Zillow is setting up their home-flipping business in Phoenix and Las Vegas, which are two very safe towns for taking a risk.
The vast majority of houses there are easy-to-value tract homes, and relatively inexpensive compared to the coasts. But Zillow’s stock price has plunged 10% since they announced their new venture.
In this cnbc article, Mahaney makes a good point. Having skin in the game will assist Zillow to better gauge and predict market conditions. When we still hear the typical market nonsense from N.A.R., Zillow could become the voice of real estate – if they’re not already:
In May 2017, Zillow announced the launch of Instant Offers, which enables home sellers in the Las Vegas and Orlando test markets to get cash offers from potential investors on Zillow’s platform. The company said homeowners prefer the process, and that most of them who requested an Instant Offer ended up selling their home with an agent.
“Home sellers welcome a hassle-free experience selling your home without decluttering your garage or taking the kids out of the house,” Rascoff said.
Rascoff said the company will take on collateralized debt to purchase the homes, and hopes to have between 300 and 1,000 homes held for sale by year’s end. He called the move “industry friendly,” benefiting buyers, investors and agents. He also said it could help stimulate the real estate market and open up new inventory for prospective buyers.
“There are people that are basically stuck in their home that would love to go buy another home, but can’t sell,” Rascoff said. “This could provide the ability to unstick people from their homes.”
Mahaney said that it will help Zillow test how much the real estate market is turning.
“This is an interesting experiment on the company’s part,” Mahaney said. “They’ve reached the point of scale with both real estate agents and with consumers. There are data points in the market that suggest this way of buying and selling homes is really starting to gain traction.”
The program will start this year in Phoenix and Las Vegas. Zillow didn’t say when it will expand into other markets.
I doubt any of the corporate flippers will ever come to the high-priced California coastal markets – with fewer tract homes and high cost, it’s too risky.
This week at SANDAG (the county’s regional transportation board), we heard for the first time the amount of housing the state is proposing for our county in the next eight-year housing cycle. I hope you’re sitting down – it’s 21,000 new homes annually, which is more than three times the 7,000 homes that San Diego County is currently producing each year.
The total number countywide is 171,685 housing units for the 2021-2028 housing cycle. Each city’s allotment from the California Department of Housing and Community Development (HCD) won’t be determined until 2019, as the proposed methodologies are still in draft form. Once SANDAG assigns Encinitas our new housing numbers, scheduled for October of 2019, Encinitas will have 18 months to update our housing plan for state approval.
There has been quite the discussion about the recent comments made by the bosses at KW, and Notorious Rob has been deciphering the meanings and intentions. This is the first installment, and the 69 comments from real estate people reveal the intensity of the debate:
The traditional brokerages are too spread out and have no thoughts of mounting a concerted effort to combat the garbage you hear advertised by the disrupters, so the home-selling business will go where it goes.
Wealthier people and those from states like New York and Illinois are moving in by the droves to California while young people with less money are bailing out to states such as Texas, Arizona and Nevada, a report from the state’s Legislative Analyst’s Office revealed Wednesday.
The underlying factors of these migration patterns are not spelled out in the report, but the data analyzed by the state’s fiscal and policy adviser office offers a pek at some interesting trends.
Between 2007 and 2016, some 5 million people moved in to California and 6 million people moved out to other states — a net loss of about 1 million residents, the report relayed.
Low-income folks moved out, high-income folks moved in
People making $55,000 or less a year were mostly moving out of California between 2007 and 2016, the report found, while people making more than $200,000 a year moved in.
More of those residents with lower income were moving to states like Texas, Nevada and Arizona. And more of those with higher incomes were coming into California from states like New York, Illinois, and New Jersey.
After reading my auction-is-the-answer series, Brad Inman invited me to his conference in the desert yesterday. I politely declined, because the real estate industrial complex is more interested in profits, than ethics – and a little guy like me isn’t going to change it.
