The real estate market is huge and inefficient, a ripe opportunity for technologists to capitalize on. But I don't understand what Zillow brings to the table. Do they have any plan beyond their current business model (advertising)?
As a consumer, I think I should oppose Zillow. They seem to just take public data, present it nicely, and slather it with advertisements. Real estate agents play the same heavy-handed role they always have, except now they have to give some of their profits to Zillow else lose visibility to their competitors.
I'm more excited about Redfin. Redfin makes shopping for a home closer to the self-service experience it should be, with agents dealing in higher volume with lower margins playing a lighter role. Unlike Zillow, Redfin seems to make that market more efficient, and I think that's the bigger opportunity for capitalization.
Trulia and Zillow definitely provided a step forward. 15 years ago, the market was intentionally opaque. Local boards of realtors controlled the flow of information on available properties, making it very hard for people to buy property without giving a 6-7% commission to agents and brokers.
That doesn't mean the market can't get still more efficient, but having a nice presentation of public data is definitely worth appreciating.
I'd also add that real estate agents can provide substantial value. Many don't, of course. But buying a house is an enormously complicated transaction, with a lot of legal, financial, and material complexity. Buying a business is even more tricky. To me it's similar to having a lawyer: there are good ones and bad ones, and sometimes you might not need one at all. But they're not pure waste.
> But buying a house is an enormously complicated transaction
Why?
Where I'm from, buying a home is a few pages at most. You need to put down the buyer, the seller, the object, the price, the down-payment and the date.
Same for getting a mortgage from a bank, it's a page of contract, and a page of terms and disclaimers. You need the buyer, the object, the mortgage amount, the date, and the type of mortgage.
(The trick, of course, is that where I'm from, the general proceedings of buying a home is regulated by law, so the only thing that needs to go on a contract is the specifics and deviations from the norm.)
People's particular needs for housing are personal and detailed. Houses are complicated objects with complicated, unique financial, legal, and physical histories. It is the single largest financial transaction most people make. And the people involved are generally novices, which makes it yet more complicated.
I get that you'd like it to be simple, but it's coming across like this to me: http://xkcd.com/793/
House is sold as-is. Buyer is responsible for finding all visible issues. Seller is responsible for X years (3 I think?) for hidden issues. Done.
> radon testing
Buyer is responsible for testing. The city can tell you if a certain area is at-risk. Sellers usually provide long-term testing results. You can add a clause to the contract stipulating that if radon level is higher than X within Y years, cost of fixing is split between seller and buyer by Z.
> title searches
What is that? googles
Oh. No, we have good public record-keeping, you don't need to pay third parties to trawl decentralized piles of unorganized records.
You come across as very naive here. "Seller is responsible for X years (3 I think?) for hidden issues." So, you need a method of determining if an issue was existing-but-unnoticed vs new-and-buyers-fault. How would you make that determination? With a home inspector whose word is good and whose work is thorough.
The MLS and agent-based system is the real culprit. Until Zillow and Trulia came around and really captured attention, that data was accessed on a few larger sites, like Realtor.com, but also a massive amount of smaller agent sites.
While Zillow is ultimately doing the same thing, I think they can eventually position themselves strong enough to start wedging agents out of the process. One of the huge issues is that the MLS listings are the go-to source for information. If you want to buy a house that's in MLS, or want to list your house for sale in MLS, you gotta play ball with agents. Since MLS is such a dominant marketing tool, they're able to maintain the archaic, but profitable, agent system. If Zillow, minus the MLS, becomes a strong enough marketplace for homes, you'll have viable competition to MLS.
There are already flat-fee MLS agents out there, where you control the commission on the buyer-side and pay a flat fee on the seller-side to get into the MLS listings. That's a decent hack for sellers right now, but it's still just a small improvement on a crappy system.
This is definitely on point. I've worked for a fairly large regional MLS at one point and interacted with a fair number of other MLS's and what I've found out about this business was pretty mind boggling.
Vast majority of them are stuck in the past (think 1990s) and their only competitive advantage is restricting access to information. A typical real estate agent (with very few exceptions, I'd guess <5%) is adding little to no value to the transaction and is simply taking a middle-man fee. They are in general petrified of places like Redfin, Zillow and Trulia and they do anything in their power to maintain the current business model. Generally it involves limiting access to "their" data and coming up with whatever legal roadblocks they can use to defend against other sites.
