We’ve had some recent banter on previous posts about creating a public/open MLS website. The idea has come up before – CA renter summed it up yesterday:
Jim and I have discussed this open MLS concept in the past, but it was difficult to come up with something that was so exceptional, everyone would want to use it right away.
When Zillow came out, I was hoping they would move in the direction of an open MLS, with all the relevant public information on the same site, but for some reason, they didn’t really run with the concept when they were fresh and everyone was looking for a new leader.
A new website just for searching properties for sale probably isn’t required – there are plenty of good ones available. If the new website had bells and whistles not available elsewhere, like tax-roll data or realtor stats and reviews, it might provide enough extras that it could garner an audience.
SDLookup offers a few bells and whistles, but they exist only because Sandicor has relied on realtors to provide their own MLS access for consumers via IDX (mine is in the top left corner above, called “Search for Homes”).
If Sandicor or other realtor associations get their act together (new national and state-wide MLS efforts are underway currently) and provide the smoking hot public website for searching properties, they could dominate like realtor.com did when it first came out.
A state or national website would handle the searching component, is there more available?
In previous discussions we determined that the website would have to be available at no charge – because all the other real estate websites are free. The effort required to create and maintain such a website, just to live off advertising, isn’t that appealing. Sell it to a big player? Sure, it sounds good, but they could beat us to the punch, or copy it.
What are other reasons that might make it worth it?
- Cut out extra agents/costs/fraud.
- Work within clear-cut guidelines, especially on short sales.
- Full transparency, including more direct interaction between buyers and sellers.
Whoa – that’s more than just a website, it sounds more like changing the real estate world!
Could a renegade brokerage take over a market, and change everything?
A few years ago a company called I Pay One tried it, and failed – even though they spent a boatload of money advertising their 1% commission concept. Their problem? They didn’t embrace the realtor community.
What if a long-time broker (and part-time blogger) devised a solution, addressing all 3 items above, and was realtor-friendly too? Is it possible to change the real estate world, as we know it?
The biggest deterrent is changing something that’s already working – it’s a good gig here already.
Let’s put some thought into it, what do you say?
Can I be General Counsel? And they are calling for you over at Calculated Risk.
Full transparency, now there’s a concept.
Perfect now that unemployment ending for millions: Hi, My names is Juan. I pick lettuce and my wife Rosa makes beds. We need an $800K loan for a house… Will you help us?
http://www.doctorhousingbubble.com/
5 reasons why California will face another lost decade in housing – 493,000 real estate agents and brokers for 219,000 homes listed on the MLS. 7 percent of 90+ day late loans in California have no foreclosure filed. State budget depended on real estate bubble jobs for revenues.
How many real estate agents and brokers does it take to sell a California home? 2 ¼ if we look at current inventory levels and the amount of Californians with a real estate or broker’s license. One of the early observations of the housing bubble was how much money was being spent in the economy because of high wage California housing bubble jobs. Toxic loan after toxic loan provided wonderful commission checks but also provided the state with a nice chunk of tax revenue. Year after year this went on. Our fate has been intertwined with real estate and since real estate has busted so has our state economy. I remember a few colleagues that were pulling in high six-figure incomes as mortgage brokers and real estate agents and were spending every dime as quickly as it came in. Many have downsized drastically and don’t have a penny to their name. Ironically many of these people drank their own Kool-Aid and bought million dollar homes with the same mortgage sewage they were passing onto their clients. A few are now in bankruptcy and many have lost or will lose their homes.
California is likely to face a lost decade in housing. Do I mean from 2000 to 2010? In some areas we have already reached a lost decade. Yet many areas will face their lost decade from 2010 to 2020. Here are 5 reasons why California real estate will have a decade of slow or no growth ahead:
I have to say I’m impressed you have the cajones to take on this topic, Jim (especially with this crowd which has many harsh opinions!) Sorry in advance for the long post, and I understand if it doesn’t make it.
I think the real estate business model is on the verge of revolution. The current one is completely flawed, as demonstrated by the amount of fraud. While it’s fun to pile on the NAR, I get the feeling there are some smart individuals who recognize this and are hanging on to their archaic model (and in in their minds, their profession) for dear life.
Access to information is what made realtors necessary. But that information is now on the internet. I cringe when I see realtors giving tours of houses while saying things like, “Well this house is 3,000 sq ft with 4 bedrooms and 4 baths,” or “here is the kitchen.” If today you can’t figure out this basic info on your own, you’re a dinosaur and your realtor is a caveman. Realtors are no longer privy to info!
