My house hunt: a look at social computing's impact on real estate
By Charlene Li
Apologies for the relative radio silence the past month. As some of you know, I’ve been engaged in a bit of house hunting, and in the past month I’ve 1) bought a house; 2) staged and sold a house; 3) decided to tear down, design and rebuild the house we bought; and 4) rented and moved into a temporary house over the weekend! The upshot: I’ve had first-hand experience with most of the new and existing real estate tools in the marketplace. So I figured I’d give you a quick take on the state of online real estate.
The past year has seen a resurgence of classifieds innovation, primarily in the recruitment area. Real estate is hitting its stride now. Here’s a quick review of some of the resources I used in the past few months:
- MLSListings.com/Realtor.com: The mainstay of online real estate, Realtor.com is the consolidated site run by Homestore on behalf of the National Association of REALTORS. My local MLS has its own listings up at MLSListings.com. This was the bedrock of my search, even though it lacked a key feature – mapping all of the listings on a map. I had to painstakingly click into every listings and then click again to see a map. But I used it because it was guaranteed to have the lastest and most up-to-date listings.
- Trulia.com: Launched in the middle of last year, this site is simply beautiful to use but inaccurate in its listings. This is because the site scrapes its listings via realtor sites, which may include listings that are pending or have been sold. It also didn’t have the most up to date listings either. The benefit of the site was it gave me a good idea of what the overall marketplace looks like, as it contains so much information that is easy to narrow or broaden given its browsable navigation. But I gave up using it later in my search when I needed to focus on active listings. If it can figure out a way to tap into the MLS listings, it will be a fantastic site.
- Movoto.com (formerly iGenHome.com): If you’re lucky enough to live in either San Mateo or Santa Clara counties, then this is a great site. Unfortunately, I didn’t hear about the site until after I had bought my house in mid-January – and I really wish I had! All of the listings come directly from the MLS as Movoto is an actual real estate brokerage, which can republish the listings on its own site via the Internet Data Exchange (IDX) set up by the National Association of REALTORS. It’s therefore completely up to date. The site plots all of the current listings on a Google Map and mousing over a point on the map brings up a short synopsis (price, bedrooms, baths, square feet, lot size, and days on the market). Click through the link on the synopsis and you get not only the house details, but also the number of restaurants, grocery stores, etc. nearby but also local school information. Neighborhood data is also available, but the killer app is the comparable sales data. You normally need a realtor to pull this information for you, but Movoto does it all. Note: You DO have to register before receiving the sales data information, which generates a lead for the brokerage side of the business. The only problem: Movoto.com is great if you are buying a home, but not very useful if you are trying to figure out what your home is worth.
- HomePages.com: A service provided by HouseValues, the top source of home sold information, launched Homepages.com last year. The service shows houses for sale on a map, much like Trulia.com. But just like Trulia, the listings aren’t updated and even more importantly, the user is left to create conclusions based on the fairly limited home sale information available. I also found the maps to be not as detailed as those from Google. The most interesting opportunity is the ability to get your home priced. I tried this service, which develops a lead for a local realtor. The pricing information was accurate and helpful, but I had to wait a few days for the information to arrive.
- Zillow.com: This site, lead by former Expedia.com CEO Rich Barton, has significant VC backing behind it from Benchmark (to the tune of $32M in the last round). The site shows it too. A user can look at ALL of the estimated house values in a neighborhood, regardless of whether it is for sale or not. I was briefed by Zillow in mid-December and as a favor, they gave me the analysis on a house I was seriously considering as well as my current house. But what I’ve found most helpful with the house is as a current house owner thinking about a major rebuild – I use their calculator to figure out how much my house would be worth with specific renovations. Also, because I can see comparable house values of my neighbors, I can analyze whether my rebuild will be comparable to the neighborhood – or if I’m wildly overbuildling. As a result, I’m in the site several times a week trying out different scenarios to see what the impact will be on my house value. Best of all, I can actually go in and update a listing with information – for example, the house I recently sold had an incorrect square footage in Zillow’s database. I can also include recent upgrades, etc. that then get noted in their database’s valuation for the house (note: these consumer-created data points are duly noted as such).
Lastly, I had to also rent a house! There was one clear, hands down winner in this category, at least in the Bay Area – Craigslist.org. I also tried LiveDeal.com, which had almost no rental listings. This was not unexpected – they are much stronger in secondary markets). My local papers had few houses for rent. And I also tried Google Base, just to see how it’s doing. There not many listings (again, not unexpected) but I found the functionality painfully lacking. A free text search brought back only two listings in rentals, where as a browse-based search came back with 10 in total (including several duplicates).
Overall, I believe all of these tools are still in their infancy. Realtors have by and large embraced using technologies like email and digital photography to update their business practices. But the central premise of realtors and also of the MLS is that they control the data, and hence, the process and the power. But as tools like Zillow tap into public databases – and more importantly, into the information that consumers themselves enter, that power will pass into the hands of the real estate consumer communities. This is yet another example of social computing taking its toll on traditional business models.
The impact: Realtor.com will have to do a major overhaul of its services if it hopes to compete against upstarts like movoto.com. The irony is that with IDX, Realtor.com may have to be reeling in its own members that can tap into the MLS with a better interface. Realtors themselves will to rethink how they earn their living – the traditional commission has already been under fire and these services will accelerate that trend. Realtors like ZipRealty are already doing their share by sharing 20-25% of the commission with buyers/sellers and as consumers do more and more of the work agents typically have done (such as sales comparables and sourcing), pressure on the commission rates will increase. I do expect that services like Movoto and Zillow will continue to make in-roads into traditional services offered by realtors (and their mortgage broker counterparts) but it’s in areas that are data intensive where machines excel.
This lead me to one final point on the role and future of realtors – we could not have gone through this process without our realtor, Samia Morgan. I found Samia five years ago via Realtor.com – yup, I found her on the Internet. I was relocating to the Bay Area and wanted an agent who felt VERY comfortable using technology as a communication and marketing tool. While I had all of the latest tools at my disposal, I wouldn’t have felt comfortable going into this complicated process without her. She was able to recommend a great house stager, builder, and even lent us a free truck to help with moving. But most importantly, she used her considerable connections and experience in the real estate market to understand how the market was changing – especially useful in a jittery market. We were extremely happy with both sides of the transaction, and especially the role that Samia played – we don’t think we could have successfully navigated the process on our own, nor do we ever really want to in the future!
Granted, technology will make significant in-roads into making the real estate process easier. But I don’t believe that realtors can be completely replaced. And I come from a family of for-sale-by-owner believers (one family member chided me that as an MBA grad, I should have ditched my agent and negotiated a lower price with the seller for not having to pay the buyer commission). This is because as long as real estate represents the biggest piece of our net worth, most of us are going to want professional help, especially if the other party is using an agent. But what we’re willing to pay for that help will come under pressure. The very best agents like Samia will continue to be able to get top notch rates – they will simply put these new tools in the hands of their clients and leverage their time more efficiently. Those still building a name for themselves will use those tools aggressively to generate leads and also lessen their own cost of doing business so that they can charge lower commissions rates. The upshot – the whole real estate business is going to undergo a fundamental shift in the next five years as realtors stratify into premium service providers and low-cost transaction providers.
BTW, if you know of any good online custom home construction resources, please let me know! One shortcoming we’ve discovered – there are few comparison shopping services for home builders, especially in the area of high-end appliances. We’ve already had good luck scoring a Sub-Zero refrigerator and freezer on eBay, but still have many other buying decisions to make!