January 2008

How much is it worth? For both the home buyer and home seller, that is the $64,000 question today. As always, I’ll get to the point in due course.

My oldest hatchling turns 18 today. For her birthday, she wants what every young California girl formally entering adulthood wants - Drew Carey. So, being Mother-of-the-Year and all, Tuesday morning Becky and I will be stationed outside of the CBS studios in an attempt to gain admittance to the hallowed taping grounds of The Price is Right.

If she is lucky, my daughter (who will spend the next school year in a 10′ by 10′ dorm room) will return home with a Broyhill sofa, a Charmglow barbeque, or, better yet, a year’s supply of Mop & Glo, but I’m not counting on that. The problem is that my teenager has absolutely no concept of what anything really costs; for the better part of the past two decades she has been a kept girl. At least she is somewhat more prepared to address “the next item up for bid” than I - that is, unless they put a four-bedroom tract home on stage. Then I am smelling a Showcase round.

For those of you who have never had the pleasure of having your large intestine removed attending a television show taping, I’ll give the brief rundown. You have obtained a ticket, one which says something fun like, “Ticket does not guarantee admittance! Tapings are overbooked! Admittance will be on a first-come basis! If you are smart, you will stay home and set your TIVO!” You will take this ticket, which is for the 1:00 taping, and arrive at the studio by 6:00 AM last October. You will sit on the sidewalk outside of the compound and twelve blocks from the actual point of entry, and wait to be assigned a number. Your number will involve scientific notation. You will sit for 1978 hours, during which time you will watch the friends of the friends of the producer, the production assistants, and the contestant coordinators, plus all of Drew Carey’s cousins, proceed gaily to the front of the line and through the pearly gates, leaving exactly 2 available seats for “the public.” Great work if you can get it.

The scene outside the studio is Real Estate 2000. “How much” was not a factor at that point. The real challenge was getting the chance to play. Buyers were so frenetic and sellers so few, that the “ticket” (the Multiple Listing) was rendered almost useless. To get in required a lot a tenacity, such as camping in your neighborhood of choice until you saw the telltale signs of a home about to go on the market. The unsuspecting home owner who merely decided it was time to wash their windows often found themselves buried in unsolicited purchase offers. For the would-be home buyer, it also helped to have connections. Homes often came and went without ever hitting the MLS; agent networks were priceless and back room deals were common.

The scene inside the studio was Real Estate 2000 as well. “How much” was whatever the seller wanted plus a little something extra for the buyer to distinguish himself from the other 47 people who had submitted offers on the home. The last one to bid, if he had been watching the show, knew to bid one dollar over. The last one to bid was always the winner.

Fast-forward to 2008. The old show has been canceled, and the studio audience is a much smaller crowd. We have too many empty seats. Sometimes, the seller is lucky to get just one person to play. Whatever that sole contestant bids will be right, even if the manufacturer’s suggested retail price suggests otherwise.

Here is how the items up for bid have stacked up since the summer of 2004:

What’s a buyer to do? Should he bid on the first Showcase or wait to see what the next holds? If only we could get a glimpse of what lies to the right of those charts…

So, what’s it worth - today? That has become a very curious question to buyers, sellers, and (if we are honest) agents alike. In a dynamic market such as ours, both structuring an offer to purchase and pricing a home for sale have become so much less science and so much more art. In our Scripps Ranch housing market we have seen homes that languished for months and one bank-owned home this week that sold in one day with ten offers.

One thing I can say with some certainty is that buyer demand is overbooked right now. We see it at the open houses, we see it in our ad calls and in our web site search activity, and we hear it from our buyer clients. The show will go on, it must, it always does. Sales will pick up again, but only when the price is right.

One of the most challenging aspects of working as a real estate agent is managing expectations, particularly in a challenging environment. Once success is achieved everyone is happy, right? And if things don’t go quite as planned the client is better prepared to deal with it. In the course of a transaction it is fairly common for emotions to blur the reality of empirical data and the interpretation of trends. That is why we find it a helpful and necessary tool to  occasionally reinforce market realities.  This is commonly done in the simple form of a follow-up memo to the client, usually by e-mail. 

So why is it that just about every time I check out ESPN or read an article on MSNBC Sports some Charger player is trash talking their weekend foe, the New England Patriots? All this does is raise (false) expectations. Don’t they know they are huge underdogs? This may be the most lopsided AFC Championship match-up in history. Everyone (outside of San Diego, at least) already knows the outcome of the game. The only remaining mystery is whether it will be by four or five touchdowns.

