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.
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.
- 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.
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.
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.
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.
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.
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).
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".
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.
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)?
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.
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?)?
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).
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.
- 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
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.
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 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.
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?
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.
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 :)
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.
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  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 . 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.
(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.)
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?
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.
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/
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).
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 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.
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.
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.
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.
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.
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.
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.
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?
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.
Oh, also the _seller_ is typically the party that actually pays the buyer's agent. Yes, this is pretty messed up.
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.
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 . 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  is open sourced, and is littered with examples ,  and  (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.
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.
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.
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.
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.
Now that I re-read my original post I guess it does seem to lump Zillow and Trulia together too much. Again, my apologies.
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.
Maybe it was a fluke. But I don't trust 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.
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.
> 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
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.
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.
Although I'm not entirely sure how they operate.
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.
Redfin Bay Area Manager
There are companies who provide the fancy HTML templates you see real estate agents use, but Craigslist doesn't allow automatic posting of listings.
>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?
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.
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.
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.
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.
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.
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:
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.
Trulia 2013 revenues: $175M, profits: -$17.8M
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.
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.
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.
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.
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.
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.
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.
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
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
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!
Zillow's site is crap compared to Trulia. Hopefully they acknowledge that and bring Zillow's data onto Trulia's stack.
I wish there was a website/service which actively debunks what real estate agents, radio channels are propragating.
Although I think he's overly pessimistic on housing.
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.
The point is: yes, it's frustrating, but it's also complicated.
Does anyone know if the intention to leave both up?
"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.
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?
Kind of amazing that a business that's limited to one country can be worth so much.
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.