Tag Archives: real-estate

Relevance is at the Long End of the Tail

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Listen to enough conversations on the internet and you’re bound to run into the concept of the long tail. It is a fascinating concept that helps define how people use the internet and helps clarify how real estate professionals can be successful on the internet.

The long tail is a concept that was first popularized by Chris Anderson as an article in Wired back in October of 2004 and grew into a popular blog devoted to the subject. The essence of the Long Tail is defined by the following chart:

long-tail-graph

In this chart, the red areas represent the most commonly sought after (and served) markets… I think of them as the “best sellers”. The yellow area represents the niche markets that only appeal to a small subset of people, and due to (the lack of) economies of scale, these markets tend to be under-served in most industries.

The concept of the long tail is that successful on-line business have (with very few exceptions) thrived by providing adequate services to the people under the yellow area of the curve. Sure you can go to Amazon to find the latest best sellers (red area), but you can also go to Amazon to find hundreds of thousands of titles that you won’t find at your local bookshop (yellow area). Same thing with eBay. The internet is best situated to serve otherwise “hard-to-serve” people.

But economies of scale don’t explain everything. The real beauty of the long tail is that it is often much easier to provide exceptional service to customers in the yellow area of the curve. If someone is searching for a generic topic on Amazon like [popular fiction], it is really hard to know if they would be happy with the results. But if they were to search [accident analysis training manual], you can be pretty sure that they will be happy with the results because there are only a few books dealing with this subject and Amazon will show them all!

The Long Tail and Real Estate

Recently, Chris over at RealtyBlogging asked “How are real estate and blogging alike?”, and this is my answer. Both real estate and blogging thrive when they effectively serve a local and/or niche market (i.e. the yellow area under the curve).

The idea behind this should really be second nature to successful real estate agents who know they couldn’t possibly serve all the niches within a major City. Rather, my experience has been that successful agents will say that they began by providing exceptional service to a small subset of people. Maybe their niche involves houseboats or condos, or a specific neighborhood… The specific niche doesn’t matter. The important aspect is that a real estate agent realized that they were never going to be able to serve everyone well, so instead they focused on a small subset of people and learned that market inside-and-out.

Similarly, blogs almost always come with a strong point of view and serve a niche market well.

In addition, the internet has allowed a few companies to do a very similar thing that real estate professionals have always been doing. Namely be extremely relevant to a small subset of the overall population. Not only has Amazon and eBay found success this way, but Google has created a billion dollar industry out of this concept. The idea behind Google Ads is that they provide relevant ads to users on obscure topics. I doubt many lawyers would consider putting up a banner ad on Yahoo to attract people looking for mesothelioma lawyers, but give these lawyers a chance to reach people who just searched for [mesothelioma lawyers] on Google, and they are willing to pay $54.33 for one click!!!

This extremely relevance is exactly how the real estate agents of the future will be successful on the internet. Not only that, but I happen to think that blogging is a great way for agents to get out from under the “red” of the curve (where most real estate websites live… and die) and out into the long tail where their niche knowledge will be appreciated and rewarded!

Floor Area Ratios – Bulk and Volume

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I attended a meeting this week regarding proposed changes to the current FAR in my neighborhood in Kirkland.  I thought I’d report on Kirkland specifically on my blog, but raise the BIG question here.  Should neighbors and local governments be able to dictate, beyond height and setbacks, how “big” your home can be?[photopress:bigger_house.jpg,thumb,alignright]

Is the “argument” really about size?  Or is it about “style”.  It seems that people complain more about homes with a flat roof made of smooth stucco, than they do about homes with pitched roofs.  If everyone in town hates the house you want to build, should that matter?  Is this argument really about trying to dictate “taste”.  When an old house is torn down, the new one built in its place can’t be expected to look anything like the one that was there, can it?

[photopress:big_house.jpg,thumb,alignright]

The reason more houses are being built with a flat roof, rather than a pitched roof, is because of the height restrictions.  Here the height can’t exceed 25 feet.  If you have a point at the top, that point counts as your 25 feet, so you lose a lot of square footage at the top vs. building your second floor up to 25 feet with a flat roof. 

