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Zillow to Acquire Trulia for $3.5B (nytimes.com)
270 points by julio_iglesias on July 28, 2014 | hide | past | web | favorite | 166 comments



Having bought real estate, I can say that Zillow/Trulia are both a blessing and a curse. They are great in that you can see what's been listed for a while, scan a map, and generally put a pretty interface on house searches. This I imagine is their great advantage. I also found my mortgage company through Zillow's mortgage rate search.

Their big disadvantage is that their records are not updated as fast as the conventional MLS. The house I bought recently came on the market 7 days before I made an offer. It was not on Zillow even by the time we had the contract signed. The sellers, for whatever reason, put a very reasonable (possibly even low) price on the house, and I was at the end of the search, having seen enough locations in the area to know that this was a great value.

Another random personal experience: when I first saw Zillow I remember thinking "who needs real estate agents if you have all this?" Then I got an agent to buy my first house. All I have to say is "you do not know, what you do not know." While I do wish that agents simply took a set fee instead of it being a (very large) percentage of the purchase price, they provide a hugely invaluable service. I am not saying it's impossible to buy real estate if you don't have an agent; but if you can do it, you are probably a real estate agent.


they provide a hugely invaluable service

What is that service? I'm not being snarky; I'm genuinely curious, as the structure of the industry (and fee level) is significantly different than where I'm from. I don't get why you need a real estate agent to help you buy.


I'm in the process of buying my first home, and it's been hugely helpful to have an agent. Services include:

- Tours of homes; seeing something online and seeing something in person is an impressive difference. Some houses look amazing online and terrible in person, or vice versa. Cannot possibly overstate the value of this.

- Negotiation; he's a professional negotiator, and he has years of experience negotiating in the exact market that we're buying in.

- Documentation; there's a RIDICULOUS amount of paperwork to file, and all I have to do is read/sign it.

- Inspections; he has handymen and inspectors on file, and knows that they're trustworthy.

- Knowledge; he's done this dozens/hundreds of times. He knows about how long things take, he has reasonable estimates of how much things will cost, and he has the patience to answer all of my questions.


The highest producing agents are indifferent negotiators, but work hard to convince you they got you a great deal. They are trying to get you to buy quickly. Every hour they spend showing you more houses dilutes their commission on an hourly basis. Plus if you think you got a great deal you will refer your friends.


Moreover, there is a moral hazard in negotiating. The higher the sale price and the quicker the negotiation is over, the more and more quickly the agent gets paid. The agents I worked with generally did not give off the vibe that they were phased by this. I think at the scale of what a normal person can afford real-estate-wise, the difference is not huge. My latest agent in fact insisted that I go see more properties before making offers when I said I was ready to go. During this time I found the property I finally purchased, and it was about $50k cheaper than the original property I was interested in.


My experience with my agent was that she picked the home inspector with the worst Yelp ratings. Most reviewers said the inspector was not thorough at all, which of course works in favor or closing the sale quickly and without any issues, so we decided to choose our own inspector, and she threw a fit. I'm disgusted by the whole real estate agent system in California, where the incentives are all set against the client, yet there is no easy way to bypass the system.


Talk to a real-estate lawyer if you want to do some negotiation. They are sharks compared to agent, incredibly vicious sharks. The agents both want the deal to happen and get paid very nearly the same regardless of the negotiation, you may very well find yourself in a situation when your agent is encouraging you to take an offer rather than beating an extra couple percent out of the other guys.


I'm also in the process of buying a home for the first time, and did some search on Trulia/Zillow. It was OK, but the data gets really stale. One home was sold already before it was taken down. I did find out that Houston has a really nice site, har.com that lets you do basically everything Trulia & Zillow does. Realtors have other interface(s) into the same data, which lets them do different things like N sided polygons instead of just squares for map searches.

Tours vs images is definitely an issue. Some people are just bad photographers, some only have 6 images (Houston MLS requires 6 images for a posting). Some are good photographers, that make things look bigger than in person.

Experience is hugely variable though. I called 2 agent offices, and got stuck with their most inexperienced Buyer's Agent. The more experienced people are doing sales of homes or commercial, and getting a cut of the commissions of the people under them. Some Googling led me to roughly a 60/40 split between agent & office, along with the agent paying a desk fee (~$50/monthly). Since the principal is still getting paid, you can involve them if needed for second opinions or more nuanced explanations. Agents are getting roughly 3% of the sales price.

Still read all your documents. I've caught things that slipped past my realtor, and also brought up questions for her to answer.

Inspections are a mixed bag. They have a preferred list, and should also provide you a legal document stating their incentives for any recommended providers (including home warranty companies). I ended up going with one of my realtor's preferred inspectors, but only after calling all 5 on their list, and several more listed on Yelp.

Knowledge goes back to experience. My agent was basically bowled over by 2 of the new home builders in the area. It was so bad I considered buying the Realtor's Residential Construction Certification program (1 day course, ~$300, they'll sell to anyone) and going through it myself if I went with new construction.

Another point about knowledge is that even with experience, you can come up with stuff they don't know. Neither my agent or the broker (my agent's boss) had worked with anyone that negotiated their lender origination fees. I got $500 off one lender and $1000 off another.


You can do polygons on har.com map search, their new map search with neighborhood boundaries is very nice too. Given the existence and utility of HAR, I've had a hard time justifying using zillow/trulia when searching. Heck, both times in recent years I've bought a house, I set up a saved search in HAR and my partner and I would browse listings at night. Effectively, all our agents had to do during the showing process was schedule visits to our top properties.


Agents are getting roughly 3% of the sales price.

In the US, agents get roughly 6% of the sales price. The sellers's agent gets 3%, and the buyer's agent gets 3%.

In the UK, agents get roughly 1.6% of the sales price. The seller's agent gets 1%-2.5%, and there is no buyer's agent. There are other costs (survey and lawyer fees) but these are not large either, and aren't related to the price of the property.


Regarding the US, I think the typical deal is that the seller's agent and broker each get 1.5%, and the same for the buyer's agent. Some agents are their own brokers, but I believe that's rare.


This split is about how the realtor splits their commission with their employer and/or the umbrella company which provides marketing, access to MLS etc., right?


Yes. The broker is the one who is "really" doing the transaction. A broker can handle a deal on their own; an agent must use a broker as well. Wikipedia's not-entirely-clear description is here: http://en.wikipedia.org/wiki/Real_estate_broker#The_differen...


We had this trouble as well. Our Realtor helped us find a nice infill development by a very flexible builder. He knew we were FTHB that needed hand holding. He dumped us on them and didn't show up until the deal almost fell apart. We did ok on the functional upgrades but botched the design. We're now faced with doing a full house remodel of a brand new house :(


Interesting how the division works in other markets. In the UK people generally do their own negotiation, the tours are arranged by calling the seller's agent, the surveys are arranged to the standards of the mortgage company (and in Scotland, rolled into the "home report" at the seller's expense). Once you've selected a property you hire a conveyancer who handles title search and almost all the paperwork.


It's slightly different in Scotland further still. Here almost all estate agency is conducted by solicitors (lawyers). I've just bought a flat in Edinburgh and for a flat rate I had an experienced solicitor advising me on the process, giving me advice on each property I was considering - such as what to look for as warning signs when you're buying a 130 year old flat. Because they're lawyers they are regulated (which is why gazumping doesn't happen nearly as much in Scotland) so standards of client servicing are much higher.

The moral hazard is removed by them not taking a fee on the buy side, they're aiming on you continuing to use their services for all future legal matters.



That’s almost exactly how the purchase of my house in the US worked. There’s definitely no requirement that a buyer use an agent.


Did the seller use an agent? If so, did the seller's agent receive the full 6% commission that would normally be split with the buyer's agent?


Agents usually split the commission. So, the seller will pay their agent 6%, but the buyer's agent takes half, or 3%. If you don't have an agent, and put in a bid on a hot property, the seller's agent will have a much stronger incentive to push your offer through, since they will make substantially more money. Alternatively, you might be able to get away with a slightly lower bid since the seller and seller's agent could eat some of the cost.


My brother just bought a house in the San Francisco Bay Area. Given that he was relocating from severe hundred miles away, his real estate agent was very helpful him shop from a distance. I helped out by doing a final walkthrough of the house with the agent, and saw the stack of paperwork the agent had to deal with. OMG, there were so many forms. A real estate agent who knows how to navigate all of that would be worth it to me.


The fee varies by state, but generally is 6-7%. It's split by the buying and selling agent.

You definitely need an agent to sell a house. Because no other agents will show your house if you do a fsbo (for sale by owner). In fact, agents will actively discourage their customers from buying your house, even if they offer to pay the agent their half of the commission.

