It was always about the data
This week I wrote an article on the Real Estate Revolution circa 2005-2007. In this time, traditional real estate was attacked at virtually every level, and the MLS was target #1. The launch of Zillow.com signaled that radical change was eminent, but no one was really clear of what the change might look like as Zillow head Rich Barton was tight lipped in those days, allowing curiosity to drive buzz behind the funded giant.
It is what it is
“I think that people go into a first meeting with a realtor right now in a very disadvantaged position”- Rich Barton
What we knew of Mr. Barton at the time was that he headed Expedia.com which did revolutionary things
within the travel industry, and he suddenly dropped big bucks into real estate behind the brand Zillow. Zillow in the beginning went with valuation models in the form of Zestimates attempting to level the playing field for consumers when dealing with Realtors and the MLS. In an interview with NPR’s Michele Norris, Barton was asked, “do you think you’ll have a similar effect on the real estate industry?” Barton responded, “well, I think our effect will be different but the inspiration is the same. Expedia was a travel agent and Zillow is not a realtor. It’s up to the consumer as to what they do. I think that the industry is at kind of a cross roads…” Barton went on to say, “you know, I think that people go into a first meeting with a realtor right now in a very disadvantaged position. They don’t know too much about actually what’s going on other than scuttlebutt and what they’ve heard. And I just can’t think it’s a bad thing for people to educate themselves and get smart and to have their own information source so they can sit down with that realtor and have an educated conversation.”
There is nothing wrong with the intent of this model as on the surface it is consumer advocacy, however, what Mr. Barton appears to be alluding to is a new MLS not in the hands of the Realtor brand, and instead monetized and now open to the public via Zillow.
What Mr. Barton also implied was that Realtors were no longer to be trusted as the consumer advocates they had proclaimed themselves to be.
They really don’t need you
There has never been a retraction of this sentiment because it’s stated fact- the only difference is that Zillow supposedly needs Realtors to populate listings and fill out their Zillow Forums and Mortgage Marketplace. But do they really need agents for that? Their model says they don’t- they’ve populated the consumer’s data for them. What Realtors fail to realize is that their participation is expediting the creation of an alternative to themselves.
Thousands Points of Light, or Thousand Tiny Shackles Spin
From 2005 through 2008 the housing bubble and the ensuing mortgage meltdown were the masked ploy to wedge consumers against real estate professionals wearing the Realtor brand, when all the while the MLS was the target. Data being the target, Glenn Kelman of Redfin says that the MLS is “a thousand tiny shackles on innovation,” according to a September 2006 New York Times article “The Last Stand of the 6-Percenters?” in relation to its limited use or display. Columnist Damon Darlin opines:
The Internet has radically changed the way consumers buy books and airline tickets, trade stock and learn news. But the real estate industry has resisted change — and protected its commission structure — by controlling the information on its Multiple Listing Service database of properties for sale.
The drum beat of the message by venture based companies like Zillow and Redfin were captivating, even to big media (evidenced by the image shown above from the New York Times article), as the bubble in Seattle, California and other places were at their peak. Home prices had skyrocketed, and commissions sored, creating the perfect storm for a mass media campaign to discredit and breakup the broker relationship model known as the MLS.
A new Realtor like brand? No Thanks!
Zillow’s Rich Barton has clearly stated they have no intent to begin an agent model, and why would they? Their sole goal is to provide an alternative means to information not controlled by brokers, and how Realtors continue to practice real estate is not their concern as their model is clear- open information for consumers, supported by ads. Barton in this February 2006 New York Times article said, “people want Realtors. But is it rational to pay Realtors what they are paid?” Reporter Damon Darlin added, “he [Rich Barton] says he thinks they are overpaid because customers are doing more of the work themselves.”
You’re an accessory
Today, Realtors continue to feed Zillow’s forums, and brokers continue to feed Zillow’s listing data, but we’re not really sure to what end because in 2006, the industry was focused on hypothetical situations whereas now, all intentions are clear. The National Association of Realtors and its one million plus members have acted as an accessory to their own demise in that Zillow never needed agents to populate listings or its forums, as they’re counting on the reality that consumers will do it for themselves (and they are). Zillow has become integrated into your IDX and is found on almost every alternative real estate webpage out there and continues to brand itself as the consumer’s “edge in real estate” but I have to ask- whose throat is the “edge” against?
