Buyers get understandably frustrated with the Realtor-centric property sales system, or more specifically, with the tools we provide to enable buyers to search for properties and make decisions. Younger, tech savvy buyers, in particular, want to be more in control of the process, and less at the mercy of Realtors to dole out information. Realtor multiple listing systems, for the most part, are still stuck back in the 20th century, largely designed to enable the sharing of listings between Realtors. The systems, along with Realtor attitudes, need to be reengineered for the 21st century to be buyer-centric.
What do I mean by that? During my time on the board of the Sullivan County MLS, we almost never discussed how the MLS system can facilitate property searches by buyers, only how the system works for brokers and agents. The consumer MLS searches found on agent websites like mine aren't even provided by the MLS. Each of us individually contracts with a vendor who receives raw data from the MLS, converts it, and offers the consumer search capability. Unfortunately, as a small MLS, Sullivan County only has a few vendors who offer this service and the choices, from a technology standpoint, are less than stellar. I wish I was a large company with a hundred thousand dollars to invest in rolling my own, but I'm not.
Even then, a consumer search would still be hobbled by MLS policies that are anything by buyer-centric. The Sullivan MLS, for example, doesn't permit the property address to be displayed on a member's consumer MLS search. So unless you contact a Realtor, you can't get the property address to do a drive by, or pull up an aerial view in Bing. The lack of adequate property identifiers also limits the ability of a buyer to research tax and property records without the intervention of a Realtor. A buyer-centric MLS would also include a detailed pricing and listing history on a property available to buyers, not just to agents, as well as links to tax or survey maps.
Some features are beyond what the MLS and Board of Realtors can facilitate. For example, until the county provides tax maps in GIS format, a robust tax mapping system as part of a consumer property search isn't possible. But in the meantime, a .pdf of the paper map could be a required inclusion as a link.
And I've long been an advocate of developing some type of publicly available feedback, comment and rating system on listings. While we're at it, why not let potential buyers search "sold" property listings, so they can independently form their own opinions of value. I criticize the "Zestimates" on Zillow as painting an inaccurate picture of value, but we Realtors don't provide a more robust or accurate system.
One move that could facilitate better buyer-centric technology is the merger of MLS's into larger regional MLS's or even a statewide MLS. An MLS with 4,000 or 6,000 agent members as potential buyers of add-on services is much more attractive to technology vendors than one with 200 or 400. Our MLS neighbor to the south, the Greater Hudson MLS, has 4,000 members, who have a much wider choice of consumer MLS search options their members can choose to buy and implement, including iPhone apps.
Many members of smaller MLSs like Sullivan resist merging with a larger MLS because of a fear we'll lose our independence and sense of identity. But never do I hear anyone say we'll lose our relevance. I've been part of MLS strategy discussions both locally and on a statewide level, and almost never is the buyer brought into the mix, in terms of "What does the consumer want?" Just once, I'd like to be part of a Realtor brainstorming session that starts from "What does the buyer want from us, and what steps do we have to take to give it to them?" That may mean giving up some control and forming into larger constellations that can develop and deliver the bells and whistles that buyers want.
In the end, we'll only survive if we stop focusing on how we, as Realtors, want to sell, but shift to focusing on how buyers want to buy.
I could not agree more with this. We've done several FSBO transactions, and they have been great experiences. If they want to survive, realtors need to focus on staying relevant and providing information and service, not on withholding information and ramrodding people into using them. They should wake up to the fact that people are starting to realize that they can do much of what a realtor does on their own, and many will happily do so if it saves them 5 or 6% of a sale price (which in NYC for example can easily mean $50K ++).
Posted by: marie | January 20, 2010 at 01:22 PM
In the past, when I first starting nosing around the market, I was able to figure out the street address pretty easily by looking at the map and directions available via the MLS. But it was cumbersome and stupid.
Posted by: Bix | January 20, 2010 at 03:54 PM
David..... I believe you are illuminating on transparency, the dirty T-word seller agents cringe to hear. Seller agents have to be sales people. They have to exhibit the best features and hope the negative ones go unseen. The seller agent wants to make the sale and that's it.