If you are buying a house. The main thing is they can open the doors of other agent listed houses and show them to you.

They have a tightly closed network, and it's held in place by laws. The NRA (national association of realtors) has a strong political lobby.

Here is a good run down of the situation on 60 minutes. It's old (2007 before bust) but not much has changed.

http://www.cbsnews.com/news/chipping-away-at-realtors-six-pe...


Disclaimer: I work for a real estate brokerage (but I'm a software developer).

Real estate agents can help in a number of ways (chaossphere2112 outlines a number of them), but one of the easiest ways to think about it is that this is a very large, complex transaction that happens rarely. That means that, while you could learn all the ins and outs of: - contracts (often regulated by the state) - negotiation (in whatever kind of market you are in--one favoring buyers or sellers - house value (both use and resale) - what can be changed about a house easily (finishes) and what is hard (layout) and what is nearly impossible (location) - neighborhood characteristics - typical home uses for people in your shoes now and in two years and five years, which might impact your purchase - the minutiae of a purchase (deadlines, appraisals, inspections, etc)

you might want to consider paying someone who does this as their job to help you out.

As for the 'pumping up the price' to get paid more, or 'making me hurry up' to get paid faster, there may be some agents that do this, but good ones are more concerned about the lifetime value of a consumer, which can easily run into mid five figures (if you move every 7 years starting at 28 and ending at 70, and buy the median house price (~200k) and use the same agent every time at 3% commission, that is 36k in commission).

It's dumb to burn a customer for a few hundred bucks when their LTV is ~40k (if you pay 210k for a house when it is really worth 200k, the agent earns 6300 instead of 6000).


> As for the 'pumping up the price' to get paid more, or 'making me hurry up' to get paid faster, there may be some agents that do this, but good ones are more concerned about the lifetime value of a consumer,...

Most people don't do anything like this, especially not in the same geographic region.

In any case, this only gives the realtor an incentive to make you feel like you got a good deal. For products where my experience in the objective (e.g. going to a restaurant) or where I have adequate skills to judge, this would be find. But the realtor in selling his skills as judging deals, among other things. He tells me "this is a great deal for this neighborhood".


The way the market works in Finland is that the seller almost always pays for a real estate agent, mainly to draft contracts, give tours of the property and so on. Negotiation is pretty simple typically, the buyer just makes an offer, I don't know what's more to it.

I can see that a real estate agent for the buyer gives value, but I wouldn't personally pay much for it. Not 3% at least, that seems like a huge waste of money to me.


There's a similar way to work without a real estate agent in the USA--you just hire a real estate lawyer who takes care of contracts and whatnot and you pay them a flat fee.

I'm always curious how other markets work (and aware that the USA is one of the few RE markets with buyer's agents). Is there an inspection period? Are most homes bought outright, or are loans taken out to purchase them? Does the seller's agent do any marketing (newspaper ads, open houses, etc)? What does the seller's agent usually get in terms of compensation (a percent of the sales price, a fixed fee)?


> Is there an inspection period?

No. However, the seller is responsible for 'hidden problems' for five years after the sale. I would guess that most of these cases go to court, and are only for serious problems like mold.

> Are most homes bought outright, or are loans taken out to purchase them?

Loans are typically taken.

>Does the seller's agent do any marketing (newspaper ads, open houses, etc)?

Yes, the seller's agent typically does all the marketing. Mostly newspaper ads, online real estate listings and open houses.

>What does the seller's agent usually get in terms of compensation (a percent of the sales price, a fixed fee)?

It's usually a percent of the sales price, and around 2-4%. In recent years fixed feeds have become popular (€3-4k).

--

The one thing that sucks most about the Finnish real estate market is the 'transaction tax'. It's 2%-4%, paid by the buyer (but first-time buyers are exempt), which means that moving often is discouraged.


Thanks for answering my questions.

I like the idea of the seller being responsible after the sale--that would make most sellers more honest.

That tax is interesting--what does it support (national government? city government? schools?)?


The tax is paid to the national government.


They know real estate the way most people do not. The analogy here would be trying to write a giant enterprise piece of software you plan on supporting for the next 10-30 years without the benefit of any experience as a developer.

On a practical level, they can generally guide you through the very intense process of lining everything up to buy a property (this process takes months, and a whole lot of phone calls and paperwork). They know prices, and can tell you what something is worth. They can spot problems with the property before you get a (very expensive) inspector on site. They help you negotiate and buffer you from the seller and the seller's agent. This is particularly valuable since a good deal can go bad because personalities clash. They help you find professionals to work with (attorney, bank, inspector, etc.) if you want them to (all of these are up to you, but if it's all the same to you, then they generally have good suggestions).


The analogy here would be trying to write a giant enterprise piece of software ... without the benefit of any experience as a developer

Where I'm from (the UK), people don't try to write giant enterprise software without any experience as a developer. They _do_ buy houses without a buyer's agent, and have done so for a long time, without problems.

There _are_ special functions which require the help of professionals:

- Conveyancing: actually executing the sale and ensuring ownership is transferred. This is dealt with between two lawyers, one on each side.

- Surveying: checking that the property is in sound condition and, if the property will be financed by a loan, appraising the value to ensure it's suitable security given the size of the loan.

Each of these services are provided by regulated professionals (solicitors in the first case, chartered surveyors in the second). Each are subject to a flat fee (i.e. not related to the sale price) which is the hundreds of pounds (not thousands).

I don't see how the US market is so structurally different (vs. the UK) that (i) the buyer needs an agent, and (ii) fees are so high.


The real estate agent is incentivized to make good suggestions because they work with the same people frequently and they want the house to close and get their check. However, the lending broker also has the same motivation and frequently is the one that handles all that stuff.


They bring lots of data and patterns to the table mostly -- because they spend all day every day dealing with it.

- If you tell your agent "I'm looking for a good investment property" they'll be able to tell you why this house on this side of the street is a good investment, and why the house 2 blocks away isn't.

- They can use this data during negotiations. You don't really know what price a home can be bought or sold for, but they can work off of a more educated guess. Should I try to sell my home for $x? or $x*1.25? They'll know how much and why. Should I try to negotiate down when buying or do I need to make a stronger offer? They'll know market conditions and can help you.

- They're familiar with all the oddball paperwork certain kinds of property deals have to work through. Like, are you buying a deprecated farm unit in an independent but not registered municipality that's been rezoned for mixed-use development but you'd like to rezone back to agricultural use? There's a form for that and they just saved you 6 months of back and forth with the state/county/city getting it sorted out.

- They can dig into property history and find out things that you might not know from looking at the property. Like, the foundation was recently rebuilt, or the property has a history of flooding and needs a sump-pump, so you might be looking at $20k in charges to put one in, or you can use it to negotiate down.

- If you are selling, connecting you into the broker network to find a buyer. It's a lot more than just putting something up on the web, a good agent will spend quite a bit of their time hunting down a good buyer for you.

Here's a longer list

http://ohiorealtors.org/consumers/184-tasks-agents-do-for-yo...


Some agents provide a hugely invaluable service.

If I am going to move to a new region, first I pick the area I prefer by renting a few months and learning the reality on the ground, then I grab the best agent based on specialization for that area, not a "generic" one for the whole city.

In my experience, the value of the agent is great there. But it lowers drastically if they are just "whole city agents."

Experience: moved to 3 metro areas in past 10 years.


Even more important given heavy gov't intervention driving house prices up 20+% annually in market markets. Renting for a few months can now do more harm than good overall.


Mine negotiated the price down another 5% (5%!) from what we would have put in as a first bid had we done it without an agent. (so if list price was 100, we would have been OK with paying 95, we would have started bidding with 90; with our agent, we closed at 85).

We did structure his fee in a way that he would get more commission if he got a better price for us. We ended up paying him 2x or 3x what he makes on a normal sale, and yet even if we had paid him double from what we did, we still would have made thousands using his services.

(This might seem to be in contrast with my other post in this thread about agents being financially illiterate, but the proposition of 'more money!' was so simple in this case, that it did seem to help. Anything more complex (opportunity cost, time value of money, ...) went over his head.)


I don't re-call the exact details of the situation, but an old acquaintance was able to sue a seller for breach of contract after the seller backed out of the deal at the last minute. The settlement was in the lower 5 figure range.

I guess the point is, for many people this transaction involves a significant portion of their net worth and and there are plenty of people out there who would happily relieve you of that money. I agree that the incentives are slightly mis-aligned when it comes to final price negotiations, but at the very least, any agent should be concerned enough about their reputation that they will have done the basic due diligence to ensure that you don't get fleeced. That alone would be worth the price.