FAR is not so much about the size of the house, as it is the size of the house relative to the lot size.  If the building code has a restriction of 50% FAR, then the maximum size of a house on a 5,000 square foot lot is 2,500 square feet.  Unlike real estate agent and appraiser criteria, building code square footage can include the attached garage, but often does not include the “air space” of a two story room with no floor at the second level.  “Volume” related complaints suggest that this “air space” should be included in the square footage as if it had a floor.[photopress:small_house.jpg,thumb,alignright]

I will stick to the specifics of the actual Kirkland meeting on my blog, but here in RCG, I thought we could talk more about the issue generally.  Used to be as long as you adhered to the height restriction and setback rules, all was A-OK.  Now people want to dictate and prevent “monoliths” and homes that just don’t seem to “fit” into the type of town “we” want to be. 

The fur does tend to fly at these meetings.  Anyone have any opinions on this topic?  Some of the questions raised are “Why do so many new homes have such small yards?”  Should we really be able to tell people whether or not they MUST have a “yard”?  Whatever became of one story houses? and “What’s going to happen if my neighbors sell?” Should we let people do whatever they want with the land that they own, or should neighbors and local governments have some say in the matter?

Weigh in your opinion.  Inquiring minds want to know how people feel about this topic.

Seattle in Top Ten for Continued Appreciation- Want to know Why?

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We’ve talked alot on RCG about whether we’re in a bust or a bubble real estate market and we in the Pacific NW have been watching the rest of the country and wondering, Why all the gloom? Bankrate.com and today’s Seattle times have some explanation that can provide perspective:

Last week, Bankrate.com unveiled its forecast for the changing real estate market in the U.S. over the next few years – ten markets where housing prices and values will continue to remain strong, ten markets where appreciation will pretty much top out and the ten markets that are most likely to experience a decline. They talked to experts, studied public and private databases, analyzed market trends and examined the analysis of many others.

The ten “bubble blowers,” where appreciation should continue to grow, are:

  • Boise (ID);
  • El Paso (TX);
  • Albuquerque (NM);
  • Seattle (WA)/Portland (OR);
  • Salt Lake City (UT);
  • Raleigh (NC);
  • Philadelphia (PA);
  • Atlanta (GA);
  • Little Rock (AR); and
  • Cincinnati (OH)/Birmingham (AL) (they were too close to call).

Just why this is happening in the Pacific NW is the subject of this mornings Seattle Times article by Elizabeth Rhodes. She sheds light on why Seattle is breaking the national trend toward stagnating or dropping home prices. Her article notes that the average home prices have taken a steep hike in the last year and appear to be continuing the rise.

Citing the NWMLS statistics that came out on Thursday, median closed price of King County single-family homes has shot up almost 12 percent in the past year, reaching $405,000 last month (and up from $392,950 in February).

Interestingly, sales are down, but so is inventory. In March 2004, there were 7,156 homes for sale countywide. March 2005’s inventory was 5,244 homes. This March recorded a further drop, to 5,100. This is the pinch that causing the rise in prices.

At the same time, the local economy is growing and employers are adding jobs, bringing more potential buyers to the area. So the competition for available homes is strong and prices are reacting accordingly.

We agents have been experiencing this hot market all spring as we did through most of last year, possibly feeling the market fluctuations first. We’re out there in it, pricing homes to reflect the low inventory and coaching buyers for the best positioning in a multiple offer situation. I just watched the price of an Eastside condo jump $20,000 in a two week period!

Rain City Guide Meet-Up This Thursday

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Are you interested in meeting up with real estate professionals and/or enthusiasts of Rain City Guide? In an effort to continue to puss the boundaries of a real estate blog, I’m organizing a gathering this Thursday and you’re invited! The meetup is this scheduled for Thursday (4/6/06) at 7PM at Cupcake Royale/Verite Coffee shop in Downtown Ballard (2052 NW Market St).