These days, the big push is for brokerages to employ artificial intelligence to predict who will be selling their home. They are able to watch your internet patterns, just like the NSA, and know when consumers are searching real estate websites. Then agents will be calling, knocking, and advertising on your Facebook account to get your business.
Because this will hopefully produce some fantastic new listings, these brokerages will be able to leverage their proprietary AI as a recruiting tool. Before long, agents who have seen enough of their clients get poached by these antics will have no other choice but to join them.
It could lead to a massive consolidation among traditional agents.
KW said yesterday that they aren’t a real estate brokerage any more – no, they are a technology company now, which gives you a glimpse of where they stand. Compass is doing the same thing (developing AI), and Reology bought Zip Realty to use their technology platform – the hits keep coming!
This happy talk will dominate the industry for the next 1-2 years, and that ethics/auction stuff by that part-time blogger down San Diego way will be quickly forgotten.
We covered in my four-part series that there is a vicious undercurrent of fraud and deceit being imposed upon buyers and sellers alike, and that drastic action is needed to stop it. But such action is unlikely to happen – at least until the district attorney has a few perp walks to get everybody’s attention.
It means that Brad Inman’s conference needs to come up with a real humdinger of a solution. In the meantime, maybe we can improve on what we have?
I mentioned that traditional agents are reluctant to say anything in public about how they do their business. But now that the disrupters are spending millions on advertising, it’s time we step up to the microphone.
The disrupters’ underlying theme is that traditional agents charge 6%, and they will do the same for less. Here they focus only on saving money on the commission, and never talk about what they actually do to sell your home:
Agents who only talks about their rate, rather than the quality of services they provide, must not have much to offer. Their website has some data though – this is their main page:
We don’t have to look very far to see how trustworthy they are. They say Bethany has ’10 YEARS EXP’, but when you go on the DRE website, this is what you’ll see – she has been licensed since 2016 (you can always get a hint from the license numbers, which are issued sequentially):
I’m sure she is a nice person and means well, but to use her as your front person when she barely has two years experience as a licensee probably means that the other agents have less. Pardon me if I’m skeptical of how ‘intimate’ she, or any of their agents, know their LA/OC territory.
Companies who blatantly lie about the people on their main page will say anything to convince you they are legit. Ask yourself what you are willing to endure – you only have one shot.
Apparently they charge you the $3,200 fee whether they sell your house or not, and they take your credit card number up front.
Rex is another one – they claim to sell your house for 2% by themselves without cooperating with other agents. Here is reality:
You may like their sexy website, but who are the people handling your sale? I have spoken to both current and ex-Redfin agents, and it sounds like a sweat shop – much like our local IPayOne, which failed twice, or Roxtons. They are good people, but the employees are being asked to handle a high volume of business with minimal support.
Sellers should wonder if that will equate to a top-dollar sale.
An ex-Redfin senior agent told me that he quit when upper management insisted that he get ‘five more deals out of every agent’ this year.
Here is what one ex-Redfin senior agent from Florida said last year:
I worked for Redfin for two and a half years. First as a transaction / hybrid coordinator then as a senior agent in the field. The concept is amazing but the reality will drown you. As a licensed broker who has over a decade of experience my base salary was $20,000 after “bonuses” paid (only after a glowing review from the client) my W-2 showed $42,000 income. Keep in mind I closed over $7 million dollars in real estate transactions last year. If you can’t close minimum of 3 transactions in a given month you are promptly let go for poor performance. With no cushion or savings because again top pay was 42k in the year. Your expected to have your schedule open for tours 7 days a week. Ready to meet a new customer not vetted not approved within a 3 hour window. Vacation is offered but is never approved. And in my market we were required to span over 300 Mile radius covering 4 counties. You are paid for each tour but it’s $35 and again you’re expected to drive 3 counties away at no notice just to be stood up. You will need to have knowledge of that area as well. Because your clients will review per tour and they will not appreciate an agent who is not knowledgeable. Please please please if you are considering joining this company be ready to give away all of your commission and time and learn from my experience. I’ve never written a review before but I’m passionate about getting this out there. Don’t believe their hype. Thank you for reading and considering.