Buying a house is a huge investment. Sure, you can do it all on your own to try to save some money but not without risks. I like to think of an agent as a sort of insurance charge to ensure I am not wasting my money and that I'm getting the best possible price on the best home on the market that fits my needs. I also don't want to spend all day looking for listings on my own. Had I not used an agent I wouldn't have bought the home I live in (and love) today since it didn't fall into the specs I was set on going after.


I'll give some counterpoints given that so many others are supporting real-estate agents.

1) Real-estate agents make money on sales completing. Their primarily financial goal is to complete the sale. Whether this means that you are overpaying (or, for a seller's agent, are under-asking), or are buying a home that isn't right for you...that often matters less than simply closing the deal.

2) Never trust or take a recommendation for a home inspector or other service recommended by the agent. The home inspector has the motive of keeping the agent bringing the recommendations, and this means avoiding having findings that will compromise the deal. Remember, the agent only makes money when the sale completes, so if they spool someone along to buy a house, convince them to overpay to get a sale done, and then bring in the "best" home inspector they know to close the sale, that inspector had better not throw a wrench in it. Always consider conflicts of interest, and there is an enormous one if you use the agents contacts.

3) The legal work -- the bulk of the paperwork, and covering your back legally and so on -- is, in many jurisdictions, done by a lawyer, not a real-estate agent who is only responsible for the most cursory of forms. And that lawyer and his team of paralegals, who do all of the title checks and bank processes and the final close...they get a small fraction of what the real-estate agent gets.

I find real-estate agents to be a profound anachronism. Sure, someone with neighborhood and pricing knowledge is of value, but is that worth tens of thousands of dollars? Is there anyone who would seriously argue that pricing makes sense?


> Never trust or take a recommendation for a home inspector or other service recommended by the agent.

I learned this first hand. I bought my first house in 2009, and used an inspector that my real estate agent recommended. The house was 25 years old at the time and he created a report full of minor issues, but no deal breakers.

I intended to live in that house for a long time, but had to sell it this spring. Got an offer in a month. All the minor things had been fixed and a I also made a lot of improvements. Then the buyers inspection found that a truss had been cut and removed in the attic by a bad HVAC guy. Ended up costing me > $1500 to have it assessed by a structural engineer and repaired, and almost caused the deal to fall through.

Once the missing truss was pointed out to me, it was very obvious, and should have been caught by an inspector on his first day. I'm positive he didn't point it out so as to not sink the deal and keep getting his referrals.


The MLS walked garden is the problem it seems to me many are trying to solve. If I see value in an agent, I'll hire them no matter what - but even with my current place, my agent sent me MLS listings and I crawled through Trulia and the like, and emailed him what I was interested in seeing. The place I ended up in I saw on Craigslist. That didn't negate the need for an agent, but his access to the magical MLS that we normals aren't allowed to have access to was inconsequential, and keeping it secluded seems silly at this point.


About a year and a half ago I bought a home, after looking at dozens of houses. I found my home on Zillow, and I agree with your general sentiment about its strengths and weaknesses. In my case, my home had been on the market over a year so it had been on Zillow a long time, but I found a lot of homes that I wanted to look at on Zillow that were already sold or under contract and Zillow had not been updated for days.

I tried several agents before settling on one, and she was awesome helping my wife and I to tour dozens of homes during our search. Handling the actual negotiation/transaction was cake compared to the time and effort she put in taking us on house tours!

Of course, if the security problems could be solved, I would probably not have needed an agent for that :)


>when I first saw Zillow I remember thinking "who needs real estate agents if you have all this?" Then I got an agent to buy my first house. All I have to say is "you do not know, what you do not know."

Absolutely seconded. I rather extremely underestimated the entire process, and was very lucky to have a college friend of mine as a professional real estate agent.


I interned for Redfin last summer. This is a really interesting space, and most people don't realize that Zillow/Trulia are operating drastically different businesses from Redfin.

Some background: The US real estate industry is broken up into regions (e.g. SF bay area, Orange County, Lake Tahoe, etc.). In order for a brokerage [1] to operate in a region, it needs to employ agents specifically licensed in that region, and have a real office there. Importantly, each region also has its own data feed of listings, called an MLS feed [2]. Amongst real estate agents, the MLS feed in each region is considered the primary source of real estate listings. If a house is not in the MLS, it's not for sale. BUT, only brokerages have access to MLS feeds.

There is no standard for MLS software. It's truly terrible. No joke, in some regions, the MLS service -- responsible for all real estate listings in that region -- is an archaic Windows program running on a desktop in some guy's Lake Tahoe cabin. Generally, MLS feeds are similar in structure, but there is no semblance of standardization, API, or developer-friendly solution for accessing it. Every region has its own MLS feed with its own structure, access restrictions, weird rules, etc. It's a nightmare to develop against.

Zillow and Trulia set out to solve this problem. They are listing aggregators, essentially filling the same role as MLS software. But because Zillow and Trulia are not brokerages, they cannot access the MLS feeds. So they have to get the data on their own. They depend on real estate agents manually inputting their listings into the Zillow/Trulia platforms. Nowadays, most agents do input this data, but that was not always the case, and IIRC Zillow/Trulia still only have something like 80% coverage compared to MLS feeds.

So Zillow and Trulia are simple listing services. They are basically advertising platforms for real estate agents. Their revenue model depends on agent referrals, paid listings, etc. They have no direct role in selling a house.

REDFIN IS A BROKERAGE. Redfin actually employs real estate agents who will help you buy a house. And instead of earning commission proportional to sale price (a huge moral hazard -- see: Freakonomics), they earn commission based on customer satisfaction. So Redfin agents are inherently motivated to work in the customer's best interest, instead of their own, which is getting the price as high as possible.

Because Redfin is a brokerage, it is entirely different from Zillow and Trulia. This is the reason that you only see Redfin in "some" areas (although they have coverage in most major metropolitan areas at this point), while Trulia/Zillow are nation-wide. When Redfin expands to a new area, it needs to establish an office, hire and train agents, file paperwork, etc. This takes time, but often when Redfin gets to a new area, there are already thousands of customers who have been waiting for them to launch there.

Also, because Redfin is a brokerage, it has access to MLS feeds. So Redfin gets its data directly from the source, instead of depending on real estate agents to enter their listings directly into its platform. Because of this, Redfin has 100% coverage in all the regions it serves, compared to ~80% (IIRC) of Trulia/Zillow.

So now it looks like the market will come down to Redfin vs. Trulia/Zillow. I'm curious to see how this plays out. On one hand, Redfin has a far more defensible model -- they have an office in every region, and actually make a lot of money from each listing. And they have a far better value proposition for the customer. Why would you use a real estate agent trying to pump the price as high as possible, when you can use one who will be paid entirely based on your satisfaction rating?

On the other hand, Zillow/Trulia have wider reach. There is nothing stopping them from opening a brokerage in their most popular markets and simply copying Redfin's model. But if they do that, they are already way far behind.

Personally, and I'm biased because I worked there, I think Redfin is going to "win" this battle. There's no reason why Zillow/Redfin can't coexist harmoniously, but I expect we will see Redfin making far more money in 10+ years than Zillow.

[1] http://en.wikipedia.org/wiki/Real_estate_broker [2] http://en.wikipedia.org/wiki/Multiple_listing_service

(EDIT since this is getting so many upvotes: I DO NOT SPEAK FOR REDFIN AT ALL, I DO NOT WORK FOR REDFIN. I worked there one summer last year.)


Why would you use a real estate agent trying to pump the price as high as possible

I was surprised to read this, since I thought you'd hinted at exactly the opposite by mentioning Freakonomics. Isn't the Freakonomics argument that an agent is incentivized to instead sell the property as quickly as possible, regardless of the sale price? For instance, accepting an offer that is $10k under the listing price will cost the seller $9,400 ($10,000 * 94%), but will only cost the selling agent $150 (1.5% * $10,000). If the agent's time is worth almost anything approaching a respectable hourly rate for a sales professional, then they should pressure the seller to take the lower offer, as not doing so would likely incur significant time costs (well over $150 worth of their time) for the listing agent.

Is that view of things mistaken?


Yes, that was the argument in Freakonomics and they're completely right.

The real estate market can be extremely receptive to low prices, so if you list your house very low, you're likely to sell it much faster. The bulk of the money the agents make will come from the part of the house that could sell very easily. If a house could sell for $200,000 today, but you have to have it listed six months before it could sell for $220,000 (which is unknown at the time, of course). The seller agent is going to make $6,000 of the $200k sale (3%) but will only make $600 more from selling it for an extra $20,000. And a lot of the time that 3% number is high. If they aren't a broker, they're splitting that 3% with someone else, so maybe the extra $20k sale price only nets them an extra $300 in their pocket.