This idea for a meetup has been cooking in my head for quite a while and was really inspired by a recent evening I spent with a few real estate professionals explaining the wonders of blogging, RSS feeds, del.icio.us and all things web2.0. I’ve tried to cover a lot of these topics on the blog, but sometimes it is so much easier to show people this stuff in person.

With that in mind, I’ve confirmed that at least a few Rain City Guide contributors will show up this Thursday, so you can expect a lively discussion with input from experienced real estate agents, mortgage brokers and real estate technology geeks. I don’t really have an agenda, but would rather let the group dictate where the discussion leads…

Who do I think might be interested in joining us?

  • Maybe you’re a real estate agent, mortgage broker, title representative, etc. who wants to learn how you can better use the internet to serve your clients?
  • Maybe you’re a home owner who is interested in listing your home and want to make sure that you get the most out of the internet and/or a potential listing agent.
  • Maybe you’re a buyer who wants a leg-up on the competition. I can show you how to use Google Earth, RSS feeds and more to make sure you’re getting the most efficiency out of your home search.
  • Maybe you’re a potential home buyer/seller interested in interviewing potential real estate agents and/or mortgage brokers in an informal setting. Should you want that type of thing, I’m sure that the agents and mortgage brokers would be happy to try to earn your business.

As long as you have an interest in real estate (who doesn’t?), you are definitely invited to what will hopefully be a fun and memorable evening.

RSVP? One of the RCG contributors who is helping me organize things thinks that this event might be much more highly attended than I do. Just to make sure that we don’t blow out one of my favorite coffee shops in Ballard, can you please let us know if you are planning to attend by adding your name to the list on the wiki? You don’t even have to use your real name, just something so that we can gauge the interest.

Should you have an Open House?

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I just sold another house from an Open House this weekend, and am reminded of all of the articles about how Open Houses do not sell houses. Sometimes I think the articles are sponsored by agents who don’t want to spend their Sundays working 🙂

I have changed a few things that I do based on technological advances, like pricing the home straight on $350,000 for double hits, instead of $349,899 to be first to show in the mls book. But listing and selling houses via Open Houses has always been “my thing”. I have provided some online training on the subject to agents around the Country, and still there are some agents who can honestly say that they have never sold a house from an Open House. It just boggles my mind.

I have always spent a great deal of time helping the seller get the house ready for weeks beforehand, before it goes on market. Then I usually do open houses the first two weeks back to back. This weekend I listed a property, that I had already spent many hours staging,and put “No showings until the Sat. Open House and Open Sat. and Sun. 1-4 p.m.” in the mls remarks. This is less wear and tear on the seller and creates a new listing that opens up with a BANG! Lots of energy! Agents showing and people coming all at the same time. I have 6 Open house signs and those big flags that new construction people use. It’s like a big party! Sometimes I even cook Italian food and play Connie Francis and Mario Lanza…and of course FRANK! But that’s usually for Broker’s Opens. I even had agents dancing once…that’s an accomplishment 🙂

Anyway, back to this weekend. I had an offer by the time the Open House was over and another from an agent who was begging me to wait for her as she rushed back two hours from wherever she was to write it for the buyers who came without her to the Open House. Turned out I didn’t have to do the Open House on Sunday, as it was all tied up by noon on Sunday.

Of course an agent who sits in the living room watching the ball game or playing with his laptop looking bored to tears may never sell a house at an Open House. But if you love doing them, there are plenty of ways to turn an Open House into a SOLD House! I hate to admit it, but I did get a call from my friend Reidi in Florida when she saw American Beauty. When Annete Bening got to the Open House hours early in her work clothes scrubbing it down saying “I am GOING to sell THIS HOUSE TODAY!!, Reidi called me and said “Ardell, they made a movie with YOU in it! LOL I’m not quite that bad…but close.

I’ve created a monster!