Posted by: Mr Hamilton | January 20, 2010 at 08:23 PM
marie, I still do believe that skilled, experienced brokers can greatly expedite a transaction, making the process more efficient for both buyers and sellers, with a higher likelihood for a successful outcome. I get emails all the time from buyers who have embarked on a FSBO transaction, and now need recommendations for home inspectors or attorneys, have encountered a problem with financing or appraisal, or some other issue that brokers have a lot of experience with. Buying or selling a house is also a higher stakes transaction that's much more emotionally charged than buying a car or a digital camera, and having brokers act as intermediaries often can keep a deal on track when buyers and sellers dealing with each other directly might implode. We bring to the table a lot of experience (and solutions) that might otherwise shit can a deal. That's the real value of experienced brokers and agents in a deal, not the control of information.
Every Sunday, the NY Times Real Estate section features 5 or 6 properties on the market. With each description, there's a short synopsis of the pros and cons of the property. That's the kind of thing I'd like to start seeing in listings, rather than just all the flowery prose proferred by listing agents. Tell potential buyers the cons, as well as the pros, because they're going to see those power lines right behind the house when they come to see it.
Posted by: David Knudsen | January 20, 2010 at 08:53 PM
Not to fluff David in the umpteenth comment but having been through the process I literally can't imagine trying to do it again without him or someone like him, a competent broker. Certainly on the buy side.
Sure, yeah, if I lived in Sullivan full time and started accumulating properties and knew every area and back road intimately I might not need such an agent. But then of course if I knew how to stitch up a wound I wouldn't need a doctor.
I suppose I could see an argument for the owner selling, especially if they are year round residents. I know a lot of seller's agents don't seem to do much and it's not rocket science to keep the house staged, take great pictures, and be available for showings. Though determining the proper sales price and a good offer to accept of course are the kind of decisions that could be helped with some from experience.
On another topic - David, how tightly controlled is the MLS data, from a developer standpoint. If, hypothetically, someone was interested in doing the development work and building superior tech to integrate the MLS data with agent websites, or felt like building an iPhone app, would it be a simple matter of willingness to invest in the technology and follow the MLS rules, or do you need to apply, have some kind of membership, be licensed, etc, etc...?
Posted by: Nick | January 21, 2010 at 12:30 AM
Nick, a developer or third party app vendor has to get access to the data under the auspices of an MLS member. So I would contract with them and then arrange with the MLS for a data access feed for them. They have to execute a couple of agreements with the MLS regarding confidentiality, data security, and agreeing to abide by display policies. If I were to terminate my agreement with the developer or contractor, then their access would end unless they had another client who was a member of the MLS. A vendor could also apply directly to the MLS for data access to offer a service, such as transaction membership, widely to the membership. But the easiest and most direct route would be to work with an initial member "sponsor", and then market from there to the wider membership.
The big question for a developer for a small MLS is how many potential subscribers they could expect. There is no standardization of data fields from MLS to MLS. We each use different data fields and call them different things, so any vendor implementing the data from a new MLS has to undertake a data mapping and standardization process. And for many vendors, that process may not be worth it for a smaller MLS with an even smaller potential base of customers from within that MLS. That's why every vendor with a toy to sell implements all the large MLSs, because the potential subscriber base is so large, but only a couple in any category implement the smaller MLSs.
Posted by: David Knudsen | January 21, 2010 at 07:46 AM
Here's an example of the problem from lack of transparency:
I'm considering refinancing, and the mortgage broker told me that I would need mortgage insurance if my house doesn't appraise for approx 10% more than I paid for it.
Now, how he figured that out I don't know, but I do know this: I have no way of determining by myself whether there is a possibility of my house appraising at more than I paid for it. Yes, I know, the market is down, so it's a long shot, but I'd like to find out.
Comparable data just is not available in any easily accessible way. So I had to ask my always-helpful buyers broker Kathy to help out (and David, if you want to weigh in privately, as I assume you know the house I'm talking about, please do so!)
If comparable data were readily available, I could figure it out myself, without bothering people. The current lack of transparency really stinks. I don't think it helps sellers either. Transparency makes the market less mysterious for everybody.
Posted by: Bix | January 21, 2010 at 07:41 PM
Transparency works against Seller agents.
Sellers and seller agents do not want transparency, esspecially in this new normal.
Remember NAR's motto: "Now {always}is the best time to buy".