When I was selling my house a few years ago, I talked with one agent that was recommended to me and he was so blatantly obvious in his desire to get commissions that I couldn't believe the people who recommended him failed to see that. He came in, refused to list the house for less than a 6% split (this is negotiable, 5% isn't uncommon at all) and wanted to LIST the house for around $8,000 less than what I actually sold it for a few months later. It wasn't that big of a house and was in an area with very affordable housing, so that extra $8,000 was high enough of a total % to make a huge difference.

Also, I'd venture that many people selling their houses still have a mortgage on the house, so the huge base commission the seller agent makes isn't even coming off of the owner's profit, it's coming of the amount they need to pay back the note.


Depending on the market, a lower list price can work out really well. If demand is high and supply us low, a low list price and not accepting (or at least responding to) offers until after a specific date can result in a bidding war increasing the price 5-10%, as you've increased your exposure.

This tactic has been used to great effect over the last few years in the area North of San Francisco. I bought a house a year ago, and this was particularly annoying as it made it hard to determine what houses were really available in our price range, since listed prices were often fictional. Brokers suggested coming in $5k to $15k above listed price as an initial bid if others seemed interested, just so you would be taken seriously.

Edit: s/$15k to $15k/$5k to $15k/


My experience has not been in "hot" real estate markets, so I've never experienced the low listing price as a tactic other than trying to sell a house faster. Most houses in my direct area sit around for at least several months, if not several years. I'm sure other areas are substantially different.


Economists have a tendency to overlook data that is difficult to quantify. In the short term, a real estate agent may make more money by rushing a sale, but on a macro level, he does himself a disservice. Real estate agents need to become your friend and engender loyalty so that you'll recommend them and so that you'll use them again when you sell your new house. Every hour spent with a client and every dollar knocked off the final price is an investment in a long-term relationship that has the potential to net many more sales down the road. Protecting that stream of future work is much more important than rushing sales for short-term gain.


We sold a house last year. I had read Freakonomics so I thought I was going to outsmart everybody (which I knew was a stupid to think from the start, of course). Turns out most real estate agents (the ones we talked to at least) weren't even financially literate enough to even understand the concept. At some point I tried to explain to one the Freakonomics theory. He always kept saying 'the more I sell, the more commission' - the concept of 'time value' was completely foreign to him. Maybe he was just playing dumb, I don't know.

Anyway, in my experience, most agents are happy wasting a bunch of time on a sale - having coffee to discuss 'the status' (2 viewings scheduled for next week, the one from last Monday seemed genuine - could have send me a 2 line email. But hey, he could tell funny stories, so I don't mind having coffee); spending 45 minutes on discussing 'the strategy' on how to deal with an offer, ... I never got the impression they cared about a house being a few months longer in their inventory. It filled up their website and office windows, made them big and professional, and as long as their cash flow is OK, anything listed for under a year was OK (much longer than that makes them look weak, of course; also, the market is bad in my area anyway).

I have since reconsidered what I once thought was a plausible argument about real estate agents. Maybe it's sample bias, I don't know, but the ones I dealt with, weren't 'rational actors' in any sense an economist would need them to be to make their models work (and I work with economists and their models a lot).


This is very true - although I think the "non-rational actor" argument needs some thinking through.

The Freakonomics model completely misses the fact that most agents don't often have enough houses to sell for the time spent on each one to be a constraint.

Given that, in many circumstances it really does make sense for the agent to spent an extra few hours working on your house if it will get you another 10K, because they get a small amount of money from that. It's true the marginal gains aren't high, but often they simply have nothing else to do!

Additionally, "working on your house" often means meeting more people who are interested in buying. Very often, some of those people will be looking for an agent to sell their house, so the agent sees that as an advertising opportunity.


> He always kept saying 'the more I sell, the more commission' - the concept of 'time value' was completely foreign to him. Maybe he was just playing dumb, I don't know.

He probably wasn't. That having been said, the inability to understand abstract concepts like the time value of money and being a kickass salesman are not mutually exclusive. Some of the best agents I've met aren't what I'd call bright, but they're quite successful and have incredible sales skills that smarter agents lack.

> Anyway, in my experience, most agents are happy wasting a bunch of time on a sale - having coffee to discuss 'the status' (2 viewings scheduled for next week, the one from last Monday seemed genuine - could have send me a 2 line email.

This isn't remotely irrational -- you just don't understand his purpose. What he's doing by spending 45 minutes chatting with you, in leu of a 2 line email, is building a relationship with you and giving the transaction a more personal touch. These are the kind of soft sales skills that are critical to being a successful agent, since despite the existence of sites like Trulia or Zillow, the majority of your clients will come not from online advertising but from word of mouth. So sure, a 2 line email might have sufficed, but a 45 minute chat where he tells you funny stories is going to leave you feeling a lot better cared for (because, well, you are), and leaves you more inclined to recommend him to your friends in the future.

Plus, you said it's a bad market. It's probably not the case that he has clients banging down his doors, so he needs to make sure that his existing clients are well cared for to ensure future business.


Sure, he was building a relationship, which reinforces the point that he doesn't care about saving a few minutes on a sale, and that he'd rather go out of his way to talk to me/us more than necessary, instead of trying to move his 'dollars per minute' needle up.

Whether that's 'irrational' depends on your definition of 'irrational' - it surely is irrational from the point of view of pretty much every economic model out there.


You can't apply engineer logic here, which seems like what you're trying to do. It's a sales and customer service business. By spending extra time with you his short term dollars per minute needle might be less than it could be (though this is debatable; he might just legitimately have the spare time, since you said it's a slow market), but his long term dollars per minute needle with do better because of the high level of service he's giving you.

To use a tech analogy, this is like suggesting that Zappos customer service ought to be replace by a knowledge base and automatic responders, since spending all that time and money to have human representatives to make customers happy is inefficient and irrational when it could be done cheaper.


I think you're both saying the same thing -- he's just talking about how economist's models don't include this type of thought in their definitions of rationality because it's very difficult to quantify. Instead, they simplify down to money over time and pretend like that's the only valid formula for defining all behaviors.

This excludes more abstract, intangible elements of the exchange that are likely to lead to increased income down the road, but it also excludes behaviors that aren't geared toward maximizes income. It's totally possible that a person is behaving rationally with a different, more abstract goal in mind, prioritized above money over time, like building good friendships or having a flexible schedule. In fact, people make those kinds of tradeoffs where they explicitly prioritize an intangible, subjective quality of life measurement over raw income all the time, but economic models don't account for this.


Thanks, I didn't feel like typing all that, but that's exactly right.


If I remember correctly the meat of the argument in the book wasn't a just so story about consciously maximized incentives but an empirical look at time on the market for houses that agents sold on behalf of clients versus houses sold on their own behalf.


I haven't read Freakonomics in several years, but was that essay stating that real estate agents were acting dubiously by knowingly taking advantage of the misaligned incentives, or was it just stating that there were misaligned incentives?

I don't think too many agents are overly crass in their taking advantage of sellers by pushing lowball offers. I think most homeowners can develop a general idea of what their house is worth if they just do basic comparisons, and if they have a mortgage or other obligations they must pay out of the home sale, can develop a halfway decent bottom-line figure. Also, when homeowners meet with an agent, one of the first things they discuss after seeing the property is listing price. The agent is incentivized to provide a non-lowball listing price because the owner has yet to sign a contract at that point and could still be soliciting other agents.

I think the real leveraging of the agents commission structure comes on more borderline decisions. For a $300,000 house, maybe the owner won't accept $275,000, but if an offer for $290,000 comes in, the agent may advocate for that offer just to get the deal done, even if she think a $300,000 offer will come in a few weeks.


Seems like the classic "relationship business" vs "transaction business". I would hypothesize that higher net worth individuals and more affluent neighborhoods will promote relationship style brokers.


There are good agents and bad agents, just like good and bad folks in any profession. (Actually, because the barriers to entry are so low, there are probably more bad real estate agents.)

See my comment below about LTV--if a consumer feels they aren't being treated well, the agent might make a bit more on this sale, but lose five figures of income later. Just like that agent that you interacted with.

Now, if you feel like the consumer isn't educated enough to know they are being treated with care, well, that's a different discussion entirely.


A lot will depend on the situation as well. Maybe you're willing to take less money to sell the house faster. Getting a very aggressive agent would be a good option then.