How do they handle the critical points of engagement?
Want to see a house? A trainee gets paid $35 to $50 to open the door.
Sellers hoping for top dollar? Trainees do the open houses.
The good agents there make around $3,000 per sale between salary and bonuses, while dealing with outside agents who make substantially more. If you were a great agent, wouldn’t you work somewhere else to make more money selling fewer houses?
Sellers have one chance to hire a great agent to sell their house for top dollar. Every agent can sell your house, and heck, you don’t even need an agent – just stick a sign in the front yard and you’ll get calls.
But houses don’t sell for the same price – there is a 5% to 10% range, depending on who is handling the sale. You’ll hear that the market is hot, and that houses sell themselves – but for how much? Will your agent do everything it takes, AND have the expert salesmanship to get you top dollar?
If not, you are going to feel like a chump for falling for their BS advertising.
This is the fourth installment of my essay on the future of real estate sales. I’ll send this along to Brad Inman, who is gathering thoughts for a leadership conference at the end of March, so they have my perspective from the street.
The unconscious desperation among agents is ripping apart the formal agreement between brokers to share listings. The environment is going the way of commercial brokers, where exposing listings to other agents is a last resort.
We see it happening – there is the occasional article – but without vigorous intervention by realtors themselves, the MLS will slowly disintegrate and be picked apart by outsiders.
Sadly, the sharing of listings is what is best for sellers, buyers, AND realtors, but the greed and desperation among agents gets in the way.
What Can Be Done? What Are The Choices?
Individual agents can adopt a full-transparency program, starting with publicly describing the specific services they offer, and their commission rates. If consumers took the time to educate themselves about the differences between agents, at least they would make better decisions than they do now. It’s unlikely that this will happen, because agents are lazy and won’t bother, unless forced to do so.
We can hope that N.A.R., C.A.R., big brokerages and other industry titans will address this specific problem, and implement changes to save the MLS and broker cooperation out of a commitment of doing what’s best for consumers. Probably the least likely of these five to actually happen.
We can have big leadership conferences where outsiders will speculate how the disrupters will pick us apart, piece by piece.
We can wait for the government to intervene.
We can do nothing, and watch the broker cooperation via the MLS – which is the best thing for everyone involved – die a slow but certain death.
We can hope that somebody will find an answer. But it would have to include ways to eliminate agent shenanigans, invigorate consumers, and be a forward-thinking solution that benefits all.
The inquiry might start with creating a national MLS, or electing a real estate czar, or encouraging agents to keep their word and quit cheating their own customers out of what’s best.
But what if a thing was the answer?
The solution is LIVE AUCTIONS.
We can easily incorporate them into our regular business as the process to select the winning bidder. All other selection processes used today are subject to the listing agent tilting the table – with a live auction, all participants will be watching, and able to determine the actual winning bidder.
Could there be shill bidders who run up the price? Yes, but let’s insist that every buyer is represented by a realtor – that way, at least the agent’s reputation is on the line.
Live auctions would keep listing agents and buyer-agents employed, though the fee structure may be in flux. But our commissions are already under attack, so let’s take a chance that consumers will agree to pay a reasonable fee for these live auctions, and the other additional benefits provided by realtors.
A live auction doesn’t have to be a showy, champagne-filled soiree with a fast-talking auctioneer. They can be as simple as gathering the buyers around the living room, in a rather informal setting.
I am offering the live-auction strategy to my sellers as the fairest and most effective way to select a buyer, and let the full transparency be the best way to reach top-dollar.
Here’s an example – catch the winning agent’s comments at the 9-minute mark:
When I first started this blog on a Saturday morning in September, 2005, I thought I needed to hurry up before every agent was blogging. Wouldn’t this be a great vehicle to educate consumers and demonstrate our expertise? Certainly, every agent will be doing it!