Even Mahmood Ahmadinejahd, Iran’s irascible President, admittedly the  biggest underdog in the world, is picking the Pat’s to win this one. It may be the only thing he and “W” ever agree on. Who knows, maybe this will become the cornerstone for future diplomatic relations.

So I repeat the question. Why are the Chargers trash talking so much? In Indy, Philip Rivers, the Chargers young quarterback, was trash talking the fans! I can’t remember ever seeing any quarterback do this, much less a guy who has only started for two years  This morning I watched a report on ESPN featuring Igor Olshansky, the Chargers huge defensive lineman trash talking the Patriots. Geez! That’s all we need to do is irritate these guys further. One would think in their position, the Chargers might want to be a bit more subtle and play the old ,”Woe is me” card. Maybe try to lull the powerhouse Pat’s into feeling a little overconfident or something. Nah!   

Or maybe the Chargers just never got the memo.

I hope the obvious answer to the question cited in the subject line is a resounding yes! Perhaps a better way to address the topic is to ask how much should we be concerned with MLS data integrity? But first, let me digress.

In my former life’s work, and also being afflicted with an engineering background, I spent a good deal of time analyzing data in search of trends and in support of business decisions. Would you think that this is a transferable skill to the land of residential real estate? My goal is not to become bogged down in statistics and data, but to be able to support buyers and sellers with “numbers” to validate their “emotional” purchase and sales transactions. Statistics have a place in the process but will never replace the emotional elements in the transaction. MLS data integrity also has a significant impact in the daily property searches we all execute. Let me paint the backdrop for this discussion.

If you are frequent visitors to The San Diego Home Blog, you will recall many a post from Steve and Kris reflecting on a previous month’s/year’s sales activities or a particular market segment trend. They tend to stay at a macro level and ignore some of the gnats buzzing around my head! I find myself periodically downloading MLS data either to confirm my predisposition towards a perceived trend or just trying to collect data on a new neighborhood or condo complex that a client is exploring. Most recently, while downloading 2007 transaction data, I came face to face with the data base integrity issue to the point of making the effort akin to placing needles under my fingernails. After many a download, I have yet to experience the pleasure of an accurate data set. The inaccuracies come in many flavors, and I find some of the errors are unintentional but unfortunately many are surely intentional. From my list of “favorites”:

• No estimated square footage for the home - could it be that this is a very small home and my list price is rather high? Why not use the data in the public records, or data from a recent appraisal, builder’s brochure info, or homeowner’s records?
• No lot square footage – most often this omission is found on homes where the lot size is quite small, and also a matter of public record (I willingly concede that not all lot sizes are included in our beloved realist.com data base). So as a listing agent let’s just assume that nobody on the other side of this transaction will be smart enough to figure out that this lovely home is on a postage stamp size lot!
• No complex name (condo/townhome development) – Am I an out of area agent and all I know is that the property is located somewhere in a given city? I’ve driven by the monument with the complex name on it but it hasn’t quite sunk in. I wear a clever disguise and promote myself as your neighborhood specialist.
• No subdivision listed (single family detached listing) – see above; in many cases we see the name of the city, or perhaps the subdivision listed in realist.com. Here you thought you lived in the Renaissance subdivision of Scripps Ranch and now you read your listing only to find out that you really live in McMillin Scripps 03 Unit 05. Welcome home! It will just be a little more challenging for the buyer’s agent to find your listing if they are doing an MLS search based upon the subdivision field.

As a buyer’s agent I find it challenging to set up custom searches for clients given the inaccuracies found in the above MLS fields. How lame is it to have a conversation with prospective buyers and utter comments about MLS data base “errors or omissions” preventing their search program from locating all homes meeting their expressed criteria? The flip side of this conversation is explaining why they are seeing properties clearly not meeting their search criteria because you did not enter a minimum square footage so as to not eliminate properties with no square footage entered but in reality meeting their requirements. Hmmm, seems like we’re going in circles here! Bottom line for listing agents…take the time to market your product intelligently and truthfully! Help me help you and your seller to ensure we find your listing during the MLS search process, and cross your door step as a result of finding the basic home amenity data properly and accurately entered.

I returned Friday from my total immersion field trip in geekdom - the Inman Real Estate Connect conference - and am only now returning to the living. Blame it on jet lag, lack of sleep, or too many hosted after-hours social networking opportunities. I blame it on information overload.