Like with most things, you're best bet is to do the research and gather several options. When I was selling my house, I spoke with three or four agents and ultimately chose a flat-fee MLS service.


Noisy reputation systems and customer education are better than nothing, but they pale in comparison to properly aligned incentives.


Brokers (of all kinds) have been around for millenia and will be around for millenia more. There are always consumers who are willing to pay for expert advice and there are always sellers/producers who are willing to accept less than top dollar because they don't want the hassle of dealing with the consumer (which doesn't scale).

I think that technology can empower the consumer, but doubt it can empower the consumer enough to eliminate middlemen (of which brokers are one type). I've heard that story before, and all I saw was a different kind of middleman (heck, Amazon.com is a middle man for a lot of products).

So, that said, how can you align incentives? You have a limited number of ways to pay the middleman or broker: you can pay them a flat fee, you can pay them an hourly rate, or you can pay them based on the size of the deal. Which incentive structure do you think aligns interests the best?


There are many other options. Here's a simple toy one, designed to eliminate the bad incentives discussed by freakonomics:

Say you have a tiny house that could reasonably sell in the range $90k-$110k, depending on how hard the broker works. If you give the broker 5% of the sales price, then he gets $5k on average, but on the margins he only sees $50 for every $1k he can raise the price by negotiating. So instead, give him 50% of ever dollar of the sales price over $90k. Now he still makes $5k on average (i.e. 50% of the average $10k over the lower-bound of $90k), but on the margins he gets $500 for every $1k he increases the price by negotiating hard!

Needless to say, there are all sorts of other ideas smart people could come up with. Often, the reason these don't work is because they seem complicated, and it's hard as a consumer to assess to broker-fee structure itself (a sort of market failure). But there's a good chance that technology can change this, by making info related to broker fee structures more accessible and more transparent. For instance, data about average broker fees, the distribution of house sales prices, etc. could be collected by a tech start-up, which would have been unfeasible to collect in the past.


This is an interesting idea. I think it would be great for brokerages to publish that information as well.


chatmasta is talking about the _buyer's_ agent. In the US real estate market, the buyer's agent is typically paid a percentage of the sale price. So the buyer's agent has an incentive to convince the buyer to pay a higher price. They of course also have an incentive to convince the buyer to buy quickly, for the reason you said.

Oh, also the _seller_ is typically the party that actually pays the buyer's agent. Yes, this is pretty messed up.


When I was buying my house, I considered not using a buyer's agent because the condo seller said that they could handle both ends of the deal and save me some money. I thought about it and read more into it and eventually decided against that because a buyer's agent is legally required to represent your best interests as the buyer whereas the seller is representing the other party. Buyer's agents are required to disclose any information that they come into that may help you in negotiation. Luckily, I found a good agent from a referral and since I found my place myself I was charged half the commission.


> I...decided against that because a buyer's agent is legally required to represent your best interests as the buyer whereas the seller is representing the other party

This actually depends on if your state's regulations permit dual agency or not; some states, e.g. Massachusetts, permit one agent to represent both parties. Other states, like Florida, forbid it due to the potential conflict of interest.

Either way, though, avoiding dual agency is probably a good call. It's fraught with potential problems, and even if the agent cuts perfectly square corners, the quality of representation will still suffer since the agent must keep both parties in mind at all times.


I worked at Placester for a couple of years and built the system that imports data from real estate agencies. When I left last year, we had coverage with around 90% of the MLS's in the US. Most of what you say is right, but some clarifications and context:

You don't need to be a brokerage to get access to the MLS feed. Each MLS has their own policies for how you can display the data, what logos, size and text needs to be shown on the page with their listings though. Which means it unrealistic to build Zillow/Trulia site off of MLS data. Placester builds them for individual real estate agents which is significantly easier for keeping the MLS happy.

Some MLS's are great and will give you access to the data without much hassle, others are not and you have to pay a lot of money. Even once you get access, you will get almost no technical help or useful documentation on integrating with them. Since MLS's are almost never related, you still need to talk to 300+ different companies in order to get coverage of the US.

There is a standard that most MLS's follow for their data, which is called RETS [1]. I would say about 80% of MLS's use RETS, the problem with RETS is that it's a standard in the same sense that CSS was a standard 10 years ago. The original library I wrote for RETS [2] is open sourced, and is littered with examples [3], [4] and [5] (to name a few), of inconsistencies across RETS servers.

If you can work through all of that, you're golden. It took us about 1.5-2 years to get the experience of seeing how MLS's work in order to simplify the integration process down to 1-2 days, with RETS typically requiring no (or minimal) engineering work.

[1] http://en.wikipedia.org/wiki/Real_Estate_Transaction_Standar... [2] https://github.com/zanker/ruby-rets [3] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt... [4] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt... [5] https://github.com/zanker/ruby-rets/blob/master/lib/rets/htt...


Thanks for all your work on ruby-rets! It works like a champ for pulling in listings from MLSPin and CCIAOR. As you mentioned, dealing with all the "certified" RETS vendors is a nightmare. For the uninitiated (and fortunate), RETS has its own querying language called DMQL which is inconsistent across versions and MLS vendors. Even trivial tasks like importing photos are handled with vast difference across MLS vendors.

Despite all the technical hurdles, given their resources, I would be shocked if Zillow and Trulia DIDN'T import the majority of their Mlsdata via RETS. Most MLS providers allow 3rd party access to the data feeds. There is no way all the listing data is re-entered via agents.


Seconded! RETS is a goddamn nightmare. For years we've used librets and it's the worst. When we found your Ruby-only library we got it working with our feeds within the day and I can't tell you how relieved we are not have to deal with librets compilation.


Hah! Glad to hear some people got some use out of it. It was definitely a huge pain to work through all of that.


I bought my house through Red Fin. Though zillow gave some interesting data, the Red Fin experience was much better. In fact because the market is so competitive here (Boston) it was a big leg up.

Our house was listed on a Wednesday morning, with an open house scheduled for Saturday. Since redfin had the most up to date feed, i got an email alert right away. That night we got an early tour, and we put a bid in at list price immediately allowing them 24 hours to accept.

Before that we had put in 4 other offers. We kept getting beat by empty nesting baby boomers offering cash. Having that extra time was a big advantage.


Just out of curiosity, which Boston neighborhood do you live in? I feel like it's such a seller's market in Boston right now, I'll probably wait it out a year before I decide to buy.


i'm in Hyde Park. We bought last July, so I have no idea what the current trend is.


I also am hoping Redfin wins this battle but, in part, for a different reason. The model that Zillow/Trulia work on is rife with scammers. I almost got caught up in one myself on Zillow. And were it not for the bad PR they get that'd be more than happy to allow the scam listings since that only generates more page views for them.

Even notifying Zillow of the scam listing wasn't enough to get it removed. I had to keep replying to them by email and post on social media just to get them to look at the listing to see it was posted by a scammer. Which tells me they generally look the other way unless forced into addressing scams. Sure, they do some analysis on listing prices and alert you when its unusually low but that's clearly not enough.


> And were it not for the bad PR they get that'd be more than happy to allow the scam listings since that only generates more page views for them.

This is really cynical and, honestly, just not true. Last year, for example, we (at Trulia) rolled-out enhanced rental fraud detection that, overnight, took down the number of published rental listings by a significant amount. And many of our metrics -- leads sent, value created for agents/landlords -- are functions of our listing count. We didn't remove these listings -- which nobody had flagged as spam -- because of some murky concept of bad PR. We removed them because we're building a RE platform, we want and need and strive for happy, repeat visitors. And because in the chicken-and-egg of a 2-sided marketplace, the answer at Trulia is clear: the consumer came first. We need happy, engaged consumers, not mindless page views -- banner ads are a small and shrinking share of our total revenue.

It's true that we as an industry -- and now potentially as a combined company -- need to continue to build more sophisticated systems to combat fraud. It's a topic here that gets a lot of discussion and mindshare, and there has been more than one fraud-related innovation to come out of our quarterly hack-weeks.


I should apologize[] and clarify; when I said, "they" I meant Zillow. I've been quite happy with Trulia and I'm honestly dismayed (or at least cautious) that the merger is happening simply because I'm worried the policies will lean towards the Zillow way of doing things rather than the Trulia way.

Now that I re-read my original post I guess it does seem to lump Zillow and Trulia together too much. Again, my apologies.


Trulia guy/lady is right. Your assessment is pretty cynical, and inaccurate. Zillow has a higher volume of fraudulent listings because as of March, it had nearly 2x the market share of Trulia, and a whopping 14x that of Redfin. The listing quality teams work really hard to tear down scams as quickly as possible, but understand that as with any content flagged by users, your report enters a queue and has to be evaluated by a human before any action is taken.