Fred Romano
October 29, 2009 at 1:49 pm
Wow this a powerful post! Great reading Benn, and it’s true, Zillow.com could be a serious threat to Realtors. But we all feed it… Will it hurt us? We shall see.
Matthew Hardy
October 29, 2009 at 2:14 pm
The typical real estate transaction *remains* complex enough that agency is still required/desired. There have been many times in business, while being perfectly up to the task at hand, I *preferred* to have representation – for negotiation purposes or other reasons. Personally, I’d rather deal with a professional in any arena that appreciates my being well-informed. Our work together starts at a higher level and the outcome is usually better and provided faster. There are many reasons to pay higher commissions than the lowest found. Real estate is, and in my view will remain, a profession that cannot be supplanted by a system. The only thing I can see changing that fact is if the government does away with private ownership of real estate. Nobody sees that coming, do they?
Jordan Muela
October 29, 2009 at 2:31 pm
How would you respond to the simple free market argument that if in fact Realtors provide services worthy of their commission than they don’t need to worry about consumers having choice since they will still use their services.
Benn Rosales
October 29, 2009 at 2:41 pm
I wouldn’t, let them make choice based on fact, not spin.
Jeff Allen
October 29, 2009 at 2:50 pm
“You’re an accessory.” Powerful line. The question, if that’s true, is are realtors getting paid like accessories yet? Or full-service providers?
Russell Shaw
October 29, 2009 at 3:13 pm
Rich Barton can spin PR on Realtors any way he chooses. He found (the hard way) that what he was saying was producing a *very* bad result and personally stopped saying much of anything. In fact, he went the other direction and hired extremely likeable people to do the PR for Zillow.
Zillow is not a “threat” to Realtors any more than any of the many other “remarkable new things” that were going to cause our demise. When the market is a red-hot seller’s market for an extended period of time those predictions always surface. They die a silent death every time, once the market changes back to a buyer’s market.
GREAT article, Benn!
Marvin Jensen
October 29, 2009 at 3:35 pm
The information on the MLS is only a small part of the purchase and selling process.
It’s pretty hard to look at 15-20 homes in a day on your own; it’s pretty hard to create a purchase agreement if you aren’t familiar with the forms and language; it’s pretty hard to negotiate the terms of purchasing a home if all you do is purchase stuff at retail outlets; it’s pretty difficult to understand what the inspection report is telling you, do you need a radon test, is cracked caulking in the shower a deal killer, what about the roof, do you even know a good qualified inspector; it’s pretty difficult to understand when the appraiser uses comparable properties from another neighborhood and your purchase price appears low and now you don’t qualify for a loan, that they used incorrect comparable properties; it;s pretty difficult when you get to the closing table, to understand what the h*ll you are signing, and did you get a good deal on the loan…
I’m sure I missed a hundred other items, but I’m sure you get the point. Zillow can’t do any of the above items…. Data on the MLS is only a SMALL part of the purchase process!
Can some buyers navigate this process on their own, yes. But most can’t, won’t or choose not to. That’s were a good Realtor comes in, and only then….
Bruce Lemieux
October 29, 2009 at 4:11 pm
If you’re watching to see fundamental changes in the business of the real estate industry, I don’t believe that Zillow and the MLS are the places to look.
#1 – MLS. MLS’s are here forever and will never be replaced by Zillow or equivalent. Some think this is a mere computer entry of an address and price. But it’s much more than that, isn’t it? For a listing to enter an MLS, a *legal contract* between the home seller and agent is required giving the agent (broker) authorization to market the property and represent the owner during the selling process. The MLS imposes the rules for cooperation between brokers providing us all with a transparent and predictable market place. This is good for agents, homeowners and home buyers. These RULES come with the MLS and cannot simply be replaced by a national technology company. Yes, an MLS is a local monopoly that can be slow to change, but they are ultimately good for everyone. MLS’s aren’t going away.
#2 – Zillow. Unless I’m missing something, they make money by attracting visitors to their website and charging for advertising. Since they have no direct business relationship between buyer or and seller, then I don’t care about them. Long Live Zillow. Let them get better and prosper.