Instead, what blogging has exposed is that agents either have nothing to say, or transparency isn’t their friend. You rarely see much more than their recent successes – advertising of the properties they just listed or sold, with focus on how great the agent is.
Why doesn’t transparency catch on?
What do listing agents have to fear?
Exposing how sales are put together is like the proverbial sausage factory. Realtors don’t want you to know how the sausage is made.
Once an agent has a signed listing, how they procure a buyer is what makes the difference between a legitimate open-market sale, and an insider job. Even those agents who initially plan a legitimate open-market sale can get duped into an off-market quickie. How does that happen?
We operate in a desperate environment, and the most-desperate agents are making the market. Even the agents who AREN’T desperate, have to operate as if they ARE desperate, just to keep up. Unethical or illegal actions are commonplace, and with no enforcement whatsoever of the rules or laws, they continue unabated.
It’s always been like this, but after the fleecing of the banks during the short-sale/foreclosure era, we have become numb to the fraud perpetrated by realtors everywhere. Agents have brought their off-market fraud practices into the tight-inventory era, and expanded upon them.
Here are a few of the tricks being used by listing agents to deprive their own sellers of a top-dollar open-market sale. The most incredible part is that every agent implicates themselves by inputting these listings directly onto the MLS for all to see what happened:
Coming Soons that never come. Instead, the listing agent finds a buyer from just placing a ‘Coming Soon’ sign in the front yard, and once procured, they input the listing directly into the pending section of the MLS.
Sold Before Processing. We now see a few of these happen every day in North San Diego County’s coastal region. The listing agent takes advantage of the MLS loophole that states every listing to be inputted within 48 hours. It make take longer than that – but who will know or care when there is no enforcement of the rule – and office managers encourage the practice in order to keep both commissions in-house.
The listing agent prevents showings the first few days on the market.
The listing agent says house will be auctioned in three weeks, but then accepts an offer before then. Either auction the house, or don’t auction.
The listing agent provides lousy MLS input – bad or no photos, etc.
Instead of lowering the price publicly on a listing that has languished for months, the listing agent lowballs his seller with a buyer he has procured.
The listing agent gives the appearance of an open-market sale, but then plugs in his own buyer at the last minute.
The worst part about this situation is that we accept it.
Other agents who see these tricks happening on the MLS are subconsciously thinking that it must be permissible, so they set out to do it themselves. After all, who wouldn’t want to make two commissions, instead of one? It is a self-perpetuating cycle that no one is talking about, let alone doing something.
We are racing towards the end of broker cooperation as we’ve known it.
By joining the Association of Realtors, every agent has agreed in writing to share their listings with other agents, and adhere to a strict Code of Ethics – to cooperate with each other. But the opposite is happening – it is cool to NOT share listings, and round-trip the commission instead.
The disrupters are taking full advantage of the opportunity, and capitalizing on the greed of agents by designing vehicles to perpetuate this vicious cycle of self-serving off-market sales, in spite of seller and buyer fiduciary duties.
Examples of how this has evolved are the listings inputted as ‘Sold Before Processing’, but then the listing agent DIDN’T round-trip the commission; instead, a different agent represented the buyer. They don’t recognize the harm being done to their own seller by not exposing the home to every buyer and agent. Yes, I’m sure there is an occasional instance that warrants an off-market sale, but not as many as we see today.
Because we see all of these listings on the MLS without explanation, it makes unsuspecting agents believe it’s all legit. Our buyers see listings come and go in five seconds, and they get more desperate:
Even the real estate maverick (who has been promising to StopZillow and save real estate for months), rolled out his answer last night. Incredulously, it is a mobile app designed to funnel all buyers directly to the listing agent within minutes (I skipped the first 20 minutes of backslapping):
This is my series of blog posts to address the situation, and my final installment is coming next.