Zillow, like Trulia, also invests a lot in developing their product to prevent, detect, and remove scam listings. To not do so would make the product unviable.

Popular sites are locked into a constant arms race with people seeking to defraud other people. Everyone's gotta make a buck somehow, and fraud is just the unfortunate dark underbelly of commerce.

Edit: Full disclosure—I do work at Zillow, and many of our hackweek projects are also focused on scam detection and prevention. Our objective is to provide the most robust and reliable service to consumers and to connect them with skilled agents, rated by other consumers. In two years I've never seen anyone scoff at a customer complaint or suggest we should ignore something until faced with the threat of "bad PR". I love working at Zillow because, above all, it's full of very decent people. And personally, I'm excited for a potential Zillow/Trulia merger because we all admire them a lot, and we certainly have a lot to learn from each other.


I only know what I experienced and that was having to email Zillow multiple times to point out the fraudulent posting. I even visited the property and spoke with the owner and even SHE contacted Zillow and requested a takedown of the listing. It was only after my repeated emails and posts to social media that the listing was taken down.

Maybe it was a fluke. But I don't trust Zillow.


Have you ever submitted a fraud report to Facebook? It can take up to two weeks. You could also have called.


I don't really understand what Facebook has to do with this but in my experience, calling web sites--assuming you can even find a number to call--is generally a futile endeavor.


> So now it looks like the market will come down to Redfin vs. Trulia/Zillow.

I think that's a terrible mindsent. As a recent homebuyer, I can assure both Redfin & Trulia have a shared adversary: the existing full service broker syndicate in a given city, often deeply entrenched.

I started my home search using Redfin, used them for 6-9 months & put in offers+counter+etc on 3-4 different houses. We saw a lot of places via open house & were surprised how hostile the seller's broker would be towards us on hearing we were using Redfin.

In fact, one agent actually flat out said if we made an offer, she wouldn't bother taking it to their client because we used Redfin. That's actually illegal in my state, so I asked her to clarify. I think she knew I knew at that point & back tracked. Still, my wife was so insulted, she stormed out, refused to see the house, and refused to see any other listing listed by that agent.


This is a great analysis. I'm working on a real estate platform right now [1] and learning the ins and outs of data regulation has been a huge hurdle. As far as I know Trulia and Zillow use lagged and incomplete listings aggregators (e.g. ListHub) and a lot of realtors think their pay-to-play model is hostile to the industry.

To get realtor quality data as a non-brokerage involves convincing each MLS that we're realtor positive and won't cut out agents. There seems to be a lot of fear in this industry that realtors will go the way of travel agents if more tech is introduced. A few of the investor-types we've talked to have tried to push us towards a model that has that potential but, as a lot of people in this thread have noted, we think realtors are providing a lot of value that can't be commoditized so easily.

[1]: http://www.openlistings.co/


Thanks for sharing. Homebuying seems like it could still use lots of disruption.

> although they have coverage in most major metropolitan areas at this point

Sadly there's still a ton of major cities not covered :/ https://www.redfin.com/out-of-area-signup


Yes, homebuying can use a LOT of disruption. Unfortunately there are many many players and change moves slowly. (Yes, Virginia, there are still MLSes that don't want to expose sold listings, as if that's some kind of secret.) If you're interested in this, the 1000 Watt blog (a real estate consulting company) has a lot more about tech and real estate: http://1000watt.net/blog/


What would happen if Zillow started to compete against MLS and tell agents to use it as the primary source of data? This sounds like it would deprive Redfin of one of its main advantages (direct MLS access) by circumventing the problem entirely, and also provide Zillow the opportunity to charge for API access to that data feed, which other developers could build their own apps against, further obsoleting the disjointed MLS system. If they already have 80% of real estate agents double-entering the data, they should be able to find a way to get them to say "We don't need that stinky old MLS anyway".

Is there any reason this couldn't or shouldn't happen? It sounds like maybe there is some regulation that involves MLS that might make this difficult.


>BUT, only brokerages have access to MLS feeds.

A long time ago, I worked for a small real-estate ASP. Now, their target was websites for realtors. They didn't have any direct-to-consumer stuff. Real-estate agent and you want a webpage? give these folks $20-$100 a month, depending on features.

My understanding of our model was that we got access to the MLS data in the customer's name, then wrote scripts to go from the format that one MLS used to our format and let agents from that area list stuff on their website.

Now, while I was there, we didn't have any kind of cross-region search setup, and maybe there would be a legal barrier to doing so... but they sure did have a whole lot of MLS data.

That's the thing. Yeah, every MLS uses a different format, but from experience? once you get in the swing of it, you should be able to write import scripts for several different MLS formats in a single day. It's not actually difficult work. Most of them were some variant on CSV or XML, and the customers are super tolerant of errors, because the MLS data itself was full of errors.

I guess what I'm saying is that at least getting all the MLS data isn't as hard as it looks. I'm not saying it's trivial, but it's the sort of thing, I mean, legal barriers aside, that I could do in a few years with me, a PFY and a salesperson who has real-estate contacts. I'm sure that if you had competence and money, you could do it in a reasonable amount of time.


There's also this: https://www.realscout.com

Although I'm not entirely sure how they operate.


I just bought a house in the bay area, I tried multiple times to contact Redfin but never got any response. I ended up using a traditional agent but I was left wondering what is going on over there. Maybe they have more business than they can handle?


Good afternoon,

I am the Bay Area Manager here at Redfin and wanted to extend my apologies for the lack of service you received. Would you be willing to contact me so that I can further assess the situation you encountered to ensure it does not happen again?

I sincerely appreciate your time and apologize that we let you down.

Kindly, Charmaine Frank Redfin Bay Area Manager charmaine.frank@redfin.com


The time to ask for free help is before they don't need you anymore, you should offer to compensate them like any focus group participant would be. Market research and management consulting both provide highly valuable information.


I honestly thought that all three sites were basically doing the same thing. Thanks for the insight, this was actually very informative and interesting to learn.


Just out of curiosity, do you know how Craigslist sources it's real estate listings? Does it integrate with the MLS or do agents list there separately?


Real Estate agents post their own listings on Craigslist.

There are companies who provide the fancy HTML templates you see real estate agents use, but Craigslist doesn't allow automatic posting of listings.


Market Leader - a company that was acquired by Trulia - provides tools to real estate professionals for obtaining leads. They have local MLS data integrated into their system for easy access to listing data. Not sure if this is entirely true you'd have to be a brokerage to access MLS data.


Isn't the MLS run by the real estate agents that RedFin is trying to disrupt?

>They depend on real estate agents manually inputting their listings into the Zillow/Trulia platforms

Are you sure that Zillow isn't just scraping the MLS data from broker sites?


I'm trying to buy a house right now in Fremont, CA. I can confirm that Zillow has errors and omissions whereas Redfin has entirely accurate data. Every Thursday my realtor sends me MLS listings; in every case, Redfin has the new listings.


Hi CJensen! I'm part of the friendly team over at Movoto. Have you tried using us? Send me at email at NJohnson@movoto.com and I'd love to help you in any way possible.


Zillow receives feeds from syndication services like ListHub and Point2, as well as direct feeds from MLS's.


that's true. zillow lists their source at the bottom of listings.


> Isn't the MLS run by the real estate agents that RedFin is trying to disrupt?

Redfin is disrupting the brokerage model of paying agents price-based commission. As far as I can tell, they are happy to use the existing MLS for listing data, and then put a nice interface on top of it.

> Are you sure that Zillow isn't just scraping the MLS data from broker sites?

Oh, I'm sure they are. But they can't reasonably do this for 100% of regions, and have 100% coverage. My point about the coverage differentiator of Redfin is that in the regions Redfin serves, it has 100% coverage. Zillow claims to serve nationwide, but does not have 100% coverage nationwide.


> Redfin is disrupting the brokerage model of paying agents price-based commission. As far as I can tell, they are happy to use the existing MLS for listing data, and then put a nice interface on top of it.

Not only that, but they're storing the data forever. You can see every time a property is listed, the price changes, status changes to contingent, sale prices, everything.

You don't get that with the MLS system.


Just adding some anecdata to the chatter about these sites and the experience of buying a home:

I began searching for a house in the East Bay about two years ago, culminating in a purchase in June 2013. The first year or so I was using Redfin, Zillow, and Trulia to track availability, prices and neighborhoods. While I got some good information, it wasn't until I started talking to an agent with about thirty years experience in the region that I actually got good leads. The listings on all of these sites seemed to trail the MLS leads she would get by days to weeks. I made several offers over many months, each one more than the last, each time watching the stock get thinner and bids climb higher. My agent was not only finding good potential properties, but also providing a lot of perspective and emotional support.

