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List and Locate are NOT the Same as Sell and Buy.

“The days of paying thousands of dollars to real estate agents are over…” Working with the TV running in the background (a bad habit), this is what I thought I heard. I looked up to see a bird’s eye view of suburbia with signs of promised savings hovering over the landscape. Next, the viewer was directed to the website – www.shopprop.com

Curious, I checked it out. (You should, too.) An introductory slide show proclaims: “Today’s technology makes it easier than ever to list and locate properties but the rates have remained as high as ever.” That’s in part correct. The rates are not as high as ever. If what is meant by rates are commissions, they are, at least on average, declining.

It is true that technology makes it easier to list and locate properties. Technology, and here comes the rub, does not make it easier to sell and buy property. Being able to locate a property more easily means that fewer buyers (and agents) will get lost but it does not make a property any more attractive to the buyer who knows the smell of kitty litter or an agent who recognizes bad vintage Louisiana Pacific siding by sight. Just because the “data” about a property is available and propagated at infinitum on countless websites doesn’t make the house an easier sell.

Data Overdose The “what” does not say “why.”

In fact, the technology could make it much harder to sell because the data that has been scraped together by the zillows does not include what’s under the pillows. I think I am about to experience the downside of data because I will list a home where Zillows and the actual listing price will be about 20% apart. Zillows has the correct data. Their data is the answer to what but it fails to answer the why. The “what” does not tell you that the property was held in a trust and last sold by a bank for 19% below the initial asking price. I know so because I represented the buyer. The data does not tell you that there were rumors of mold wafting about that kept agents and buyers away for months. Scientific environmental tests found nothing foul and my buyer took advantage of the opportunity.

Kicking the tires is not something technology does well.

Given these circumstances I recommended to have the house appraised before putting it on the market (my client is now moving and asked my advice before listing). We also wanted to know the exact “finished” square footage because the “data” that’s out there does not reflect the complete build-out of the basement by the prior owner. My client and I saw at the time of purchase that the house was much bigger than advertised.

The appraiser did what a good appraiser does: measured and compared. The resulting appraised value, I am afraid, does not square with zillogical data. Technology will not make it easier to list this home. Au contraire, it will make it harder. The data does not tell the story. The data is history and knowing history is more than knowing the date of the battle but who won it and, most important, why the battle was fought. If and when I will list this property I will have some explaining to do, especially to those who put their trust in the data miners and scrapers.

Serving clients by the numbers

Which brings me back to the TV commercial and the aforementioned website. This brokerage must like data and believe that real estate is sheer numbers. “If you buy through ShopProp we rebate the buyer’s commission back to you”, they promise. “They” are currently a broker and one agent and they are looking for agents to become “listing tour guides.” The buyer is charged $50 per hour for home tours, the website says. I found nothing on how much these agent-tour-guides will get paid. But I suppose they are not expected to do much more than locating the properties. That, thanks to technology, is easier than ever.

Posted by Gerhard Ade on 12/14/2006 01:25 PM

Comments (27)

zillow, online property data, data mining, scraping, appraisal

27 Comments on List and Locate are NOT the Same as Sell and Buy.

DEC

2006

What an excellent post! There are a few dialogues in here I may just have to steal. =)

Right On! Can I score some extra kudos if I say I know how to recognize the faulty LP siding? (The secret is in the knot hole design.) Of course, I'm SURE the 'Z' will advise their consumers of that, RIGHT?? NOT!

I was a newbie when I had my first experience with the LP stuff. My buyer was a lawyer who decided they really liked the house and since he knew how to participate in that civil suit LP incurred, bought the house. We got it at a really good price because the seller didn't know about the problem until the buyer's inspector pointed it out. My buyers have since torn off the LP siding & replaced it with REAL cedar. Now 8 yrs later, I'll be listing it in Jan-Feb.

Fortunately, we don't have too many homes here with that LP stuff, as builders were just starting to use it as a substitute for cedar when the lawsuit hit.

The buyer and seller today do have more data to sort through. There lies the problem, "data overload" and they can't process it because the data lacks homegeneity.

Great post. You are right. There's more to it than data. It doesn't take much to show people how inadequate the Zillow data is. It's also amazing how easy it is to look like an expert by being able to identify Hardy Plank siding vs. LP.

Outstanding post Gerhard! To me, this pretty much sums it all up, "just because the “data” about a property is available and propagated at infinitum on countless websites doesn’t make the house an easier sell."

Spot on.

A world record for blog commenting!

http://www.ThompsonsRealty.com
http://www.PhoenixRealEstateGuy.com

This is the era of data overload; however data has to be carefully studied for it to be useful. As you rightly stated, a house might have sold for less than it should, but why? this is a question a realtor would have the answer for not Zillow.

Up until last August, the word around here was "How much over list will it take to get this house". We got the contract and our buyers almost always paid over list.

But, we killed them on the home inspections.

Lenn

I think the recent surverys on Internet further support your points. While large numbers of buyers are using the Internet, 80% or so (perhaps more now since the NAR survey), data from the California Association (I haven't purchased NARs survey data yet) also show that the majority of Internet buyers (87%) used an agent, and 97% of Traditional buyers did. They can find the homes but use an agent.

Great information. Buyers need the agent to better understand thet data (which, as we know, is not always accurate). And what data has anyone seen showing the actual usage of, and success through, by sites?