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Despite my adamant protest, many Rain City Guide contributors have gone off and created their own blogs. (what are they thinking???). However, as each and every one of these people have been very good to me, I thought I’d let you know where you can find more of their writings:

  • Russ Cofano — Realty Objectives [link removed]. While Russ is a real estate lawyer, I can tell you from our many conversations that his true love is innovation. His blog is a reflection of his interest in understanding real estate technology. (Check out his Speaking Opportunities [link removed] section to see something I might blog about soon…)
  • Ardell DellaLoggia — Ask Ardell. I don’t know about you, but I could NEVER get enough of Ardell’s writing… Where does she find the time???
  • Craig Blackmon — Real Estate Law Blog. He’s been keeping up a great real estate blog mainly geared to FSBOs.
  • Robert Gray Smith — Lake Sammamish Living. All kinds of good stuff about life on the Eastside.
  • Galen Ward— ShackBlog. He’s been out of town for a while, but when he’s around, he’s always sharing interesting stuff.
  • Marian Crkon — It’s a Feature. This might sound a little like it is coming out of left-field, but if you’re interested in Oracle applications, this blog is as good as they get!

As I often enjoy following the comments on RCG more than the posts, 🙂 I thought it also might be fun to highlight some of the great contributors (via comments) that regularly appear on Rain City Guide:

Can Real Estate ever ‘Bust’?

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Last week an investor called me from LA who is a stock broker. Our conversation got me thinking about the rich investment opportunity real estate provides, in spite of all the talk of a bubble burst. I’ve played the stock market for years and have won some and lost some but I’ve never been able to get it down to a predictable outcome. I invest in stocks because I’m told by financial advisors that I need to diversify. However, there is a way to invest that has many more controllable and dependable outcomes – Real Estate! Real Estate will never go out of business, never merge, never have problems with DOJ, never be outdone by the overseas manufacturing industry, never worry about ever changing technologies. There’s always supply and there’s always demand. With the exception of mother nature simply obliterating the landscape, real estate will always be there.

I don’t mean to paint an overly rosy picture here, but having been in the business for, gulp, nearly 30 years, and watching the ups and downs and downs and ups, (I once sold a home to a client with financing at 22%! not to mention using precious gems as a down payment!), I just don’t see the glass as half empty but rather half full. I have been a restaurant and marina owner and a real estate developer and investor, throughout the various market ups and downs. I suggest you look at real estate values over those last 30 years and see how many times they’ve multiplied. And we’ve had 5 or 6 ‘busts’ in that time. As a new licensee, I sold my first home for $32,500 in 1978 and today that home is listed at $495,000 – a multiple of 15 times. We all know this is true, so why are we all sitting around worrying? All this talk about real estate busting like the stock market did is just ridiculous. We’re not comparing apples with apples and even if the prices do go down, it will most likely be short term creating a great buying opportunity, and when prices bounce back we’ll all sit back and have a good laugh at all those naysayers with dour predictions.

I wish I’d taken my own advice in 1986 when I could have purchased 150 homes from a bank for 20 cents on the dollar. I didn’t have the foresight at that time to know what I am telling you now; real estate bounces back and prices rise even higher. Had I bought those homes that year, I’d be writing this from my estate in Maui! I’ve learned my lesson and now I want to share my perspective with you.

So, keep on investing. You may not be able to live off the profits from a short term flip but if you invest with someone that understands the market and the profit potential, you won’t have to worry about any ‘busts’ now or in the future.

Can we create THE Real Estate Guide for Seattle?

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I’ve been playing around with wikis for quite a while, and I finally got around to installing one (that I’m happy with) on the Rain City Guide server. But before I tell you what you can do with the wiki, I should probably give some background…

What is a wiki?

In the simplest sense, a wiki is an editable webpage. Have you ever read something and thought “I know more than the person writing this!” Well, a wiki gives you this option as it is designed to allow readers to edit webpages.