The real “threats” are changes to the current brokerage business model. Redfin is definitely one to watch. They are being successful by implementing a different business model that operates within the rules of an MLS. I just took a look at their stats for MRIS (the MLS for the Metro DC area and beyond). Over the last 12 months, they’ve closed $4M in listings. Yawn. For buyers – over $105M closed up from under $12M the previous 12 months with only 8 agents. If they continue at this rate, the will approach $1B in buyer sides this time next year. Wow – very impressive.
The Zillows and Trulias of the world may be somewhat influential, but ultimately peripheral players for real change, IMO. Many large, traditional brokerages still maintain big cost structures. So much bloat will present opportunities for more efficient models like Redfin to prosper. The end result, I hope, is a real estate industry that’s more professional that provides more better value to buyers and sellers. It seems reasonable to me that the compensation per sale will to go down in the future, but we should all be better able to take advantage of technology to service more clients and still earn a good living.
Benn Rosales
October 29, 2009 at 4:28 pm
“operates within the rules of an MLS” not because they want to, but that’s another module to a long story 😉
A Zillow listing service is already in place, it also provides valuation, as well as compeitive marketing data. You can make the argument that it’s crap, I’ll leave that up to you.
The real questions is, will consumers run with it? Probably not in this down cycle, but the minute the world begins to spin again, I predict they will at least try, similarly to how they are with FSBOs.
The problem for Zillow is their new competitor is an up cycle away.
We’re not looking to Zillow or MLS for innovation, we’re simply illustrating how complacency can be used to root and destroy market share- agents and smaller more lean brokerages can do better, if they want to, I’m not sure there’s a big brokerage house out there worth saving imo.
Briggs Freeman
October 29, 2009 at 8:47 pm
RT @coldwellbnkr: Questions on the Real Estate Revolution https://bit.ly/aQLPz #realestate
InvestorsClassifieds
October 29, 2009 at 8:51 pm
RT- RT @coldwellbnkr: Questions on the Real Estate Revolution https://bit.ly/aQLPz #realestate: R.. https://bit.ly/IhmUd
#realestate
Matthew Rathbun
October 29, 2009 at 10:14 pm
Benn,
I often wondered why Realtors push so hard for a revolution in marketing, but not in the core element of how business is done. It seemed like fee for service was on the rise in the “good times” and isn’t nearly as popular now.
We constantly talk about meeting the client where they are and raising the bar, yet we want to innovate everything but traditional ways of doing business.
iRealty Inc
October 29, 2009 at 10:23 pm
RT @agentgenius: The info on the MLS is only a small part of the purchase and selling process.
It's pretty hard to… https://bit.ly/FhktR
iRealty Inc
October 29, 2009 at 10:26 pm
Consumer Facing Real Estate….Reality or Pipe Dream??? https://bit.ly/aQLPz
HAUTE NATURE
October 29, 2009 at 10:50 pm
RT @iRealtyCO Consumer Facing Real Estate….Reality or Pipe Dream??? https://bit.ly/aQLPz
Michael Wurzer
October 30, 2009 at 2:30 am
Good questions and comments over at Agent Genius re whether the down market is hiding Zillow's industry impact. https://bit.ly/aQLPz
FrancesFlynnTho
October 30, 2009 at 2:38 am
@mwurzer I think Agent Genius article is based on false premises about Zillow. https://bit.ly/aQLPz Organized RE reaps what it sows.
Steve Remillong
October 30, 2009 at 3:06 am
The War on (Terror) MLS – Questions on The Real Estate Revolution https://bit.ly/2wqkFD
Will Kelly
October 30, 2009 at 3:38 am
Good questions and comments over at Agent Genius re whether the down market is hiding Zillow's industry impact. https://bit.ly/aQLPz @mwurzer
Marlow
October 30, 2009 at 4:31 am
Matthew asks: “I often wondered why Realtors push so hard for a revolution in marketing, but not in the core element of how business is done. It seemed like fee for service was on the rise in the “good times” and isn’t nearly as popular now.”
Right. Not so popular now. Probably because it’s been tried by a handful of people and didn’t work. May work in certain situation for sellers, but would probably never work for buyers.