So what do (some) realtors do? They use pocket listings. Or they keep groups like the one in La Jolla which manages all the listings separate from the MLS. (There’s no way a group like that should exist, but it’s allowed to in hopes the realtor profession can be saved.) They game the system.
So what needs to happen? In my mind Real Estate Advisors will replace Real Estate Brokers. (This has already happened in the investment business over the last 20 years. Once you could get all the data online and make a trade at Schwab or E-trade, stockbrokers became dinosaurs for the most part.) Honest and experienced people like Jim are still necessary to help people be smart about buying homes and avoid traps (just like financial advisors can help would-be moronic day-traders who blow up their own accounts on E-trade.)
The compensation schedule also needs to change since it encourages fraud, or just may not be appropriate (I saw a show on TLC where a couple looked at ten homes and finally bought a short sale for $95k. 3% can’t possibly be worth it for the agent. On the flipside, does an agent who sells a $1M home always deserve $30k?) There’s currently a conflict of interest – it’s better to sell the house quickly than for their party’s better price.
How about a fee schedule? For example, on the buyers’ side charge $100 to open the lockbox on a house, $1,000 to write an offer, and $5,000 to handle escrow. On the sellers’ side charge $500 to create a listing on the MLS, $1,000 for photos, $1,000 for a video tour, $1,000 for an open house, and $5,000 to handle escrow. I’m sure there’s plenty of flaws here, and I pulled the numbers out of my rear end, but the concept has much less conflict of interest. You could also charge by the hour.
I think I-Pay-One was on to something, but just a little ahead of its time, and still flawed with 1% commission. THE RE WORLD NEEDS PEOPLE LIKE JIM, BUT THE MODEL HAS TO CHANGE!
As I alluded to earlier, there’s simply too many realtors that prefer the current systems precisely because they can be gamed. If everyone were like Jim then it would already be a foregone conclusion.
Personally I believe change will come, but it’ll be forced.
I agree with The Blur – the business model is ripe for change and it will eventually come whether Realtors like it or not. All it takes is for Craig’s List to decide to launch a product that meets the criteria listed above. Frankly, I think the wisest move would be reaching out to Craig Newmark and seeing what sort of convergence might happen.
Real Estate business model is on its way out, following travel agents, newspapers, music and every other business sector that relied on controlling distribution and information. Guys like Jim are already adapting and will survive by retrenching their services to match what tomorrow’s buyers will need. Trying to restrict information will only result in the same backlash we see in the music industry.
The digital revolution is going to continue to plow under archaic business models – either you get out in front of it or get flattened when it rolls you over.
I know a very experienced and reasonable programmer for interactive database driven web sites when you are ready. It’s not me. I’m the PM. 😉
Oh altruistic one,
It’s all very exciting. But how will the site/effort make money?
I like redfins set up…anyone else use them?
Frankly, I think the wisest move would be reaching out to Craig Newmark and seeing what sort of convergence might happen.
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I think this is a good idea, Art Eclectic. They already have the name and much of the infrastructure set up.
What are your thoughts, Jim?
As we’ve discussed before, I think the sellers would be more than willing to pay for listing on the site. It’s the buyers who need “free” access. I favor having the option of menu pricing/fee-for-service, as many buyers and sellers are pretty good on their own, but might like a little help with contracts or open houses or???
Advertisers could provide some nice cashflow, IMHO. Think about all the goods and services needed when buying or selling a house (all the contractors, cleaning, landscape, security for open houses or vacants, escrow, mortgage lenders, appliances, etc.). All of this could be sorted by location and have ratings from previous customers.
I think “CA renter’s” business model would work. Just need a barrier to entry to block out copy cats or success would be short lived. The barrier is likely related to marketing.
I could whip up a nice MLS in a few months of full time work. That’s not the issue…like Jim said, it’s all about the marketing and angle that the website approaches. A competitor to Sandicor can only be a good thing in a free market system. Of course, they will disagree with that.
I use Redfin almost exclusively. I occasionally check Realtor.com, and very rarely Sandiegolookup.
I met with one realtor who wanted me to sign a contract that said that any house he found for me he got the commission on. In this day of the internet that made no sense to me. Unless he’s finding me stuff that’s not on the MLS then he’s not doing anything that I can’t do myself. I passed on using his services.
You can get some tax data by going on the county website and clicking the “Pay” button for a specific address. There’s still a bit of info in the MLS that you can’t easily get other places. Hopefully that will change soon.
As someone who just reactivated his license and had to join the CAR and NAR (Ethics,you see) as a prerequisite of joining my MLS I would like to see change.The current system works very poorly and as mentioned is rife with agency conflicts and fraud as well as information asymmetry.I hope to see something much better but do wonder if the “Jenae’s” will be the ones who decide the new model.They will certainly try,hard.A more open and transparent system will only benefit those agents that add value.