Posted by: Glass Steagall | January 22, 2010 at 10:29 AM
Sure, there will still be times when a realtor is a good investment. Yes, there are emotions to contend with, and realtors may bring a certain expertise to the table, and for some people in some situations that will be worth paying for. But there is no denying that just like, say, researching and purchasing airline tickets, eventually more and more consumers will find ways to get the information they need themselves. I just got a great price on a multi-leg trip to Europe, on different airlines etc. etc., and it didn't take me long to do it. That would have been unthinkable 10 or so years ago. People can find ways to do much of what realtors do, i.e., get comps, referrals for inspectors, and they will do so more and more. It just seems to me that the practice of buying and selling houses has for whatever reason been slow to adapt to new technologies and flatter access to information, but it's catching up. And when it does, a realtor is going to have to show how they bring real value to the transaction other than simply hoarding information.
Posted by: marie | January 22, 2010 at 02:10 PM
Sorry, I just don't agree with marie on this one. I do agree that there's an element of truth in what you say for sure, especially the last line.
There are a lot of occupations where people have made money through some combination of expertise and exclusive access to information/product/etc. Travel agents a great example, used to be you had no choice. A half-assed travel agent could still make a living as the gatekeeper to a walled of system. Now, they have to add value. There are still travel agents of course, probably hundreds of thousands of them even, but the business has shrunk from "all airline tickets" basically, ticket counters excepted of course, to those who provide valuable services, like booking really complex itineraries, large groups requiring coordination, etc. I work in the music business and know some incredible travel agents. Booking a weekend in Cancun is one thing, booking all travel and arranging docs for all principals and the support staff required for an international concert tour is a whole different animal.
So real estate agents are going to keep being squeezed by the same forces. It's unbelievable how well the business has been able to maintain the standard commission under what would seem to be such intense pressure. Everyone else has had to buckle, stockbrokers, travel agents as you mention, hell even things like newspapers when craigslist demolished the classified ad money machine. But there are other reasons besides control of information. As you likely know, NYC does not have an MLS service, and there are still plenty of real estate agents. The deals are complicated, the stakes are very high, and even rudimentary expertise is mandatory. I'm a read-the-manual type guy and did lots of research, but there were *dozens* of things about buying my first house that I would never have caught, from property lines to what inspectors or appraisers will and won't look for and care about, to being abreast of changing local zoning, you name it. The fact is there's an opportunity to add value -- since there's so much information to master, and it's not worth it for one transaction. It's worth it to pay someone who already knows.
I can research airlines and destinations and hotels online. I can research stocks online. I'm not really sure I can research Sullivan County online. Or Brooklyn for that matter. It's a lot more complicated. Which blocks/neighborhoods have certain characteristics. What's a telltale sign a deal is doomed, or a seller isn't serious? How would I know without ever having done it before, and why would I make such a ludicrously large financial decision with zero practice and no training wheels.
A better analogy might be lawyers. Yes, you could learn the law. You can't represent other people without passing the bar, but you can represent yourself. You can look up every legal decision in the universe online, you can get lawbooks, you name it. Fact is that the same several characteristics when approaching a home transaction, or approaching an encounter with a court, like a lawsuit say:
* It's really complicated, and there's nuance. A legal decision may seem very clear, but have been overturned since. A zoning regulation that's impossible to misinterpret may be subordinate to a state law. You don't know what you don't know.
* It's really important. The stakes are very high. Real estate accounts for the largest transactions of most people's lives. The dollars are usually multiples of annual salary, the commitments measured in decades.
* You don't do it very often. Or in other words there's a very diminishing return to mastering it. Unlike airline travel, where mastering frequent flier programs and bonuses and booking secrets will serve you well next Christmas, chances are all the effort you'd have to spend becoming an expert would never be used again, it would be out of date, out of jurisdiction, whatever. It's hard to justify it given the quantity of transactions.
So I think real estate agents will stick around. I suspect that listing agents who wait for the phone to ring are probably going to get replaced sooner or later by machines. How could they not. And it's inevitable that one day the logjam will break somewhere and discounting of commissions will become commonplace. But someone who is an true expert in a field that's complicated, important, and involves a lot of money changing hands, I bet will still be able to make more than a good living.
$.02
Posted by: Nick | January 22, 2010 at 07:08 PM
Nick and Marie both make good points. In the future, I expect we'll see a range of how real estate is handled, from "self service" through "assisted self service" to "fully brokered." Areas where there are a lot of relatively similar, interchangeable properties — like a suburb with block after block of 1980's bi-levels and colonials — may lend themselves to a more self service approach. Areas with more unique, less interchangeable properties, as well as properties with more complex attributes may be less amenable to self service sales.