The agents
However, they are sitting on an absolute treasure trove of data which would be amazing in the hands of the right people.
This is readily available by a variety of services. Google "flat fee mls" to see the options.
I sold my house using one of these services in 2011. I saw seller agents adding zero value outside of MLS, so I just paid what it cost to get on there. Buyer agents are actually a little more useful to their clients, but ironically, the seller has to pay them as well. When you do flat fee MLS, you specify on the MLS contract what % of the sale will go to the seller agent. I actually don't know if you can write in "0" or "0.5" in that box on the contract, but I know for sure you don't have to write in the industry standard 3% (standard is 6%, with 3% on the buyer broker/agent and 3% on the seller broker/agent).
In my experience, we did not need to do anything that required an agent. The paperwork is mostly prepared by the buyer's loan company and then a title agency handles the rest. Paperwork like the purchase agreement is basically boilerplate and I had a lawyer review ours just to be sure.
The lawyer cost me $50. That plus the flat-fee totaled less than $600, saving me thousands on what I would have payed if I had to send an extra 2.5-3% to another agent.
Information is certainly useful as a potential buyer. I was able to find open houses that matched what I was looking for much more quickly on Zillow. I was also able to get updates for those properties to see what they actually ended up selling for.
> But I don't understand what Zillow brings to the table.
As an end user (albeit a window shopper so far), the map-based searching on both Zillow and Trulia is really nice. Map-based searching on Redfin feels kind of clunky and slow by comparison.
Problem is the data is so sketchy on Trulia and Zillow. I'd be interested in a house only to find out it already had a contingent offer accepted. They need to figure out how to get realtime data from the MLS systems.
Trulia and Zillow do have the best meta-data on houses though. School info, crime, purchase history, walk scores, etc.
Honestly, this depends totally on whether you are in a hot real estate market or not. If homes tend to be on the market 30 days, scraping MLS data is OK. If homes tend to be on the market 3 days, not so much.
As someone who has worked in a closely related industry to real estate, I can confirm that technologically the industry is at least 10 years behind. Example: Most of these companies are still using giant XML files pushed around via FTP to send data to each other.
As a real estate broker, I think the major problem isn't Zillow, Trulia, or any other repackager of information. The problem is the MLS. There is still one source/database of legit listings that is bought into by every other broker. Other site (ForSaleByOwner, etc) do not appear legit and nobody trusts a listing put there.
Democratizing the listing information is where disruption needs to happen. What do you think about me as a broker charging a small fee ($100-$200) to post your listing to the MLS, managing in/out calls, but letting the Seller keep the vast majority of the commission and letting a lawyer/broker service to handle the close/escrow process. Selling a home shouldn't be wasted on 15k to a broker who doesn't do anything. (Yes I realize CA has some laws that would make this tricky)
Another idea: How about having homeowners list their properties on a reverse-bidding listing site, where brokers bid for the listing in exchange for the lowest commission? Ideas?
I like where you are thinking with the real estate ideas, but here are my thoughts: As long as we have the concept of buyer's agents, then the system will continue. Real estate agents take any buyer and tell them that their service is free to them. As a seller, that's 2.8% that I don't even have a chance to get away from, which is no good.
No bias here as I don't have any affiliation with Zillow/Trulia/Redfin but...
I feel like the only real disruptor in this market has been Redfin - the only one with actual real estate agents.
Zillow and Trulia are, put extremely simply, a map with ads on it. Useful tool, absolutely, but not going to shake up the real estate industry, which is undoubtedly a dinosaur.
When you look at a company like Redfin, who is an actual brokerage but with non commissioned agents, and lower commissions across the board, they're actually disrupting a market that has been ripe for change for years, and they now are offering a better service/product at a cheaper price. I'd expect big things out of them, and expect several brokerages will either change gears to match them or more competition to pop up here soon.
I was originally using Trulia to send me emails on new homes in the market, and it works fairly well. Problem is that the data can be sort of dated fairly quickly as it doesn't get MLS data immediately (at least in my area). This is sort of troublesome in markets where a home can be sold in 48 hours from being listed.