First, the photo-op which was one of the bigger kicks in the britches for me:

It turns out that my designated photographer, the Phoenix Real Estate Guy, was a little off-balance at the time, but you get the picture. In case you need a hint, I am standing next to a rock star who needs no last name. He goes by “Craig” and he has a “list,” hundreds of them, actually. Pretty cool.

Steve asked about the constituency of the attendees. Once again, I found myself in the thick of the tech-savvy bell curve, albeit leaning a little toward the right. The agents, brokers, mortgage brokers and other industry professionals in attendance ranged from the “What is a Zillow?” end of the spectrum to the innovative extreme. There is one thing of which I am certain, however. If you are an agent who is more than one standard deviation off of the wired mean, then you have cause for concern.

More than once, I found myself amidst a capacity elevator crowd where every commuter was checking their email, sending a text message, and even posting to the Internet from their global positioning somewhere between the 12th and 15th floors. At one point, I took a ten minute break to receive an eFax of a Request for Repairs, which I forwarded to a client in San Diego for his electronically signature, and which I summarily delivered to the other agent, also on the West Coast. Ten minutes and 3000 miles away. And all of this stuff is just basic application of what have now become the more elementary tools which improve our efficiency and our value to our clients.

Despite this, I heard one sentiment repeated in the halls all too often. Real estate is still personal; technology is great, but we tend to forget that the average consumer doesn’t (need, want, appreciate, grasp) the online world. This statement is at least half correct, but I wouldn’t be so quick to put all of my data points at one end of the axis.

We all heard those same proclamations when web sites first made the scene. And email. And electronic ticketing. And online shopping. The difference is that we are now advancing at a much faster clip than ever before. Five years ago, it was much easier to “get it” after the fact and play catch-up. Today, that same hesitation could very well leave the hoof prints of the thundering herd squarely on your forehead, and leave you in the irrelevant dust.

To the consumer and the real estate agent, technology is about information and connectivity. It is about efficiencies, and it is about the ability to cast a wider net. As individual agents and as a collective, we can distinguish ourselves by remaining contemporary and enhancing our value to our clients as our roles continue to be redefined. We can commit to change and betterment, which is going to require a retooling of our of entire culture. Or we can hesitate and resist - until it is all a blur.

Big news today from the Zeenormous online real estate site that brought us the Zestimate.

Zillow now comes out of its “beta” phase.

That’s not really the big news; it’s the punch line delivered as a throw-away in the company’s press release. It is also the remark that got the biggest laugh at the pre-release briefing I attended last night given to a few of the die-hard real estate bloggers attending the Inman Real Estate Connect Conference in New York City.

If you are a real estate agent, you will get the joke. About seven minutes after their initial launch in 2006, our clients were flailing their own homes’ Zestimates about like the unabridged King James Bible, only this bit of ”truth” was considered far more credible. It came from a computer. The concept that Zillow’s web site and all its data has in fact been ”under development” has escaped most to this day. 

There was an embargo on the news until midnight last night. No worries; in the City That Never Sleeps, I went to bed. As I considered my options before crashing (write something timely or attempt to move this week’s sleep tally into the double digits), I decided that Zillow could wait. That is because the real news is not in the press release itself but in the larger and less time-sensitive issue: Zillow is upside-down. They are upside-down, and this is precisely why their enterprise is genius, but more on that in a moment.

First, the party line:

SEATTLE – January 10, 2008— Real estate Web site Zillow.com today announced a major expansion and upgrade to its database of nearly all homes in the country– increasing data coverage from 70 million to 80 million U.S. homes in 48 states, or 88 percent of all homes in the country. Zestimate values are now available on three out of four U.S. homes, or 67 million, up 68 percent from when Zillow launched in 2006.

That’s big news for some. However, if you, like I, live in San Diego County, our properties and our Zestimates have been represented on their site from the beginning.

Zillow today also announced it has dramatically expanded and improved its Zestimate algorithm, incorporating 20 times the number of statistical models than before that factor in more local and home-type variables…

Blah, blah, blah. In other words, the geeky science guys (and I mean that only in the most affectionate way) have been working overtime to achieve a greater accuracy in their published computer-generated estimates of value. In other, other words, bits and bytes which have never once set foot in my neighborhood, in any neighborhood, never seen my impressive Koi Pond or my highly upgraded home, every inch of which has been appointed with fancy 18th century Italian wall paper depicting cherubs and zoftig unclad ladies of the period, and never enjoyed my view of the shopping center (”evening lights,” in agent-speak), are now better prepared to nail that magic number.

