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March 06, 2006

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!

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Listed below are links to weblogs that reference My house hunt: a look at social computing's impact on real estate:

» Immobilienmakler im Umbruch: Internet als Bedrohung und Chance from FUTURELAB FUTURETALK
Man sagt: "Dreimal umgezogen ist einmal abgebrannt." Und wer ein Haus kauft, der kann etwas erzählen. Charlene Li, Analystin bei Forrester, hat in den letzten Monaten a) ein neues Haus gekauft, b) das alte Haus verkauft, c) sich entschlossen, das gekauft... [Read More]

» links for 2006-03-07 from medmusings
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Comments

Pradeep Aggarwal

Nice blog with good information on articles.

Thank you for providing relevant information. I’ll keep visiting it for updated information.

Keep it up.

Niki Scevak

Charlene, congratulations on the full turn of real estate cycle!

I wanted to introduce a venture I founded, homethinking.com that hopefully might help with your second piece (staging and selling your home) the next time around.

We monitor real estate activity to know what homes each realtor has sold and then, consumer reviews about the job they did.

So for instance, you might enter in your zipcode and see which realtors have been achieving exceptional returns for their clients over the past year on the homes around you.

Also, if you liked your experience with Samia, be sure to fill out a review about her at http://www.homethinking.com/review01.action

I'm she (and we) would be appreciative.

Irene Fu

Hi there Charlene, congratulations on getting through that marathon! :)

There is a site that you might find helpful for building products etc. called http://www.ebuild.com .

Cheers!
Irene

FSBO

Great comments and good advice. One of your options your mentioned was the FSBO side of things... here is a site you may want to use the next time around: http://www.forsalebyownercenter.com

Marlow

Dear Charlene,

What an interesting and thoughtful play-by-play discussion on your adventures in real estate. With all the new technological changes, it's easy to forget that this medium is still in its infant stages, with all the accompanying foibles and inadequacies.

I had a laugh at the quote from one of your relatives: "....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.)"

What does he think, that when one gets an MBA, one loses all sense of right and wrong? Do MBA grads typically use someone's services then refuse to pay for them? I'd watch that guy, if I were you!

Good luck on the new home.

Osh

Nice post Charlene - love all the details. You mention getting a briefing from Zillow. I assume you're also talking with Redfin and maybe some of the establishment orgs. Would be cool to hear your future thoughts on the evolving intersection of real estate and computing. Cheers.

Scott Aikens

Hi Charlene,

Great article. Thanks. I forwarded it to people that I work with.

I think it would be extremely interesting to see something similar on retail real estate. If you come across anything like it, or have reason to pursue the research, or want someone to help with the research, let me know.

Cheers,

Scott Aikens

Scott Powell

Charlene,
Thanks for the balanced view on using technology and professional advice in your real estate venture.
As an agent for ZipRealty in Phoenix, I believe the web is reshaping the way real estate is bought and sold - but (somewhat self-servingly) agree that there will always be some value to having a capable professional help you with the transaction.
Thanks for the ZipRealty plug - and thanks for not ditching your agent!
Best Regards - Scott Powell

HomePriceMaps

If you checked out Zillow and weren't happy with their tax assessed "zestimates" check out www.HomePriceMaps.com

HomePriceMaps.com integrates Home Sale prices pulled from public records with google maps.

Ryan Home

I have started a Nationwide Home Finding Community that is not as advanced as some of these big companies you have been talking about, but I think it has a lot to offer. MyHomeSearches.com is a Nationwide Real Estate Community that allows consumers to find a good quality agent in the city that they are interested in and then interact with that agent online through the local agents website. Consumers can search the local MLS and recieve helpful info about the areas of interest from someone that actual lives there. I think that this site really helps the agents and the consumers with their online experience. For the agents and brokers I am only allowing one agent per city so It guarantees that the agent for the area recieves all of the traffic. If this sounds like a good idea to you please feal free to e-mail me your opinions.

Thank You,

Laura Rippy

Invaluable advice from Charlene as always. As someone who has followed this category for more than ten years, and is now a consumer in the process, it blows me away that so little has changed until the last year or so. Particularly realtor.com .... have they changed the UI in a decade? I agree that the valuations of zillow and housevalues.com will shake things up, and there will be more to come from both of those players. Integration of maps is overdue.

I disagree that the time has not come for more and better FSBO services. Yes, RE is a huge part of a consumer's asset base. But once the FSBO tools get stronger, and the FSBO listings better integrated into the mainstream shoppers experience it will be a huge shift in the category. Realtors may continue to fight it but there is an inevitability there. Maybe before another decade is past...

Mary McDonald

Thank you for outlining use of the various approaches to finding a home. As a realtor and accredited staging professional with the Mary Opfer Team at Re/max Unlimited Northwest in Cary, IL we suggest to our clients to broaden their search to include homes just outside of their price range. If looking up to $475,000 for example, we suggest they not miss homes priced as high as $490,000. In our market homes tend to sell for approximately 97% of their asking price and if they don't broaden their internet search those homes that might match their criteria are invisible to them on the internet. Buyers who enlist our help using the various searches benefit from this and other search tips. For these and other home buying tips, visit our website at http://www.mcmary.com
We would love to hear from you on our blog at
http://mary-mcdonald.blogspot.com/
Thanks!

Mary Anne Martin

This blog posting was of great use in learning new information and also in exchanging our views. Thank you.
Mary Anne Martin
http://www.onlinerealestate4less.com

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