Someone on HN mentioned Redfin, and I tried it out. It's incredibly fast (guessing 24-48 hours quicker than Trulia) to get emails on new listings as it's using the MLS data directly. Give it another year, and I feel like the UI will be on par with Trulia on the desktop.
I think Trulia and Zillow rely on RE agents to post the information or they take it from other postings. They view it as a great marketing arm for RE agents, while agents (some) view it as a cost that isn't worth it.
With this announcement[1], if I am a broker in NY, why would I post to Zillow if this other agency's listings are always going to be higher than my listings.
Check out OpenHomes.co - 1 year-old startup. They take 1% commission, list your house on the NMLS, and give you the tools to take care of boilerplate legal etc.
If this deal were to go-through, it'd be a massive consolidation of the online real estate industry. Zillow keeps saying otherwise, but local MLSs are going away.
And they should go away. Local MLS's are fraud and add very little value to either buyer or seller collecting 6% of total value.
When I bought the house, My agent spent total of less than ten hours showing the houses and made 30K with 3% he collects. (He was even absent at final walk through vacationing)
I believe Real Estate Agents even got a law passed where you can't be a real estate agent unless you work for someone for year in California. Really? You can be a doctor and do surgery on Patients on your day 1 as a Doctor but you apparently being real estate agent requires some unknown skills.
I'm about to make a big move, and it is absurd that the only value the agents I'm talking to are (that a user on Reddit can't provide by telling me about the area) providing is the MLS they have access to.
The 6% commission, you would think, would be a price subject to market forces, but due to collusion among realtors, its locked in. Why anti-trust isn't investigating? Lobbying, that's why.
The commission is subject to market forces. There are a number of agents in my area (South Bay) that will accept a $5,000 flat fee.
A good agent really shines when you get into "unusual" situations, by providing you with good advice when the way is not clear. If you buy and sell houses a few times you will see some of these situations.
When I bought my house, I didn’t use an agent at all. Luckily I had rented in the area for about 5 years prior, so I already new the area pretty well.
When I began talking pricing on the house, the FIRST thing out of the realtors mouth was “Since you aren’t using an agent we can knock $x off the price of the house” that was before and negotiating had started, and before I made any offer.
And to even sweeten the deal more, the selling realtor was the owner of the house I ended up buying, so there was no commission for the seller to add into the price really. Needless to say, after negotiating we got the house much cheaper than equivalent houses were selling for.
its only _locked_ in if you sign a contract with a realtor (which can actually be negotiated, shop around). if you do a 'for sale by owner' you have no such obligation. even if the other party tries to use an agent. the agent will often 'ask' if you offer a 3% buyers commission, which is, totally up to you. even that is negotiable at that point. the downside is, they have less motivation for showing your house. but both times that i did, i hired a real estate lawyer to get the contracts and such, but handled the 'showing' and negotiations myself. in a hot market, a good agent can earn their % in patience and marketing.
I don't know about your experience, but I've bought two houses and sold one.
In each case, having a real estate agent to act as my "agent" when negotiating with the buyer/seller proved to be valuable. He/she understands real home values and selling trends through experience, not through algorithms. He/she also can spot warning signs for a property, usually has plenty of good vendor contacts, and can guide a buyer or seller through fairly complicated process.
I would absolutely recommend hiring an agent for a first-time home buyer or seller.
However when it comes to just "finding" property to show you; I agree agents and the MLS are becoming obsolete. In fact the second house we bought we had picked out before hiring our agent. So I'm all for open listing and open data.
Isn't that the fundamental problem with percentage based compensation? It doesn't take that much more work to buy / sell a million dollar home vs. a $300k one, but the agent's income is vastly different.
I'm not a realtor but I'm not sure "It doesn't take that much more work to buy / sell a million dollar home vs. a $300k one" is true. I wouldn't be surprised if it involved pickier clientele with more difficult to accommodate hours, for one.
My issue is that you can also have picky clientele at $300k, but you don't get paid any more. Or for instance, compare a client who spends every night checking Zillow for the latest listings vs. one who relies on the agent for new listings. There may be some correlation between home price and effort, but there are other factors that often dwarf that, and those aren't priced in at all.