They are factoring in more “variables.”

… and now integrate homeowner-edited home facts – such as the number of bedrooms, bathrooms or square footage. More than one million homes have been claimed and updated by their owners to date, contributing to improved Zestimate accuracy on many of these homes. Incorporating these changes… have resulted in a 12 percent improvement in Zestimate accuracy nationwide. Many larger metropolitan markets, such as the greater San Francisco, Miami, Los Angeles and Atlanta areas, have some of the most significant accuracy gains at 18 percent, 21 percent, 22 percent and 28 percent respectively.

Hold on! From where I sit, that is kind of a big deal. No, it’s genius. They are now considering the one “variable” that truly matters: Their users. Zillow is outsourcing (albeit just a teensy bit), and they are outsourcing to the consumer. But, there’s more.

More specific details about Zillow’s coverage and accuracy down to the county level can be found in its updated data coverage and accuracy pages that now show how often a Zestimate comes within 5 percent, 10 percent and 20 percent of the final sale price… These pages will now be updated every three months, arming consumers and real estate professionals with the most frequent and detailed information possible, supporting the company’s commitment to information transparency.

Transparency is not just a buzz word anymore but expected, even demanded, by the consumer. The consumer wants information, lots of it, and they want honesty and full-disclosure in its delivery.

In Zillow’s case, the consumer is both the real estate agent and the homeowner (which makes for one crazy-big target market), and Zillow needs two things to succeed. They need data, sales and “for-sale”, and they need eyeballs. You can’t have they latter without the former, but rather than build their reputation and their inventory by taking the more-traveled route, courting the big real estate brokerages, they have reached this point primarily by appealing to the individual agent. It is the individual agent who is online and socially connected - and blogging. Appealing to us makes us happy, which in turn inspires us to write nice things about Zillow.

And, instead of pushing the information to the customer, they have given them ownership. What Zillow has done is build a business model designed to work from the ground up, a MySpace for your home. Rather than cling to yesterday’s antiquated marketing practices wherein the customer was slapped silly with a message and expected to respond, they have recognized what so many are resisting. Zillow is recognizing and capitalizing on a new social culture. The conversation is no longer between the guy with something to sell and the guy who might be buying, top down, but between the buyers themselves, upside-down.

Wikis, consumer reviews, chat boards, and, yes, blogs; the customers are the ones doing the talking now, and they are the ones making the rules. We are all journalists, researchers, and analysts. Google and Yahoo! and the likes have made us all, to some extent, famous. The Internet has given the individual enormous power, the power of information and access, certainly, but more importantly the collective power born from connectivity. We are living in a new “Me” generation, and we are all going online to show off our ”All About Me” poster to our friends. And, my goodness, do we have friends! When the people with something to sell in our new world celebrate this, they will rock the house.

Since the day they first opened for business, the much-maligned Zestimate has been under attack by most real estate agents and by many homeowners. By introducing more fancy algorithms and, more importantly, by listening to their clients and including them in their product development, Zestimate accuracy will now be improving. But the Zestimates themselves will still be wrong. Every time. So what?

Rational people know that any estimate, whether it comes from your real estate agent or it is preceded by a “Z,” is just that: An estimate. How good or bad or better Zillow’s data is today is not the point. The point is that they have included the consumer in the conversation and have positioned themselves to dominate that conversation. Genius.

(Note: There are undoubtedly 50,000 sites out there who posted on this hours ago, but I haven’t peeked - That would have been cheating.)

Related posts:
Zillow cultivates their garden… Bloodhound Blog
Bye Bye Beta… Phoenix Real Estate Guy

Hopefully there are no major catastrophes this week. I am the sole line of defense. Kris, at the moment is winging her way to New York and I’m left to deal with the real estate (moderately manageable at the moment), the pets, Simon the Dog and Fluffy the Cat (there was already a Fluffy ”Incident” this morning) and, of course daughters Becky and Emily (challenging). So as Kris burns up a gazillion of our frequent-flyer miles and is enjoying Times Square, I will be faithfully fulfilling our responsibilities to our clients.

Kris was invited to participate in a panel at the Inman News “Real Estate Connect” Conference this week. The subject of her panel? Blogging, of course. Hopefully we will be able to sample some of the action on Inman TV tomorrow as she files her field reports from her trusty laptop.

Until then, I toil on in a desperate attempt not to screw things up while she’s gone. New York, however, may never be the same.