Buyers don’t want to pay upfront. It’s not done in any other businesses, so why real estate? When you walk into a shoe store you don’t pay the shoe salesman to try on some shoes. He helps you “for free”, brings out what you want to see, maybe suggests another similar shoe in another line or color, waits for you to try them all on, and then rings you up at the cash register when you’re ready. Then you pay, when, and only when, you’ve found the shoe of your dreams. He doesn’t collect a fee at the door or charge you an hourly fee for his time.
Some people try on one pair of shoes and buys them. Another person may try on 10 pairs and not buy one. But the commissioned shoe salesman needs to service each person well. When he gets good at what he does, maybe that shoe salesman can offer the buyer suggestions about other shoes and increase his sales that way. Or maybe he can learn to work with several buyers at once, increasing his sales even more. The people that buy shoes end up “subsidizing” the people who don’t, but that’s the way it is. It’s the cost of doing business. People who don’t like this can go to a discount shoe store, but they often have trouble finding what they like because the discount shoe store, operating an a shoestring, may have less of a selection and less service. But even at the discount shoe store, they don’t pay upfront.
John Foreman
October 30, 2009 at 5:19 am
The War on (Terror) MLS – Questions on The Real Estate Revolution https://bit.ly/41eoFY
Doug Lazovick
October 30, 2009 at 2:21 pm
Benn,
I think that given all the data that was suddenly available to the consumers, their first inclination was that the they can do it on their own. However, I think what they have begun to discover and will continue to discover is that most would prefer to be guided by a professional.
Furthermore, the recent boom in RE prices made consumers “professional investors.” With Zillow at their hands, why even use an agent. But with the recent bubble and meltdown, these professionals will go back to doing what they were doing before to make ends meet and find out they have no time to play professional.
I think we will get to the point where every consumer will have enough at their hands through the Zillows of the world to get extensive price and informational discovery. So, for them, the differentiating factor will be the agent. Someone who is good at what they do and not a hack. In that regard, I think that Zillow’s “edge” is against the throats of the poor agents (who only give the profession a bad name and drive people into thinking they can buy/sell on their own)
Just my two cents.
Doug
Rob McCance
October 31, 2009 at 12:46 pm
Benn:
Good post and good timing, with the recent Real Estate “capability” Google has added to their maps.
I think that regardless of where the MLS data gets spread around, there will always be the need for a Realtor, at least on the buy side.
Can you imagine the failed transactions and resultant lawsuits everywhere from untrained individuals trying to execute deals?
There are way too many laws governing all this stuff. Even the simplest of activities, like giving people the ability to enter a home (via lockbox) to do a showing.
Does the current cost structure seem crazy? Maybe. (at the higher end of the price scale)
Will it evolve to something else? Possibly.
If it evolves to some sort of fee for service which is unsustainable, then we all move on to higher paying professions.
Hey, change is fun.
🙂
Rob McCance
November 1, 2009 at 10:04 am
So I asked the wife this morning to:
1) go to google
2) click maps
3) type in Atlanta Real Estate (you don’t have to go to more and select real estate)
She says, “what are all these dots?”
I say, “zoom in on our neighborhood.”
She sits there for a while clicking away, then says “Why would anyone need to use your site anymore? Why do you pay to provide this info? Why do you do all that stuff that you do?”
I just responded “the game may be changing” and she looks at me with this concerned look.
Benn Rosales
November 1, 2009 at 10:55 am
Rob, concern is the first step, the second is going all in 🙂 We’re right there with you but about four steps ahead. There’s a new post coming today that will give you a glimpse into the future. We were scoffed at back in July when I brought Googles US play to the attention the real estate blogoverse, and I was vindicated. What’s coming today is more bad news, but a real shot at advantage… stay tuned.
rob mccance
November 1, 2009 at 12:42 pm
Benn:
If any of these naysayers can seriously go to google, do a search, click the dots and realize that there went the prospect, and still not be concerned, then those will be the first to go!
It worries the crap out of me, because just first pass, its better than a lot of the garbage IDXs out there.
And the same company presenting the data controls the search results on the side of the map.
Ouch.
Bruce Lemieux
November 1, 2009 at 1:32 pm
I have no doubt that Google can create a sexy interface off of this data, but the data itself is not very good – often it’s not accurate, and it’s not complete. None of the non-MLS data is (Trulia, Zillow, etc.). Be the consumer, click on a google dot and make a call. How’s that experience? Not so good I think, although you might get lucky. Consumers will seek out reliable, quality data sources which will ultimately lead them to MLS-sourced listing data.
