as there is definitely some contention in the blogoshere as to the best margarita in Seattle.

Some say that La Carta de Oaxaca serves up the best margarita, while other good sources say that El Gallito is the place to go.

But the real answer may be a different place altogether! (Did I mention that I serve up a mean margarita?)

There is really only way one to find out, and that is a Gringo Tour! (Am I allowed to say that on a real estate blog?)

I’m all over organizing a tour to get the determine the margarita in Seattle… If you’re interested in joining the tour bus, let me know, along with the evenings within the next week that would work for you. I’m thinking that this weekend would be best although both of these places can get quite busy!

Some people who simple need to show up include Virginia from Seattle Pulse, Chris from Metroblogging and Chris Pirillo from, well, Chris Pirillo, but all are welcome! Just email me if you’re interested and I’ll coordinate from there!

party drinks

* Free Margaritas are ALWAYS available to people who use Anna to purchase or sell a home. Unless, or course, I find out there is a policy against offering Margarita’s to clients… 😉

Does Zillow's Game Plan Includes Blogging?

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dark doorYou bet it does!

I just noticed that I’ve started to get hits from website with the URL: www.zillowblog.com… (Don’t expect much from the link as the site is password protected at the moment.) IT’S LIVE!

A little research into the URL suggests that the site is owned by Zillow as one would expect.

I don’t think the idea of a zillow blog will shock anyone, but it may help one of those people who are attempting to put together the Zillow puzzle.

And while I’m up to Zillow updates, the latest press release from Property Shark mentions Zillow 4 times!

New York City, February 7, 2006 – PropertyShark.com announces its home sale-price maps to empower appraisers and real estate professionals to effectively serve home buyers and sellers.

Launched as a beta, an example of this map for New York City can be seen here: http://www.propertyshark.com/maps/sales/

“We’ve decided to launch this on the eve of the launch of residential home valuation tool Zillow because, in my opinion, computer-based automated valuations, such as those you will likely see at Zillow, are more likely to be wrong than right. Every property is an illiquid, unique asset, and a computer program cannot accurately predict the price it will fetch on the market,” commented PropertyShark.com founder, Matthew Haines.

PropertyShark.com, which is designed primarily for use by appraisers and real estate professionals, provides users with the original data directly from government records, including sales price, mortgage amounts, document images, and ownership records.

“My understanding is that Zillow is out to disintermediate the broker and real estate salesperson, attempting to devalue the broker’s Comparable Market Analysis by providing an instant valuation of sorts. Unlike Zillow, PropertyShark.com is focused on empowering real estate professionals, not disempowering them. We give professionals, and savvy consumers, the actual raw data, as well as an unprecedented level of depth which captures the unique nature of each piece of real estate and its value,” expanded PropertyShark.com chief executive officer, Ryan Slack.

I wonder if the people at Zillow feel extra pressure because of all the expectations?

UPDATE:
Here are the Seattle property maps from PropertyShark. Select “Residential Sales/Sq ft (2004)” from their pull down menu to see an interesting map of all the property sales in the region color coded by the price per square foot of the sale. Interesting stuff…

Interesting Insurance Program from King County Metro

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I just received a newsletter from Todd Litman of the Victoria Transportation Policy Institute that describes an innovative project that is being tested by King County Metro.

King County Metro, the Washington State Department of Transportation and other partners has $2,2 million to develop a Pay As You Drive (PAYD) Insurance Pilot project for Washington State over a 4-year period to evaluate the impacts of a pilot including at least 5000 participants. They are in the process of recruiting an insurance carrier to join in the project. The deadline for expressions of interest is February 15, 2006. For more information contact Bill Roach (bill.roach@metrokc.gov) or Bob Flor (bob.flor@metrokc.gov).

I probably wouldn’t have mentioned it, but I noticed that the Cascadia Scorecard had an article on this topic today, Pay As You Drive Insurance, and they didn’t mention this interesting program. This makes me think that the project must be really below the radar and in need of some Rain City Guide attention!

So how does it relate to Seattle real estate? Barely… But what’s important is that if you are a King County resident whose car spends almost all day at home, then you may be able to save money by joining this program and only paying insurance on the miles that you drive.