The travel agency analogy is apt. It's something that I know quite a bit about, as I owned a successful corporate travel agency in Seattle for a number of years, through the wrenching years of elimination of airline commissions and the introduction of on-line self booking tools. (And yes, Nick, we handled most of the travel for the Seattle grunge groups of the era.) Our company survived and even prospered in the evolution of the business (and was subsequently sold to a larger company.) The reason is that we didn't just book travel, we managed the entire travel procurement process for our clients. We had great agents, great service and bleeding edge technology. But we had two aces in the hole: our ability to analyze client travel data and leverage that into negotiated deals to save companies money, and our skill at solving tricky problems. Those aces can't be relegated to technology. They require skilled people capable of creative thinking. Arranging the evacuation of a company's staff from a remote African country after a coup or natural disaster isn't something you can do so easily on Expedia. Or organizing stranded travelers into rental car caravans to get them home after 9/11.
Of course, those situations were the exception rather than the rule, and most of our business was far more mundane. That's the same with real estate. Most transactions are pretty mundane. But the value of an experienced broker really shines when they aren't. I doubt that any of Marie's FSBO transactions were short sales, for example.
One note about Marie booking her multi-leg airline trip to Europe online without an agent. How does Marie know that what she booked is the best routing at the lowest possible cost? She thinks she got a great deal, but she doesn't have a way to know that an experienced agent could have done better. I know this first hand. Until recently, I worked as a consultant for my previous travel agency and had access to the agency's airline booking system. I was very good at using it, and had years of experience using various strategies to find lower fares, particularly on complex routings. Friends often called me to ask about booking their airline tickets, and would tell me what they'd found online. On simple domestic round-trips, say, for example, from New York to Florida or LA, I often couldn't better it in any significant way. But add a third leg, or go anywhere internationally, and in most cases I could suggest a better routing at the same price or a different routing at a far lower price for the same trip. It involves the kind of thinking they haven't been able to incorporate well into the online airline booking systems.
Posted by: David Knudsen | January 23, 2010 at 06:38 AM
All good points, Nick and David. And for what it's worth, David, I think you provide an outstanding service, at least on this blog.
I have to say though that you are both assuming that the client in question, maybe a first-time homebuyer who is totally clueless, has indeed chosen a GOOD broker. Not any old broker is going to provide all of the great services outlined above to the level that, say, David would. Some do, but many don't. And maybe the person who doesn't even know where to start also won't know how to find someone knowledgeable, but they'll still pay handsomely either way (ok, the buyer doesn't pay a fee, but they might pay if they listen to bad advice or whatnot).
I recently sold a house in Sullivan, and I did use a broker. When it came time to price the house, our broker found some comps, then immediately told us how useless they were because while they were the most recent sales the properties were not at all comparable to our listing. She then suggested a price, which was, to the dollar, the price that my husband and I had in mind all along. Then as the negotiating process went along, we were always in lock-step with our broker. I say this just to illustrate that people who are fairly well-informed can often do just as well as a broker in a number of areas where they are supposedly much more "expert."
I'm not suggesting that every person will want to go it alone, nor should they. I just think the model will eventually have to change. I think people will start to offer services (maybe pricing, maybe staging or hosting open houses) on more of an ad hoc basis. People will see that they need help with some things, but they don't want to pay 6% of their asking price when they feel (often rightly) they can do much of that process on their own. (And, at least in New York, with the help of a good lawyer, who charges more like 1/10 of a % of the sale.)
And actually I do think the lawyer analogy is good. There will always be a need for good, experienced lawyers, especially for more complex situations. But you can go online now and literally set up your will. I'm not saying that's right for everyone, but the point is that for relatively straightforward legal transactions this is now possible. I just think people who assume "real estate is different, the model doesn't have to change" are kidding themselves.