[photopress:hanging_tree.jpg,thumb,alignright]The most popular wiki is, without a doubt, the Wikipedia. The Wikipedia is essentially an encyclopedia made for the web. It allows anyone to update any page. This might sound like a mess waiting to happen, but in practice, the concept has worked well because there are more good people than bad on the site and the results is an amazingly comprehensive listing of public knowledge. While running a wiki takes a certain amount of faith in the “goodness” of contributors, all public wikis tend to have really good “roll-back” features that allow an users to “undo” unhelpful comments and block IP addresses from spammers (including the wiki I installed!).

So what am I up to?
In my quest to create the best resource for real estate information in Seattle, I’ve created a wiki that will complement this blog. Whereas the blog best serves timely updates, the wiki will hopefully become a wonderful way to present information that can benefit from continuously improvements over time.

So what am a really up to?
I want to create THE real estate guide for Seattle. It will take time, but I think that if we keep plugging away, we can harness the knowledge of the Rain City Guide community to create a truly unique resource. As I really do plan for this to become “the” real estate guide for Seattle, I’ve named the site: the.raincityguide.com.

What are some uses for the wiki?
In my mind, the low hanging fruit is a real estate directory for Seattle. If you are a real estate professional in Seattle, feel free to add yourself to the real estate directory that I’ve created. Adding yourself to the directory is easy and just meant to get you comfortable with editing a wiki, while also qualifying yourself as a web-savvy real estate professional. 😉

In terms of the directory, I’ve added the following categories: Appraisers, Construction, Escrow, Handymen, Mortgage Brokers, Real Estate Photographers, Real Estate Agents, Real Estate Lawyers, Real Estate Technology, and Title Companies. But the beauty of a wiki is that if I missed your line of work (assuming it is within real estate), simply edit the page and add your profession. (By the way, I haven’t added separate webpages for any of the people in the directory yet, but if you’d like to add a page to expand on yourself and the services you provide, feel free to create a page by putting your name in brackets, as in [John Doe].

Another idea I have is almost definitely ahead-of-its-time, but could be interesting, is that anyone selling a home is free to create a webpage that describes their home on the.raincityguide.com. It will cost you nothing but time, and if you are creative enough, it might get you some interesting publicity.

Of course, I have even more ideas for how a wiki could be useful for better understanding real estate in Seattle, so don’t be too surprised if I reference wiki articles in future blog posts! With that said, I’m a huge fan of the “release early and often” philosophy (and this feature is definitely released early), so don’t expect too much from the wiki and you likely won’t be disappointed!

Also, if a wiki seems a little bit intimidating to you, feel free to play around in the sandbox. You can’t mess anything up in there, so edit away and I think you’ll quickly see how easy it is to create and edit webpages with a wiki.

A Funny Thing Happened On The Way To The Forum…

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Actually it was a great evening at the MIT Enterprise Forum program last Wednesday (3/15) on the topic of Online Real Estate. I was on the volunteer program development team that put the evening together, and I got tagged to put together this note for you 🙂 And my own personal thanks to all who helped us with insights and contacts to build the program, including Dustin. There’s already been a lot of great timely comments on the program in this blog, so this note is primarily to report some of the stats and survey results, and a couple of my own comments on disruptive technologies and market inertia (or active resistance, as the case may be).

Attendance at the dinner/program meeting was a sold-out 400 people, one of the highest numbers ever for an MITEF program. The program panel was made up of three local online real estate companies – House Values (Niki Parekh), Redfin (David Eraker) and Zillow (Spencer Rascoff), plus a broker, Real Property Associates (Gordon Stephenson), and an Internet savvy agent, who was also our moderator (Jim Reppond, Coldwell Banker). So it was a good crowd, and a good spectrum of players on the panel. The program consisted of introductions of the players and their companies, key questions and panel responses led by the moderator, and open Q&A from the audience.

Wednesday morning (3/22) we reviewed the results of the online survey we sent out to the 298 attendees that we had emails for – we got 96 responses back, which is a pretty good sample. Here’s some highlights of the responses:

  • 63 % were there because the program was relevant to their work or job – usually not that high; lots of Realtors present, as expected. For over 60%, this was their first time at an MIT Forum event. The other large segment was more the regular MIT Forum attendees who follow, and lead, tech-driven companies and their business issues.
  • 87 % said the topic was relevant to them; 78 % said the program met or exceeded their expectations.
  • 69 % said the level of detail was just right, but 31% said it was too general – higher than we would have liked.