Do you think that technology has helped the more successful agents to the detriment of the lower half of the agent pool who have less $ to invest in things like Zillow’s premier agency and what not. And if the haves continue to take share of industry sales, do you think that ultimately increases their leverage over the brokerages/allows them to get better splits?
I work in the investment management industry and have been looking at Realogy as a potential investment but can’t quite wrap my head around what technology ultimately does to the brokerage model over the longer term but guessing it at a minimum drives commission splits higher in the favor of the agent.
My answer: The top agents have always spent more on their business, and ‘technology’ is just the latest shiny object. As agents get better at generating their own clients, then yes, they will insist on better splits or go to other brokerages that offer a more-profitable package.
There is a push for all brokerages to offer an ‘improved technology package’ to their agents, in an attempt to retain them – and it will be the recruiting tool for the foreseeable future.
Realogy survives just on their sheer numbers – they have 272,300 agents working in 14,100 offices around the world. It would take years to disrupt it, and in the meantime, they will offer technology to their agents at a reduced commission split.
But will that technology make a difference? Will those traditional agents implement this ‘technology’ effectively, and be able to out-run the barrage of disrupter advertising?
The hot technology topic today is AI; artificial intelligence. Several programs are in the market now that can predict (allegedly) who is thinking of selling their home, based on the homeowners’ Facebook patterns and other internet use. Those who are searching for homes on the internet are bound to be moving soon, right?
I am extremely skeptical of this AI being just the latest junk to sell realtors who are notorious for blowing money.
I was a brief customer of SmartZip, who promised to use their advanced technology to predict who will be the next homeowners to sell in my designated area. They gave me the list of the Top 20%, and I went to work. Of the people I spoke with, none of the Top 20% were thinking of moving, and the four people who were thinking of moving weren’t on the list. I cancelled my subscription.
It might be worth it for you to look at it from the consumers’ perspective. Will they believe the lies and deceit they are being fed through disrupter advertising, or will they thoroughly investigate all of the choices available?
And then a more hypothetical question is do you think a buyer’s agent fees would be 2-3% of the purchase price if the buyer was forced to pay it out at the close? Been looking at the UK real estate market and there is no such thing as a buyer’s agent in that market – everyone finds their properties on Rightmove.
Thanks as always for your thoughts/opinions!
My answer: No, I don’t think buyers would pay 2-3% themselves when they think all they have to do is follow their favorite real estate portal to find a home. But no attempt is made to explain why the sellers should pay a hefty ‘bounty’ or reward to a buyer’s agent for bringing the buyer.
The trend is to reduce commissions, but incentivizing agents to sell your home for top dollar is worth considering, because the highly-motivated buyers – those who pay top dollar – find a realtor to assist them.
There is a notion – pushed by the disrupters – that houses sell themselves, and every agent sells them for the same price. But there is a 5% to 10% range for every house, depending on who is selling it.
I’m just getting started. More posts coming on the future (i.e. Redfin, etc.).
We first encountered Jim back in 2010 when we were looking to move from Pismo Beach, CA to to San Diego area. We had been having a difficult time finding (1) finding a realtor and (2) being able to see a home since we were so far away. Then we found Jim. He made the process really easy – he was able to take incredible video tours of the homes and it was as if we were there touring the homes ourselves. once we found homes we really liked, we took a trip to see it in person. One of the things we really liked about Jim was that he was honest with us about the homes and advised us weather a home was a good buy or not. He was not just out to quickly sell us a house just to make a commission. He really cared about ensuring we found the right one. more “
I have followed Jim’s BubbleInfo blog from the early days of the bubble when “real estate could only go up in value” and I knew him to be a straight shooter who would not sugar coat properties nor gloss over their faults.