The house I ultimately bought was something she found via her network of colleagues before it even was placed on the market. I made a bold offer and gulped at what I was putting on the table, but in retrospect I was fortunate considering what's happening in the bay area housing market right now.

Maybe I'm a dummy, but I cannot envision going through the process without a real human pro providing guidance and leads.


Funny I've bought two houses in Berkeley in the last 4 years (bought one, sold it, bought another) both times I found the Redfin data to be spot on, ie new listings every Thursday the same list I'd get from my agent. This won't beat finding an agent with a listing before it hits the market but the East Bay is hot, if I'm a seller theres no way I'm not putting a house on the open market.

The first house we bought my wife and I found on Redfin (we timed the bottom of the market - by luck - and bought in December of 2010) and had a friend who's an agent in SF just help with the paperwork.

The second time we had a Berkeley based agent (we worked with her to sell our house so she got our "buy" work as well) but again found the house ourselves on Redfin. During our 4 month search our agent never got us a lead that wasn't on redfin. Truth be told if we buy again we may go the Redfin route, we really didn't get a ton of value from our agent on the buy side of our transaction. No way I'd sell a house without an agent however.


The house I ultimately bought was something she found via her network of colleagues before it even was placed on the market.

That's my experience too. My agent notified me of a property that was "probably going to be sold". I liked the description; he came back to me a month later to say it was going to be sold. I took a tour a week later, prepared an offer a week after that, and submitted the offer the week after that- on the same day it was listed .

Suffice to say, I had "some" advance notice on this property! Without the agent, I would have been much too late to the party. I went under contract with the seller 12 hours after submitting my offer, competing against another offer that had been submitted that day.


I think it depends on the market and the competitiveness. I also bought a house last summer, but in a smaller, much less competitive midwest market. I watched the buyer's agent walk out of the closing meeting with a check for several thousand dollars, despite my wife and I thinking she had been a net negative to the entire process.


I trade stocks as a hobby and I was wondering what I'm missing here. This morning Zillow offered .444 shares of Z for TRLA. Currently (1:50 pm EST) TRLA is trading at only a 0.411 valuation of Z. What's to stop me from shorting Z and buying TRLA to lock in the difference as profit? It seems both have agreed to the 0.444 ratio. Is it a regulatory issue? What else would cause the deal to fail?


Look into merger arbitrage. Its a huge area that has spawned many hedge funds, including the one I work at.

The difference is the market saying the deal might fall apart.

Some issues with shorting:

- very limited borrow, not much more than 2 million.

- very concentrated borrow.

- the spot rate for us to borrow is 2-3%, but with such a small amount of float avaiable to borrow the chances are high that you won't be able to get any and you won't pay anything close to 3%

Here is a good primer:

http://www.barclayhedge.com/research/educational-articles/he...


1) Deals can always fall apart.

2) Shorting isn't free. It will costs money to borrow the stock. You have to borrow it for more than 6 months until the deal closes.


Zillow 2013 revenues: $225M, profits: -$12.5M

Trulia 2013 revenues: $175M, profits: -$17.8M


You would expect this from the two most innovative companies in the industry. Both companies are leveraging their revenue to grow rapidly. A concern for profits at this point is premature. Trulia was profitable years ago at a vastly smaller revenue number.


profit isnt the only concern; the revenue numbers dont seem in-line with companies that have such high valuations.


Hmmm... Combined market cap is about $10bn, which is about 25x revenues. The similar ratio for Google is 12x. Dropbox's revenue is reported at $200m with a $10bn valuation, which is 50x. So the ratio doesn't seem crazy to me given the assumption of growth potential and the ability of the new company to better control pricing. When you say the numbers don't seem in line, what examples were you thinking of?


Does that leave any real competition in the space?


[deleted]


I imagine it would be relatively easy for them to operate as actual brokers also. I wonder what has stopped them.


That's the thing... it's not as easy as you'd think. There are a lot of barriers put up to protect the industry. In many ways, innovation should have put Realtor's out of business like they did Travel Agents. The difference, Travel Agents didn't have a powerful lobby group like NAR.


Question: the internet has been a boon for shaking up entrenched incumbents. What happens when the internet gentrifies? Will we have even more hideous incumbents with no new tech on the horizon to generate a disruption event?


Brokers are subject to regulation which limits what they can do. For instance, they can't receive kickbacks from mortgage providers


Real Estate agents. Craigslist to some extent.

Generally speaking the biggest competitor to any innovate website is the status quo and apathy. Every startup I have ever been in had a harder fight against people that were reluctant to move to better technology than against our direct competitors.


Presumably, realtor MLS isn't so much as a "competitor" to Zill/ulia so much as the dominating incumbent.

88% --- eighty eight percent --- of home sales (presumably: owner-occupied single-family residence sales) were done using licensed real estate agents in 2013. A staggering amount of money is funneled through that profession, which as I understand it exercises guild-like control over the MLS databases.


Direct sources.

Here in Houston, nobody uses Zillow because their data is not reliably up-to-date. The city has a custom solution: har.com. It's not as pretty, but it's what all the realtors in the city actually use.


Yeah, here in the D.C. area, nobody's using Zillow for much either since the "Zestimates" are pretty wildly off of actual market value and even in between homes in the same area.

For example, it puts my house at about $50k under my next-door neighbor's house, despite my home being larger, with more upgrades (about $100k worth), with one more bedroom and an additional full bathroom.

The identical house to mine, a block over, is $30k more than mine, but still $20k under the neighbor's home. A home another block away, similar to my neighbor's, but slightly smaller is actually on the market for $2k more than theirs.

Another house, identical to mine, half a block over in a different direction is Zestimated at almost $90k more than mine. And a similar house down the road is on the market for $75 more than mine.

My neighbors, directly behind me, have a model one size smaller than mine, and have done a tremendous amount of work on their home. Custom landscaping, high-end playground for their kids, fences, completely remodeled basement, and one more bedroom than my house, Zillow puts it at $10k under mine.

So within, basically 2.5 blocks, in a cookie cutter suburb, we have almost $100k variance, with Zestimates at least $50k under market prices in some cases, and $50k over in others, and smaller homes Zestimating to be worth more than larger homes next door.

Believe it or not this is an improvement from a couple years ago, but no reputable agent in my area uses Zillow for anything.

Trulia, by way of comparison, puts my house at $20k more than Zillow and flips the relationship of small/big houses so they make slightly more sense pricewise.

Redfin seems to be the closest.


>So within, basically 2.5 blocks, in a cookie cutter suburb, we have almost $100k variance, with Zestimates at least $50k under market prices in some cases, and $50k over in others, and smaller homes Zestimating to be worth more than larger homes next door.

Zillow will only know what a house is worth when it is either sold or when you have it appraised and manually enter the details. I don't think any reasonable person would expect Zillow to know about improvements made (like work done inside a house or landscaping).

My neighbor just listed his house for a price that I thought was kind of high. He sold it within a day of holding an open house. My zestimate went up 2 days later.

I think Zillow actually works surprisingly well, for what it does.


> I don't think any reasonable person would expect Zillow to know about improvements made (like work done inside a house or landscaping).

Well sure, but one of the reasons local realtors have dumped it as a source of information is that buyers and sellers were starting to latch onto the Zestimates like they were gospel.

If a Zestimate was too high (like my neighbor's house), the seller would insist it go on the market at a very high value, and then end up with a bad relationship with their realtor when it didn't sell. Realtors don't have time for this nonsense.

If a Zestimate was too low (like my house), buyers would want to negotiate down under a fair market value. Again, realtors don't have time for this kind of thing.

In either case, Zillow was skewing the market. And we're not talking by a couple thousand dollars either, but on 20-40% swings.

In a neighborhood like mine, where the Zestimate is off by up to $100k from one house to the comparable one next door, the Zestimate becomes a hindrance on the fair market and causes more problems than it's worth.

It's like people getting medical advice off the internet, it's better not to because it causes too many problems in the established industry and not in a good startup "disruption" sense but in a "fucking everything up" sense.

The reaction from local realtors has been pretty swift and strong against Zillow for these, among other reasons. In an area like mine, I'm not even sure what it's useful for: the tax assessment fmv is wildly different, actual buy/sell prices are wildly different, it provides almost no value for pricing your own home to sell, and no value when buying a home that your local MLS doesn't provide (and even worse it's frequently wildly out of date). I suppose if I was looking for a rental it might provide some value, but the few rentals in my area have long since been occupied and Zillow still shows them up and available.