Enough of the stats. Here’s some quotes from the comments that show more of the flavor of the event, and some of the mixed reactions it generated:

“Having Zillow, Redfin and House Values in the same room at the same time was the reason I decided to attend. Not necessarily the speakers themselves, but the companies they represented.”

“I was expecting to hear about more revolutionary technology. It seems the real estate industry is still in the technology dark ages.”

“The topic was “The New World of Buying and Selling Real Estate”. The moderator and the audience of R.E. agents didn’t allow for a real discussion on the future because they feel so threatened by these new technologies. Boos from the crowd of R.E. agents and a moderator who encouraged it stifled an open and honest discussion.”

“It is difficult for businesses to share the future directly as competition is present and they cannot release product plans before they are ready to launch.”

“It was good to hear the stories on the companies’ background and how they work. Although, at times it almost seemed as though I was at an infomercial.”

“Great topic; always fun to hear the spirited discussion that an industry in transition generates.”

All of the above once again proving that it is very difficult to satisfy all of the people all of the time, and that divisive subjects generate divisive reactions. It would be fun to do this again a few years from now, when more of these companies are bigger, and public, and have more visible business strategies.

So now I get to put in my nickel comments, based on my own background as a tech exec, seven years working with the MIT Forum on these kinds of programs, and now full-time realtor for several years. I think that this is an industry in the very early stages of being hit by disruptive technologies and the new business models that they enable. The mass and momentum of the industry are huge, and the consumer market is highly diverse. It may take quite a while for the new business models to clarify and engage their target segments of the market and start to get real (no pun intended) traction. The players we see today may not be the players of the future (for example, see Dustin’s earlier post about Google Base vs Zillow). But some will get traction, and as they do we will see a lot of resistance and delaying actions by those whose market is being disrupted. Some resistance will be tightened corporate policies, some will be PR campaigns, and some will be lobbyist-driven regulation. Anything sound new here? We’ve seen it in industries as diverse as airlines and telecoms and travel and books and so on … Delaying change is worth $billions to the incumbents, and they are pros at the game. But it still looks to me like the technology train is on the tracks, and gathering speed. Personally, I will take every advantage I can of the technology-driven changes… and I will continue to welcome ‘old-fashioned’ people-driven referrals 🙂

Zero Commission

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[photopress:howie.jpg,thumb,alignright]We’ve been talking down there in the comments about all of the things agents are “not allowed” to do. One benefit of being an independent is that you can be an avant-gardist and try out new and different things from time to time. I had this idea. Everyone knows that when you list a house, you often sell other houses as a result. Buyers call on the sign or from the internet or you meet them at an open house. These buyers may buy the house they called about, or they may buy a different house from you.

How about reducing the commission on the house you have listed, every time you get a buyer client as a result of that seller’s house being for sale?

Let’s say it is a condo priced at $225,000 with a seller’s side commission of $4,500. Someone calls to buy it, but they have a dog and that condo association doesn’t allow dogs. You sell them a different condo that does allow dogs and earn a commission of $5,000. You would never have met that buyer if they didn’t call on the condo listed at $225,000.

So how about taking 10% of the $5,000 you made as a result, and reducing the fee on the listing from $4,500 to $4,000. Get two buyers from calls on the listing, and the fee goes down to $3,500. Of course no one would want their property on the market long enough for the agent to get 10 buyers, lowering their fee to zero. But it would be possible. Maybe it should be 20% each and 5 buyers to get to zero.

What do you think? Too complex? Is figuring that out as hard as trying to figure out what is going on with Howie on Deal or NO Deal? Maybe I shouldn’t have watched that American Inventors show…agents aren’t supposed to be as “out of the box” as you techies 🙂