You worry about not getting the call, but you don’t get most calls now. The consumer currently finds your listings on lots of IDX or syndicated sites — not likely from your site. Although they’ll indicate the listing broker, you don’t see the listing broker’s contact info, do you? You see the contact info from the agent/broker/company that provided the IDX. That’s who the consumer contacts.
MLS-sourced data is the gold-standard for data quality. It will be this way forever, unless, as suggested by this article, that a MLS competitor will spring up in the next up-cycle. I don’t see this happening. It’s just too hard to implement the underlying – and necessary – business rules that govern data maintenance within an MLS. I’m not pro or anti MLS, but that’s how I see it.
I’ve re-read the article, and I simply don’t see the threat. The real change is that consumers are given access to more and more data — and more and more noise. As a result, agents will have to be more knowledgeable to help consumers navigate the sea of data to help make informed decisions. And, we’ll have to adapt our lead generation methods. It sounds evolutionary to me, not revolutionary.
Rob McCance
November 1, 2009 at 3:24 pm
Bruce:
I completely respect your opinion.
I’ll just say that I’m more worried than that. Right now, the data is iffy, scattered, unverified and from all sorts of sources. But this just started, and already it’s not horrible.
Here’s what could be next:
Someone types in Atlanta Real Estate.
They get the usual SERPs but at the top will be a small Google map with the red dots all over it.
This is eye candy at a minimum and gets clicked. The searcher says, “hey sweet, these dots are the listings. This is all I wanted. This is fast, clean, from Google (so it must be right) ….so I’ll just use this.”
Then they click the dots, find one they are interested in and in my case, call Coldwell Banker, who “owns” a lot of these dots because they have a page on their site that lists ALL listings in text form. They apparently were ahead of the game.
So now, I have to say, how do I become the link on the dots. Probably not possible.
That’s game changing. And in my estimation, that won’t be the end, but the start.
Now maybe Google realizes that any way they can monetize this produces LESS income than the ad revenue they will be displacing. But, if this is the case, then why do it in the first place?
Who knows. This is all conjecture. But, I’ll go back to my original stance and just say I don’t like it.
Bruce Lemieux
November 1, 2009 at 4:35 pm
Rob, I hear you. Especially as google rolls out attractive new map-based apps, I too believe that consumers will find their red dots. As consumers try to find homes here, I believe they’ll quickly discover that the data is poor and they’ll migrate to other sources that are MLS-driven. Going to a broker site, Redfin or others won’t help you get the call… unless they find and stay on your site.
Still – I too wonder how to get ownership of the red dots. My listings are syndicated to Google maps a couple of ways. I would like to know how to control the dot.
Rob McCance
November 1, 2009 at 5:21 pm
Bruce:
If Google really didn’t want in the game, then all the dots would come from the local MLS via direct feed, and just say:
SOURCE: FMLS Georgia
I could live with that. Then the searcher would still need to search for a Realtor.
Isn’t it funny that one day we are all discussing page one and targeted traffic and the next day it’s all red dots. (over exaggeration I know)
LOL!
Rob McCance
November 1, 2009 at 5:27 pm
Bruce:
I noticed a week or two ago that in my area, if you zoom in far enough on a Google map, you get a light grey outline of the land lot.
Of use only to real estate, I would think.
Hmmmm..
Bob
November 1, 2009 at 5:31 pm
Google Base will probably do something like that, but the listings would be sourced to the listing broker. You’ll get your name on the dot by being the listing agent. And before you tell me Its just my opinion and Im over reaching again, that scenario was put forth as the long term goal in a discussion I had with one of the lead engineers from the Google base team at the Plex,
Google wants accurate data and has been right there with other 3rd party entities like Trulia and Zillow trying to get an industry wide data distribution standard in place that would be used by everyone for syndication. Bad news for lead generators, but good news for listing agents.
This dovetails with Google’s stated philosophy (Eric Schmidt) that the brand is important – if you Google Marriott you should get Marriott and not an affiliate. They can accomplish that in real estate with Google Base and a standardized RETS feed. Its not displacing the local MLS, but repurposing the information they get from the MLS and monetizing it with ads. That is the biz model – take all the content they can get and monetize it with ads, as ad revenue was responsible for almost all of their $22 billion in revenue last year.