CA Renter – here is why I think starting with Craig is a good idea (he may not be interested, but it is a logical place to start.)
1) He already has a known brand in place – a new service is going to have a steep climb to get their name out there and build trust. If Craigslist launches a new listing service with all the features we’ve been talking about, it will be front page news with zero marketing effort.
2) He already has much of the infrastructure in place. Sure, new programming and databases have to be built, but why re-invent the wheel when there’s one half built right on the next block over?
3) Craigslist is about community – about people reaching out to other people. That is exactly what we are talking about with this new listing service. People contributing ratings and experiences with Realtors, service providers, school districts, city services, etc. What we are talking about here is COMMUNITY – building better communities and matching home buyers with the right communities and services to fit their needs.
The whole thing fits together beautifully. Charge $50 a month to list a property and make the information free to browsers.
Set it up like Trip Advisor – let registered users upload photos and opinions. “Noticed some water damage on the ceiling in the master – make sure you take a closer look.” “Reports of soil instability on this block, make sure you check those out.” “School board full of crazies, tread carefully.”
Seems like there are lots of sites where you can place a property for sale on the net.What advantage the MLS seems to have is the database record of sales and the screening of realtors allowing for trust when allowing access to peoples homes.
If you are a broker in CA I believe there is no law saying you have to join the mls,CAR or NAR.You can place your listings for sale on craigslist, ebay or wherever.
The problem occurs when showing your listing or showing others listings if you dont have a lockbox key.
Either you show your listing personally everytime or find a way to let others view the house.The mls basically screens all the members so you have some basic trust with the people viewing the homes.If you let just anybody have the capability to show a house you open yourself for theft and vandalism.So the bottom line any site that is going to allow others to access a house for sale will have to have some sort of screening.If I had a personal lockbox on a listing I would not just let anyone calling wanting to see the home access.
What if there was a company that strictly screened realtors or other home buyers?Anyone wanting to get access to inside the house would have to have been screened by a third party company before access is given.Also should a potential home buyer be able to view a house without a realtor?As it sits now you basically have to have a realtor to see inside the house because of the lockbox.
So then the database issue.How do we get brokers to give up the details of their sale?Well if you offered them money that might work.Whoever is running the database would have to give the brokers financial incentive to give up the details of their sale.As it is now the mls gets access to all the details of the sale because you are a member.If you are not a member you dont have to give nothing.Just like a fsbo does not show up in the mls data.
Bottom line you need a system where brokers can access data, list a house and show the house safely.Showing the house safely is the critical point.
I would suggest creating something small that works for SD only. Get all he kinks out then approach private investors / venture capital. (if you want immediate cash, marketing, assess to lawyers and don’t mind that they’re going to take all the $$$) Don’t focus on making $$$ on the front end focus on making $$$ on the back end invisible to users.
I think such a website should be on the auction system for both the realtors and houses.
The house listings should be just like eBay. Set amount of time, highest bidder wins. Everyone sees the bidders and current bid.
The realtors would have reviews and the commissions would also be set up on an auction system. You want Jim to be your agent, you have to outbid the 2.2% commission offered by the other guy for Jim to be your agent. So on.
Art Eclectic,
Yes, you’re exactly right about Craigslist.
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Bubblenerd,
An auction option should definitely be a part of this MLS system.
I agree that we don’t need roughly 500,000 agents in the state; however for all this doom and gloom talk about the death of the real estate agent, in reality there are many people that don’t want to do the research. They would prefer to pass the time consuming task off to someone else.
The travel & investment industries have undergone this transformation already, and while there are fewer independent travel agencies, there are quite a few more travel agents working centrally for Expedia or Costco. Both industries are still booming despite the change in service style. Sure you can make a $5 trade on Ameritrade but it doesn’t make you a stock expert. Most of the time it’s good to have an expert to bounce an idea off of, and while there are many good blogs, there are quite a few that don’t have a clue as well.
I think this evolution is a great thing, it will weed out the worthless agents that are only capable of opening a door and provide more opportunities for ‘experts’ like Jim to showcase their talents.
Data wants to be free, Jim. It is the best thing that could ever happen for Realtors. Make the raw MLS data, images, tours, etc. available to anyone and provide affiliate links, just like every other product company is already doing on the Internet. The website owner that refers the buyer gets a couple hundred bucks. Your listings will instantly be all over the Internet, and you will see insane creativity in real estate promotion. Time to end the monopolies. It is the best thing that could ever happen to your industry.