PS- David, you were in the travel business, what, ten years ago? How do *you* know that online booking services haven't gotten much more competitive in that time? And some people just want to go on vacation, not evacuate from a a faraway nation after a political coup. For that I'll leave it to the experts ;-)
Posted by: marie | January 26, 2010 at 12:42 PM
Marie, while I sold my travel business ten years ago, I continued to work for them on a part time consulting basis until a year ago — and had access to the agency reservation computers. One of the things I did, pretty much up until the end, was to research fare strategies as part of my work writing a weekly travel update for the firm's clients. So my pretty intimate knowledge of airline booking systems isn't a decade old.
The self-booking systems have come a long way in the last ten years. The issue, though, isn't always the limitations of the online booking systems themselves, but rather that non-professional users don't know how to request what they really need. For example, a person may not know that the three New York airports are 'common rated', so if you have a fare that requires a same-city arrival and departure (with no break), you can fly into LGA and fly out of JFK. Or that, on a 3 leg trip, it can save a money to shift the order of the cities to put the furthest city first, depending on the fare type. Self booking systems offer options to fly on different dates, or to take a one stop versus a nonstop, to save money, but not suggest rearranging the order of a trip or to include a "throw away" flight in an itinerary.
Posted by: David Knudsen | January 26, 2010 at 02:42 PM
I really am not trying to belabor this one point about online travel booking, and again it's nothing against you personally because you seem like one of the best people around in the biz, but for example we are flying out of one NYC airport and back home into another one, and we tried all different combinations of cities and orders (no, I did not think to add a "throw-away" flight as I am traveling with children - no thanks!), and even booking one round-trip ticket and then separately the other city.
I'm not trying to defend what I did (I have no need to because I've traveled a lot - including back when a travel agent book our tickets - and am extremely satisfied with what we got), but just to say that people sometimes do think these things through in the same way an insider might. The insider might have access to other information, but my whole point is that that is slowly (or not so slowly, perhaps) giving way to everyone having pretty close to the same information.
Posted by: marie | January 26, 2010 at 03:00 PM
Sullivan County Realtors don't know how to beg. They just give up.
Posted by: Jordan | January 26, 2010 at 10:45 PM
And the analogy continues. Travel's an interesting one, as I'm not a travel agent but I would consider myself more knowledgeable than most travel agents. Not David of course, I have a strong suspicion. Although -- watch out for those add-collects if you're going to make a habit of selling hidden-city itineraries... ;-)
But.... I have a subscription to a SABRE front-end and know tons of arcane rules and how fares are constructed and how to do all sorts of things. It started as a hobby and became an obsession, and yeah now I'm the friend everyone asks for help when they have travel to book. I haven't flown coach in a long time, I've been to like 25 countries in the past 5 years for peanuts. It's great.
Side note, for anyone wanting to dive in here's a good totally free place to start. Learn what the hell this stuff means:
http://matrix.itasoftware.com/cvg/dispatch/help/advanced-topics
The fact is took me a couple years to get fluent and a couple more than that to really feel like I know what I'm doing. And I'm sure a truly experienced travel agent would still beat me, handily. There's no substitute for the concept Malcom Gladwell coined as "10,000 hours" when it comes down to it. People who do it all day every day, and are putting the effort in, are always going to be ahead of the part-timer.
And those two facts, together, I think are the main point. I have little doubt that I *could* become a pretty competent real estate agent in Sullivan County, given some time and hard work. But I'm not and I haven't. And the point is that it doesn't make sense for me to do so in order to buy one house. I will travel often, dozens of times a year, for the rest of my life. Mastering the arcana of airline rules has a long run payoff. Mastering the details required to *really* know an area and having repeated trials enough to truly be confident without an agent has no such payoff. If I ever decide to become a professional real estate investor/accumulator in SC (just after winning powerball at this rate) then maybe I would even go so far as to get an RE license.
But that doesn't apply to most people in most situations, including myself, and I suspect most others. Real estate isn't "different" and the model will undoubtedly change. I believe the NY Times wrote quite a large story about just that, and David's model of openness and transparency and engaging customers online through his website was worth of a major trend story. That's in fact the point of this post in the first place, that RE agents need to adapt to how people research and shop now.
But there's *still* no substitute for experience. I will probably buy/sell well under 10 single family residences in my life. David will do that (hopefully) every month or two. When that much money's involved, I wan't someone like that working on my team. Hell I paid something like 15k+ in the past year on just interest alone on my mortgage. There's a lot at stake. Agent's commissions don't seem too high in that context.
$.02
Posted by: Nick | January 27, 2010 at 02:04 AM