The wild west of real estate: a startup story

Questions about succeeding in real estate

As a startup in the real estate industry and with the overwhelming perception that, at it’s core, this is a broken industry, I am faced with numerous questions about how to be successful. What does it take to rise to the top these days in real estate? With the value proposition of brokerages shrinking, along with their profits, how can you monetize the brokerage value proposition for your clients and yourself?

Should you become an agent to a large regional broker? Should you be a franchise to a big box brand? Should you start your own brokerage? Do you license technology or build it yourself? These are a few of the many questions I have asked myself.

I believe the consumer is entitled to all of the data that is available. Data transparency is key to the most efficient transaction. I set out to start a technology-based brokerage with a new standard of collaboration and efficiency for both the agent and the client. No, this is not a new idea but it is one that I believe is the minority in terms of the real estate brokerage experience.

Setting the stage

I want to be different. I want to be unique. I want to offer my clients a better experience. In Houston, that is a tall order. Why? We have the Houston Association of Realtors (HAR). What is so special about HAR? They are the leading MLS in the country in terms of technology and their consumer facing website. They do an incredible job of providing all the tools a brokerage or agent needs to be successful. What more could you ask for… right?

There is one pitfall. One need ask, is this good or bad? I am of the opinion that while it is good in some respects, it falls short in others. That creates opportunity.

All of the large brokerages in Houston, excluding some national names, have the same experience. They all use the same tools and there is nothing to differentiate one from the next except the agents themselves. Each does a great job and is a pleasure to work with, however, I believe there is more to the process than just the agent. In today’s world of technology and with the Internet, a brokerage has an opportunity to define themselves in other ways than just having good agents. Your sophisticated clients expect more. They are now doing a large part of the process on their own and while they still want and NEED a good agent, they also want the tools to make the most informed decision.

NuHabitat is in the process of developing our own proprietary online experience from the ground up. I could use all the tools available to me as a member of my MLS but I want to establish NuHabitat as a brokerage with the ability to stand on it own two feet. What if we want to grow outside of Houston and there is no HAR? In order to do so, there are many issues to address.

Issue one: data

The first dilemma is how do we get the data and how to have the ability to do with it what we need to give our clients the best information and experience. Due diligence directed me towards a VOW (Virtual Office Website). To my surprise, I didn’t find a good solution in the market so I said, I’ll do it myself. Ambitious… right? Look at Redfin, Zip, Sawbuck and others… all brokerages with their own value proposition. Makes sense to me.

I later found this to be no easy task. Zip is publicly traded and Redfin has raised over $30 million dollars.

Then there are the politics. Who owns the data? Is it the MLS? The brokerage? The agent? I always hear the brokerage. What about the consumer? Seems to me it is their data. The whole transaction starts and ends with the consumer. I think that tends to be forgotten.

Issue two: to VOW or not to VOW?

There are so many issues that surround data in real estate. It is exhausting. IDX, VOW, Syndication. Somebody give me a stick. I don’t think the horse is dead yet. I wont go there as it has been covered ad-nauseam, however, I will comment on VOW since that is my chosen approach.

For those of you who may not know, a VOW is a Virtual Office Website and was the result of the 2008 DOJ vs NAR settlement. In its simplest form, it allows for a brokerage to access and display on their website (once a broker-consumer relationship has been established) all the same data that can be provided to a client in a “bricks & mortar” setting or by any other means of transmission.

Seems to me everyone would do this. Well, not really. The alternative, IDX (Internet Data Exchange), is easier and cheaper. The barrier to VOW can be extremely high with a tremendous expense if you are going to develop your own application from the ground up, but the benefits in today’s marketplace are tremendous. Look at Redfin’s platform. What if you could license it? Would you? Is Redfin a brokerage, or really a technology company with an identity crisis?

It would seem to me that with the never-ending debate about the end of IDX and brokerages pulling their listings or the concern about syndication, VOW would be a no-brainer.

Real estate is still the Wild West

There are a lot of moving parts and I hope I can share my experience first hand and maybe save someone else the aggravation that I deal with while navigating the process of starting a technology focused model in an industry that feels more like the wild west rather than one that represents the single largest asset each of us will probably own.