It's basically the worst kind of disinformation, close enough to look reliable, but ultimately a waste of people's time.


Very similar here in the city of Saint Louis, Mo, but I don't really blame them.

The change in house prices block by block in many places can go from 20-30K to 300K to 800K depending on whether the block has been restored or are old burned out 100 year homes. Also, crime levels can change quite a bit in a one mile radius.


Yeah, that's interesting. In cities, a couple blocks can be wildly variable. However, in my boring suburb, you probably wouldn't know one part from another 2 miles away. I suspect it's an algorithmic problem, using the same concept for a city in the 'burbs.


Zillow doesn't work well in Houston because the sales price is not public record and they rely on Realtors providing the sales price voluntarily. By the way, HAR is not city-run. HAR is the Houston Association of Realtors and they manage HAR.com, the MLS for that area. It's a really good MLS by the way for residential real estate. For commercial, Loopnet.com is the best.


I guess there is still Realtor.com, but I'm not sure how popular the site is.


Having just gone through a move in the midwest, we used realtor.com as the primary search site. Too many times we found Zillow/Trulia information to be inaccurate, either missing listings or just wrong data for bedrooms/sqft.

Realtor.com was very kludgy but it was leaps better than the local MLS website even if well below the UX of Trulia/Zillow

Both the listing agent of my old home and my buying agent in the new state asked for Trulia reviews when the process was over

/1-random-data-point


There's Realtor.com, which is actually the better app vs. these two, since it is directly tied into the MLS database. There's also redfin.


Yes there is, but it hasn't gotten any HN love... :( it's called Househappy.org.

To really understand why it's different takes some knowledge of the industry. The biggest difference, the contact information on the listing is actually the broker who listed it! And it's free for anyone to post.

Oh... And it's the easiest to use! At least I think so :-D

Note: I work for Househappy


What's the advantage over Zillow? It seems to have less properties. The contact info doesn't really matter to me much, since I will almost surely have a buyer's agent who will just look the MLS data up.


Your agent will appreciate us then... As they'll get leads for listing your house instead of being sold to who paid for the best ad placement.

As well, we have some of the highest data integrity in the business and are continuously trying to make it better...

And less properties, we're working on that too! After all we're a bit over a year old! Give is time!


I would have guessed the "Note" part. Gonna check it out!


Redfin, but they don't do anything outside of the big cities. (Redfin doesn't service my area, for example - while I used Trulia to look at the school boundary markers and occasionally to look at houses.)

Zillow's site is crap compared to Trulia. Hopefully they acknowledge that and bring Zillow's data onto Trulia's stack.


Ugh, amen! Zillow's interface is horrendous, both from a user and programmatic/scraping standpoint. I've been relying on Trulia for ease of pointing queries at their results pages, so fingers crossed that some of Trulia's sanity trickles into the Zillow site. That article makes it seem doubtful that this will do anything other than beef up Zillow's stack with Trulia's data, though. =/


I've had trouble with Trulia's image serving for the past several months. It seems like their images just take forever to load, to the point that I switched back to Zillow.


Can I ask where you are located generally and was this on mobile or desktop/laptop?


I am in the southeast US, and it happened on both mobile and desktop. It got especially bad a few months ago (give or take).


There's Redfin


All real estate news and websites are biased and always suggest you that buying a home is a god think. In the SF bay area, I hear real estate agents speak on the radio. Before recession, they said you should buy a home immediately so that rates may increase....Then during recession they say you should buy a home as rates have fallen to historic lows..for last 1-2 years, whenever you hear...they say the interest rates are low, so you should immediately buy it, irrespective of dynamics between interest rate and price of house.

I wish there was a website/service which actively debunks what real estate agents, radio channels are propragating.


Yeah, it's hard to get a real estate professional to talk frankly about the market. Right now I'm in a market that I think is over priced, but you won't get that sense from any of the realtors here.


http://patrick.net/

Although I think he's overly pessimistic on housing.


`god think`


Can you please expand...I missed any reference...if you meant one.


You said "god think", I think you meant "good thing", unless I missed something.


that would be the Freudian Slip of the weak


I listened to Sami Inkinen talk about how proud he was that Trulia was the underdog to Zillow several months ago. I assume that the acquisition talks had probably already started, even as he was talking about this. I'm not incensed at this, I just think we need to be honest with ourselves. When your competition wants to buy you, then you've probably done something very right. But everybody has a price and Zillow obviously found theirs! Congrats to them, they've done a lot for dragging the real estate market kicking and screaming into the future.


It will be interesting to see how the home value estimates play out. Zillow and Trulia each have their own methodology for determining a home's value and the disparity between the value of each service lists can be significant.

I purchased a home two years ago in Portland, OR (South East). At the time of my purchase, its price on Zillow was listed as ~$70K less than it was appraised for (I had two appraisals and both were within $1K of one another). Trulia listed the value within $1K of the two appraisals.

In two years time, the value on Zillow is listed as the original purchase price. On Trulia, the value is ~$60K more (it is based on an average appreciation of 8% annually of homes in my neighborhood).

I know a home's value is only what someone is willing to pay for it, but the disparity in estimates between those two services has always bothered me.


Most of the difference is likely just a matter of data. If Trulia has better data than Zillow, their estimate will likely be closer to reality. There is the added difficulty of coming up with what's basically one methodology that has to work everywhere. My guess is that if you're in a funky place, like on the border of two neighborhoods, or if you're in a rural area, your estimates are likely to be further from reality than if you live in a cookie-cutter subdivision or in a downtown area.

The point is: yes, it's frustrating, but it's also complicated.


A different article, which I'm having trouble tracing back now, mentioned that this acquisition is more like the same company owning match.com and tinder.

Does anyone know if the intention to leave both up?

article: http://www.bloomberg.com/news/2014-07-28/zillow-to-acquire-t...

"Rascoff said in an interview that the deal to buy Trulia signals that Zillow is creating a portfolio of online real estate brands, which lets the company appeal to the broadest audiences and attract the biggest set of real estate advertisers. The strategy is akin to how IAC/InterActiveCorp (IACI) has multiple online dating brands such as Match.com and Tinder, he said."

Seems odd to leave both up when they're so similar.


Well they bought hotpads + several others and left them up in this same way. Acquire, put on back-burner, repeat. Not a bad strategy, I suppose.


It seems like every time I see an interesting deal Qatalyst Partners are involved (Priceline/OpenTable, Elance/oDesk, Yahoo/Tumblr, probably some more I'm missing). Those guys get to work on some really interesting stuff.


A question for the RE insiders here. What restrictions are there for building services off Redfin/MLS and Zillow listings?

Am I allowed to blog about listings or do I need to be an agent to use image and listing data? I get mixed opinions elsewhere about whether this falls under fair use.

I notice that Redfin provides OpenGraph annotations but the TOS disallow sharing. Am I permitted to share on Facebook, Pinterest, etc? What about on other websites? Is it possible to build a vertical search engine based on these details?


You need an attorney for these sorts of questions, not a real estate insider. These are IP and contract concerns, not real estate concerns.


As someone from the UK, I've never heard of either of these sites.

Kind of amazing that a business that's limited to one country can be worth so much.


Only when that one country has a GDP roughly the same size as the entire EU or ~6x that of the UK.

http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nomin...


Nobody outside the UK knows Rightmove or Zoopla (the UK equivalent). Zoopla is looking for £1bil (1.7bil USD) valuation in their coming IPO.


Curious how this impacts Streeteasy, which Zillow just bought some time in the past year. Streeteasy is the defacto MLS (in a sense) for NYC (Manhattan doesn't have an MLS, nor does Brooklyn. Uncertain about Staten Island, Queens or Bronx).


New York City does have an MLS. Its run by the Real Estate Board of New York (http://www.rebny.com/content/rebny/en.html) and is called RLS (REBNY Listing Service).

Streeteasy simply never had access to RLS so they had to get their data from other sources, primarily from scraping websites and emails, as well as some direct data feeds from brokerages that agreed to work with them.

source: I work in technology in the New York real estate sector.


The thread from when this was just a rumor: https://news.ycombinator.com/item?id=8081176


My first reaction was this headline has to come from a markov chain built out of Business Insider and My Little Pony.


Trulia was so much better then Zillow -- reminds me of Flipboard buying Zite.


I'm hopeful that Trulia won't get worse. I'd like to see the best of the two sites available in one site.


Don't sleep on Homesnap! * Snap a photo of any home to find out all about it * Similar to Redfin in terms of model and data access * Unique iPhone, iPad, Android and Web experience

http://www.homesnap.com




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