I keep wondering in print in my post responses WHEN IS THE NAR GOING TO DO A STUDY OF SIDE BY SIDE RESULTS COMPARISONS (between full service agent-represented clients, discount agent represented clients and the rest that think they saved a few shekels doing it themselves)??? Until that happens people are going to keep trying to use a computer to do a person's job. Why? Because they think, again, that they are saving money, ignorant to what they leave on the table (or what flies out the door on them). I still don't see a computer/internet based model taking over a whole lot of REALTOR jobs, but I do see the internet as a fantastic place for us to better enhance our client prospecting, our marketing and even our transacting.

Remember when TV was introduced, the pundits predicted the end of radio. Ask Howard Stern how that worked out.

I agree with you 100%

List and locate - I like that alliteration! Just because the Buyers and Sellers can do some of the "grunt" work doesn't mean they are in any less need of professional representation.

I agree with Michael's ponit about TV and radio, but don't forget there are other instances of the opposite, or nearly so, like FedEx losing something like 50% of its revenues in the year after the fax machine hit the market big time. Ebay has changed the face of business for a lot of pawn boutique shops by becoming a more transparent, and global marketplace. There are two sides to that coin, be sure you aren't on the wrong one with your business plan, because there are ways to make this enhance your business, and ways to let it hurt you.

High tech and Old Fashioned is a great combo. Another way of putting it is Hi-tech and Hi-touch.

I really like the kicking the tires analogy!

DEC

2006

I don'y know if anyone followed FedEX lately. EBay has multiplied their business. Shopping online has done nothing accept make their business grow.

E-mail was supposed to eliminate paper mail. Computers were to eliminate paper. I used to work for International Paper, business is booming.

Discount Realtors, online Realtors, etc., generate more interest in real estate. I am glad they are there. my business will continue to grow.

Great, we go from greedy agents to benevolent tour guides in a giant leap. We won't have to negotiate, market, or keep in contact with the clients (whoops, I mean tourists). We won't even need to help our clients understand why one area could be considered better than another. List and locate......

If data were everything, why would more (a higher percentage) Internet buyers use REALTORS® than non-Internet buyers?

With data overload, buyers need someone to Interpret that data, and add local knowledge and wisdom.

I hear and read a lot about the nasty z company. In the mortgage arena most of use this as a guide for a neighborhood. I was saddened when yahoo changed its engine to use the same as "z" Maybe it was the same all along. But when looking for house values we use comp searches online to help clients. But I am also very careful to explain that there are many things the online pricing does not take into account that affect value.

It all boils down to education and communication from the professional. Discounters in every business make the other people in the market have to reinvent themselves.

In the mortgage business: Anyone and everyone can write a mortgage; Me, I use mortgages to make you wealthy!

Gerhard, Thanks for the post. I stated in another post that, the Internet has created more opportunities for middlemen, none of which I see as a real benefit to the consumer. After all, who has the "REAL" lowdown on the property, the Listing Agent. That is why they need us. They need us, They really do!

I agree that buyers and sellers have more information available to them than ever. I am happy... Let them do their own research. I don't mind. Instead of me driving those buyers around all day long, let them see the props themselves. After all, I am not a taxi driver, I am supposed to be an industry expert and address the important issues. You are right that zillow info half of the time is incorrect and I am happy that educated buyers and sellers know that too. THAT GIVES ME MY JOB SECURITY. Rock on Zillow! ;)

Its amazing to me that so many people don't question internet sites' credability and accuracy. So many of my buyers use zillow and I have to take time to explain to them all what you just said. The funny thing is that many of them assume that the site is more accurate than my data, and knowledge about particular home sale circumstances like what you described. One of my clients bought out her brother in an estate sale for $150,000, which is what shows up in the tax records as the sales price. The actual market value when that sale took place was double that, but zillow doesn't care about that.

Hi Gerhard, it's David from Zillow,

AMEN -- this is a message that needs to be read, not only by consumers but by the Realtors who believe that the sky is falling. Zillow does not compete with Realtors and from the feedback I receive, most consumers absolutely get it -- they understand that a Zestimate is not a replacement for a CMA and they get that posting your listing for sale on Zillow is no different to taking out an ad in your local paper's classifieds (other than that it's free to post on Zillow, of course).

Thanks for writing this great post - I'm sure I'll be quoting you on this.

Thanks for all your comments! I did by no means wish to disparage Zillows. Their "guestimates" are fine as starting points and they are fairly accurate for homes of recent vintage in a homogeneous neighborhood. The smart consumer knows this.

I am writing this at the Seattle airport where I am to pick up my son who is coming home from college in Chicago. There was a terrible storm in Seattle last night and it knocked out the power in most areas. I was lucky to make it to the airport. I was running low on gas but found an oasis of power along the way.

I once had a customer tell me they found the properties all by themselves. Yes, they found them by themselves using the website, IDX feed, daily property update emails, and MLS membership that I paid for!

Gabriel Silverstein wonders when the government will do an [objective] study of full service vs. discount, or whatever.

That is not what government attorney's do. Rather, they develop a theory and proceed to prove it. Seeking the truth is not the objective. Prosecuring a case to prove the theory is.

I saw this over and over when I was with the government, SEC. Many of these cases are assigned and made the full time job of a career attorney who is not interested in facts, only points to support the theory.

Lenn, the NAR, not the DOJ!!! The NAR needs to do such a study!

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