In my experience, local MLSs are still way ahead of the publicly available online services. Trulia tended to be better than Zillow in my region, but they still lagged weeks behind what my realtor was able to send me. Properties moved so fast that almost everything I sent my realtor from a publicly available data source was already sold.
I bought my house after seeing it on Zillow. It never showed up on the Keller Williams site my agent set up for me, and he never knew about the place until we asked about it. It was my first home purchase, so he was very helpful throughout the process. I probably won't use an agent the next time I buy, and I definitely won't be using an agent when I sell.
realtor's often have 3 days to 'pocket' a listing before they have to put it in the mls. these 'pocketed' listings can be privately shared and thats where realtors keep a little advantage.
It stands for Multiple Listing Service. Essentially, it's the database used to manage listing information about a property which has been entered by the realtor handling the sale of a property. In the "old days" you could really only find out about properties for sale by looking in the newspapers, or speaking with a realtor who could search for-sale properties in these databases. There are thousands of them in the United States, and you generally need to have a realtor's license to gain access to your local MLS.
MLS's can choose to syndicate their data to third-parties using services like ListHub or Point2 - but usually stipulate that the data must always point back to the listing agent so they stay part of the selling process.
Companies like Zillow and Trulia have challenged this model. Increasingly, they've become the de-facto starting-point for real estate research. They've built more-user-friendly interfaces, and surfaced public-records information along with property listings in order to present a more-compelling way to buy and sell houses. Furthermore, they've done this while positioning themselves as advertising companies so as not to upset realtors or make them feel as-if they're being cut out of the process.
The big complaint realtors have had with Zillow and Trulia usually centers around two concepts. One is "stale" data. The typical claim is that once data is syndicated from an MLS through a syndicator like ListHub to a site like Zillow things may have changed on-the-ground and the data may be stale. Another complaint is that Zillow's business model is built on the backs of the work realtors have done. They source all the information, and Zillow earns money from redistributing that data.
I never thought of Zillow being the bigger company until I compared their listings to Trulia's. Looks like Zillow has been acquiring other real estate sites like crazy over the past few years to get to where they are now. Pretty impressive. However I feel like the Zestimates are still not very accurate. Not even sure how they get those estimates. Can anyone shed some light on this?
Also, I wonder how long it will be until Amazon acquires Zillow and 'homes' will be listed in departments.
Zestimates are worse than random. There seems to be no sanity-checks in the algo whatsoever.
Check out this Baltimore home. In a single month it's estimate went from $700k to $300k, then back to over $700k during the worst part of the housing slump, and back down to $300k during the recovery. lol wut?
I did an analysis on the accurate of Zestimates a few years ago. I took sales data for my county from the previous month (that Zillow had not imported yet) and compared it to the Zestimates Zillow computed. The mean error was almost 0, but the standard deviation was about 20%. An engineer from Zillow wrote to me and said my analysis was close to their own internal measurements. Their algorithms might have improved since then since it sounded like it was something they were continuously trying to improve.
It was on my old blog which is no longer online. I'll see if I can find the article in my backups and post it somewhere. I should probably do the analysis again since my original test was during the end of the housing bubble when prices were unstable.
As far as number of listings of on-market homes, Zillow and Trulia are certainly very close to one another. Possibly in your local market that wasn't the case, but generally speaking it is.
At Trulia, we also calculate Estimates for properties but in most cases we do not show that data. In theory, the estimates work much the same way an appraisal works: Comparing the home on its various attributes to recent sold homes nearby. Obviously it's not possible to capture the essence of an Appraiser in an algorithm, but we display the estimates in cases where we feel it's better than just showing an old, out-dated last sale price.
I expect Amazon will stay the hell away from that market. Note that they haven't even gone after cars, which are a much easier thing to sell.
Homes are a mess: novice buyers and sellers, complicated laws, tricky financial deals, and a "product" that is complex, unique, and can have many hidden flaws. Real estate agents frequently get sued when things go wrong [1] [2]. The last thing Amazon needs is to get in the middle of that.
With 10 years experience in the real estate brokerage business I have witnessed the value of a good agent in the home buying/selling process.
The number of things that can and do go wrong on the eve of a sale, are often things that a good agent with good vendor/contractor/mortgage relationships can fix so the deal can close.