The #1 issue for the RE biz is understanding that since we can’t put the mls data back under lock and key, we have to figure out how to syndicate it properly. Once the power players understand this (and Google is doing their best to explain it to them one big broker at a time), we will start to see more of a coordinated change. I believe this is one reason why NAR didnt act decisively on the mls indexing. I believe there are a few who clearly understand the R.com problem and know that sometimes not acting decisively is a wiser choice than making the wrong decision for the long term.
Rob McCance
November 1, 2009 at 5:58 pm
Bob,
Let’s take all your info at face value and take it a step further then. Try some predictions.
Lets assume that Google, Trulia, Zillow and xyz, are all fed a nightly updated aggregate feed of every MLS in the nation.
They make huge announcements, run TV ads, etc., and the public eventually knows these sites are the one stop place for all RE Listing Data.
If every listing must link back to the listing office, what happens to the listings with no web presence? Believe it or not, there is a real percentage there.
Also, if this link-back is not a requirement, what does a user get when he clicks the red dot?
Do all these National MLS sites try to capture the leads and sell them to agents, aka HomeGain?
Going on, what’s left for folks like me and you and others that are in the lead generation game?
You stated Googles biz model, and I fully agree. But if every red dot links to a competitor of mine then why do I want to run ads on Google at all? That seems like just too much competition.
I’ve then got to pay for ad space beside the map with the red dots and each dot is a competitor of mine.
Ooff!!
Bob
November 1, 2009 at 7:40 pm
We still own the data, so it is up to us to decide how it can be used. IMO that is via a standardized data feed adopted by every MLS where we retain our leverage and local autonomy. Think of it as states rights While the data feed is standardized, each MLS should have the ability to decide what info to include. Since the listing technically belongs to the broker, my guess is that the broker would decide what contact info would be included.
The upside for us with a standardized data feed is that we can use it to equalize the 3rd party players. if everyone has it, it decreases its value to any one player. I would like to see Bing, Google, Trulia, Zillow and whoever else have all of the listings as long as fair use is defined by us.
That eliminates the need for a national mls provider with any centralized control (good for all agents – not just those who belong to NAR}.
The downside is that buyer’s agents have to figure out how to make money if they don’t intend on having any skin in the game like a listing agent does. When I started 20 years ago, the listing was the key to success in this business, If you didn’t have any listings, you held open houses, but you didn’t expect to be top 10 in the office with a one-sided biz model. The Internet and IDX allowed us to take the open house concept to the next level, but it also opened the door to the 3rd party.
Standardized listing syndication allows the industry to regain control of the product they lost with IDX. Lead generators will have to figure out something new, or start listing properties, or find themselves paying referral fees for leads generated on the backs of the Russell Shaws of the world.
At the end of the day, it will raise the barrier to success and cull even more from the business. On the listing side, it will shift the emphasis from those who are primarily great marketers to those who are great agents. With marketing almost a default level playing field, representation will be how value is measured by the consumer.
Fred Romano
November 1, 2009 at 7:47 pm
It’s simple… Everyone (sellers) will just list their home for sale on Google, offer a fee to a buyers agent (or not), then buyers will find the home and buy direct from the seller.
It could happen. Google could replace the MLS as we know it. Think about that 🙂
Bob
November 1, 2009 at 7:56 pm
Like I said Fred, the value is and has always been in the representation.
FWIW, I dont believe Google will be a national mls. They rely on content and all we have to do is distribute it to the point where its ubiquitous.
Bruce Lemieux
November 1, 2009 at 8:44 pm
Bob – If this is Google’s strategy, why wouldn’t they start by targeting the largest MLSs and simply process existing IDX feeds? This gives them clean data for a few large metro areas, demonstrate how they would use it, and could help put them in a leadership position to develop a standard data collection process for subsequent MLSs. Maybe this is a tactical question. As you say, the broker would still control the use of the data. Why wouldn’t any listing brokerage support getting this additional exposure from Google? I guess NAR would be a barrier since ultimately R.com could go by the wayside. REMAX.com would also be directly affected. Are their other losers…. besides IDX providers perhaps?