So when we decided to move back to California after 7 years in the more “
Jim met with us prior to listing – provided guidance on preparation, detailed information and stats regarding local market conditions. He was invaluable for providing contacts for repair and improvements that would provide return on investment. Our combined efforts, strategy and his attentativeness more “
Jim and Donna Klinge are an impressive team. They work extremely well together and back each other up, as well as their clients, along every step of the way. Their expert guidance made a tremendous difference in the experience we had, both buying a new home and selling our previous home of 40 more “
Since Zillow only allows me to write 1 review per real estate transaction, per team of agents we worked with, this is going to be a super long review.Review on Jim Klinge:
Jim Klinge is the quintessential real estate agent, the “broker’s, broker” of real estate agents. My husband and I reached more “
by Louie and Tim Cook
Jim and Donna are the BEST of the BEST! Their knowledge, professionalism, work ethic, and devotion to their trade are unrivaled. It was refreshing to have worked with a pair of professionals who truly understand the meaning of customer service, a lost art in our opinion. Despite living over 3,000 miles away on the opposite coast, Jim and Donna were with us every step of more “
Jim found me a multi family property that we purchased as an investment (Please see my review of Donna Klinge for details on how it went). But the bottom line is this: I never would have found this property, which cash flows right out of the gate, if it weren’t for Jim pointing me toward that house. It just was not on my radar, even though I consider myself a savvy real estate troll. Jim is giving of his time, and his intelligence. And he is also transparent and truthful. And I think he is funny, which is helpful in stressful situations like RE transactions. Jim and Donna have earned every last penny they made from our deal — and in fact they deserve more. And that is why I will use them for my RE transactions the rest of my life. Thank you, Jim and Donna! more “
I can’t say enough about Jim and Donna. Jim got a great price for us and negotiated well. Donna walked us through escrow, handling vendors, and negotiating everything we asked for in the request for repairs. They are know exactly what they are doing and I’ve already recommended them to two other people. more “
I followed Jim’s blog for several years and decided to contact him (along with several other realtors) when an out-of-state work relocation required me to sell my home in San Marcos, Ca. At our initially meeting, Jim spent a significant amount of time discussing pricing options, strategy, as well… more “
Honesty. Integrity. Professionalism. Dedication. Commitment. Jim and Donna Klinge hold these attributes in abundance. They have acted as both our buyer agent and our seller agent delivering highly relevant insight into local market conditions, spot-on advice to maximize the home’s value, and unparalleled management of the transaction process… more “
I cannot imagine a better experience! Jim was our broker when my husband and I bought our first house. Jim never pressured us or glossed over anything. He was patient, knowledgeable, and helped us buy our dream home. His office was detail-oriented, always responsive and we closed in 30 days! The excellent service didn’t end when we bought our house, either, the Klinges have given us excellent and fast referrals along the way. We feel privileged to have worked with such a consummate professional and appreciate how rare this level of skill is. Jim is simply the best in the field. more “
Jim and his team are top flight. He knows the market better than anyone, and his team ensures the deal goes through without a hitch. There’s always something at the last minute, but you’d never know it with Jim and his crew. I’ve bought and sold houses with Jim as my agent over the years, and I wouldn’t use anyone else. Save yourself the headaches and potential costly mistakes… more “
Buying a house is one of the most emotional,exciting, and sometimes confusing milestones you’ll reach for in your life! Being a buyer in this market can make it even more interesting! My husband and I have been looking to buy for a year, and when the time came we wanted a realtor team that would be on our team! Being that I’m a business woman and was 7 months pregnant, I wanted, NEEDED, communication, dependability, and consistency! The Klinges went so far above and beyond … more “
Jim was recommended to me when I bought my first house here in the US five years ago. He and Donna explained the whole process and it was a great experience to work with them. Not surprisingly, when my company asked me to relocate my first choice was to work with them again… more “
I have followed Jim’s real estate blog for years and by the time I got ready to sell my townhouse I felt I knew him both personally and professionally. At our first meeting he was prepared with recent comps and listings for the area… more “
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