With tight lending standards post-2009 an agent with good mortgage broker relationships can get loans approved that would have otherwise fallen through. I have seen this a hundred times.
90% of agents are useless middlemen/women that want to collect a few commissions a year to supplement their income.
A full time, capable agent/broker is like having a good lawyer on your side.
Being a real estate agent/broker is not an easy job. It's extremely competitive, the margins on a brokerage are often very thin.
It's a demanding 7 day per week job, and putting in a lot of work to get no payment is an ordinary occurrence.
The MLS and the mandatory broker councils that one must belong to are another story. I have found them to be petty dictatorships at least 10 years behind technology wise.
One MLS I have worked with has for over ten years had an internet explorer only web interface. The MLS API is a giant XML beast that is the most confusing API I have ever worked with.
The MLS has great value, and the freshness and integrity of the data come at a large cost. I am not surprised that brokers and associations protect it the way that they do.
even if zillow & trulia merge, none of the potential disruptors in the real estate listings space (zillow, trulia, redfin, fsbo, etc.) have any real chance until the MLS system is dismantled... and brokers have a massive disincentive against that--brokers have exclusive access to property data via their local MLS before anyone else. the MLS's allow some access to this data to zillow & trulia, but will never let them have instant & complete info since it's the MLS's core competitive advantage.
agent commissions will remain at 5-7% as long as the MLS system is in place. but MLS's are not going away any time soon. even the DOJ looked into breaking them up via legal action and gave up.
interestingly, new york city does not have a strong MLS presence, but is basically an oligopoly of 6 major brokers, so the effect is the same.
figure out a way to dismantle the MLS system and you're looking at a >billion dollar business (just note that zillow & trulia have been trying for ~decade, so it's not an easy problem).
The way it works is : seller pay 5%-6% of commission to his agent. Seller agent then posts what the buyer agent will get. Buyer agent will get equal or more, as he to do more legwork.
now interesting part:
a buyer can negotiate with his agent to get some of the commission a buyer agent gets in range of 1.5%-2%. But buyer has to work with smaller agents, not affiliated with big firms : century 21. There is glut of agents, and you can get the deal. (me and some of my friends have)
needless to say : you have to do lot of legwork : finding house urself, and just the agent to do the paperwork.
Same goes with seller : he has to give 3% for buyer agent, but for his agent (seller agent) he can negotiate to 1% - 1.5% (know of that happening too)
while looking for a next house, I just made a aggregator to scrape multiple sites and let me know when new house is available in bay area. (http://www.twikstik.com/ : running on appengine)
It's relevant to link to Citron Research's scathing report that Zillow is among the most egregiously overvalued public tech companies, with large insider selling and video footage from management admitting to its partners that it does not have profits with which to pay them.
Keep in mind that Citron Research is known for providing info for short-sellers. So it's somewhat in their interest to see the stock go down for companies they review and, in turn, suggest their readers short.
Note: they've recently been doing lots of reviews on Z
Largely true, but they've also put out Long reports, namely Blackberry recently which they highlighted about a year ago and have reiterated their positive stance, which has played out in the market. I add this not to toot their own but even out the message that although they're known for their shorts, that's not all they research and pick.
Redfin is pretty good but is in only select cities. IMO Trulia's interface is superior to Zillow's. One small example, on Trulia you can wrap around when cycling through pix. On Zillow you have to go backwards through all pix to get back to the first one. Trulia is more fine tuned like that. On mobile, the gap between Trulia and Zillow is even wider in Trulia's favor.
Zillow shows lot lines, which is nice. Zillow has better price history. I use Trulia for finding a house initially, and then Redfin or Zillow to get deeper info. Redfin has the deepest data.
As a consumer, I think I should oppose Zillow. They seem to just take public data, present it nicely, and slather it with advertisements. Real estate agents play the same heavy-handed role they always have, except now they have to give some of their profits to Zillow else lose visibility to their competitors.
I'm more excited about Redfin. Redfin makes shopping for a home closer to the self-service experience it should be, with agents dealing in higher volume with lower margins playing a lighter role. Unlike Zillow, Redfin seems to make that market more efficient, and I think that's the bigger opportunity for capitalization.