Monday, April 8, 2013

Revolutionalize Real Estate: A Modest Proposal, in Which We Talk Shop

The question of the what's the Next Big Thing in real estate comes up every now and then, and I pretty much think no one knows what it will be. But then comes a new venture called LessThan6Percent, which takes a big step forward in the home-selling process. It has huge potential for consumers.

As things are now, the 21st Century home-selling model--find an agent who will put your home on MLS and likely sell it at some point--isn't too terribly different from how it worked fifty years ago. Differences can be traced to the advent of the internet. Perhaps the biggest change is that brokerage firms are no longer gatekeepers to information. 

Until the internet matured sometime after 2000, anyone who wanted to buy a house had to contact a real estate broker and look through a periodically-updated book of multiple listings. Now, Redfin (who has the most useful website) and other sites such as Zillow and Trulia make information widely available.

One effect of the internet dynamic is that the needle of real estate transactions has moved from Brokerage-centered towards Client-centered, stopping midway around Agent-centered. The buyer/seller still pretty much needs to use an agent's services and isn't really in control of what he or she needs, but the brokerage house is less important than an agent: You care who Smilin' Sue the Agent is, but not what firm she works under.

Think of it this way. If you want to sue someone for a personal injury, you can pretty well determine your own issues and contact an attorney who specializes in your personal injury theater. A lawyer's quality brands her or him. While you know the branding difference between JC Penney and Nordstrom, you know nothing of the difference between, say Remax and Coldwell Banker.

When you want to sell your house, though, "branding" evaporates. You get offers of "free CMA's," which says something about the CMA's actual value. You get declarative statements of "neighborhood expertise," with no objective correlation. You get representations of dollar volume--"Million Dollar Club Member," for example--which has the value of "We're Number One." So what?

Agents' self-created branding is often something you have to take on faith. As my father used to say, "Joe is a helluva guy, and if you don't believe me, just ask him." Is your  agent any good? Just ask him or her.

Quality, by which I mean agent expertise, fees, services and transparency, is not readily obvious or even available, as it pretty much is with an attorney. Worse, no one thinks much about these metrics. Most people go with someone they know or with whom someone referred him or her to. When you want to sell your house, you have a dizzying array of choices from For Sale By Owner to hiring your broker father-in-law.

Browse a real estate website, and you'll be directed to a broker. Zillow, Trulia, Realtytrac and most others sell zip codes to local brokers so that the broker's name pops up when you perform your search (Redfin and similar sites do not, since they're licensed brokerages). Trouble is, how do you know if that popup agent is someone you want to work with?

I can't tell you how many times long-time real estate brokers have told me, "This business is a relationships business." Well, so is everything else. You don't retain lawyers who behave dismissively to you and you don't leave generous tips for waiters who ignore you. Those kinds of transactions are centered around you and what you want, relationship concerns notwithstanding. 

With a personal injury lawyer, you pretty well know what you're getting when you select a $500-per-hour firm over a $200-per-hour firm. With a real estate broker whose compensation depends on the close of your transaction and not its conduct, you have no idea. Her advice to lower your price or accept an offer is always a bit suspect, no matter how much you like her, no matter how nice the relationship is.

With LessThan6Percent, a seller enters certain criteria, anonymously, and a local broker will make a proposal, including fees, marketing plan details, and so on. In other words, a client may see, in detail, what she's getting and what it costs. This is really cool. Sadly, the service is only available in the San Francisco Bay area, but it's a sign of where things are headed, in my view.

I have some issues with it. Only brokers who it sells subscriptions to can respond to client Request For Proposals (RFPs). LessThan6Percent has determined its own criteria for broker-subscribers, and their metrics exclude newbies and others with low volume, for whatever reason. It still has a top-down factor, which is anti-consumer. Excuse me, but new, young brokers without much of a track record and hundreds of past and future clients on a drip mail system can often do far more for you than Mr. Spin and Grin on the shopping cart. Number Two might try harder.

To me, the ideal consumer website would allow sellers to post their homes for sale, with free, unfettered access to the site for buyers. Brokers, title companies, lawyers, home inspectors and brokers could advertise on the site. Sellers would have the option of paying for whatever services by tendering RFPs, and buyers could likewise receive offers for representation and, in the process, learn that buyer-brokers are not "free" after all.

The transaction would be completely Client-centered, because brokers, and others, would compete for your business in a totally transparent way. People who don't like hondling (excuse me, haggling, or who like working with an objective, structured and (initially) anonymous process--which includes most millennials and many Gen X'rs and Y'rs prefer doing business this way.

The Next Big Thing? Maybe.


***

I was going to write a few lines on why Redfin is so terrific for both buyers and sellers, but this post has gone on too long. If you're interested, ask me in the comments section. I've been thinking of doing an advice section anyway, and this might be a good way to kick things off.

I can't always write about LIfe and my sometimes cynical, hopefully humorous, approach to it. Real estate, where I've worked more than 35 years in various capacities, needs to count for something.







2 comments:

  1. Hi William,

    Thank you for your considerate comments about our service. Over the last few years, companies like Redfin, Zillow and Trulia have changed the way home buyers and sellers behave when it comes to real estate. As you mentioned in your post, we have created a marketplace for agents to compete for listings. The result is that our service puts the power back in the hands of the seller. Something that we think needed to happen for this industry to evolve. Redfin empowered the buyer and made the experience easier and smarter. I should know, I was there in 2006. On the other hand, the home seller process by and large has remained the same, hence the genesis of our company.

    Just to be clear all of the agents that we partner with don’t pay a subscription. Real estate agents don’t subscribe to work with our sellers, they are given opportunities to meet with real home sellers. As you had mentioned, In this industry, there are too many “pay for play” sites, we want to be different. We are very proud of the relationships that we have created, we have met some amazing people along the way.

    When you have time, we just added some new features to the site. We would enjoy getting your take on some of the new things that we have done.

    We re-designed our “How it Works” section
    We added a video section featuring some of the top agents in our network
    We added Home price appreciation vs. S&P 500 interactive chart

    Happy Selling,

    Maximillian Diez
    http://www.lessthan6percent.com
    Find me on twitter: @max_diez

    PS. Over the last few weeks, we have received a number of emails from home sellers in Denver. Colorado is definitely on our map.

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  2. Indeed I shall have a look. Since this post is a couple of months old, I'll update it. Except it will be at my newer blog, A Rookie's Guide to the Real Estate Galaxy at http://rerookieguide.blogspot.com.

    ReplyDelete