Real estate big tech

real estate big tech
Real estate tech (infographic from nar.realtor).

The business of real estate seems to be turning away from actually selling homes and wants to be housing big tech.  Nothing is as it seems.  Real estate companies are now technology companies, and technology companies want more of your information to control your opinion and behavior.

How much control should big tech have over what you think and do?  It’s a compelling controversy that is currently being debated.  It’s not clear when the discussion exactly began, but there have been many who have been wary of big tech for decades.  Even President Eisenhower had something to say about it in his second 1961 farewell speech (the first being famous for his warning of the military-industrial complex) he also warned. “…we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.

Once called paranoid, those who feared big tech are being vindicated by the acknowledgments of data collection and leaks to third party users.  Additionally, reports of censorship and behavioral control are slowly making its way to public awareness.  Sounding like a movie plot about a dystopian future, consider the internal Google video that was leaked by The Verge earlier this year (Google’s Selfish Ledger is an unsettling vision of Silicon Valley social engineering; theverge.com; May 17, 2018).  The leaked video (seen here) discusses the use of data to not only change opinions and shape viewpoints that correspond with the company’s values, but to change behavior and shape society to “a directed result.”

Imagine being told where to buy a home, and which real estate services to use based on your behavioral data.  Big tech’s “guiding” of real estate consumers to homes and neighborhoods based on behavioral modeling algorithms seems like it could save time and effort for the consumer.  But it could also be considered steering, which is considered to be a fair housing no-no.

But big tech wants more of your data, at best to improve modeling algorithms.  According to a report in the Wall Street Journal (Facebook to Banks: Give Us Your Data, We’ll Give You Our Users; wsj.com; August 6, 2018), Facebook has been in conversations with banks to access users’ accounts and transactions.  The social media platform denied the story the next day.  However, the Wall Street Journal reporting by Emily Glazer, Deepa Seetharaman and AnnaMaria Andriotis is compelling given the report’s sources.  Some experts are also talking about Facebook wanting to become a consumer marketplace.

Zillow is also allegedly expanding its data usage.  Zillow announced this week of their acquisition of Mortgage Lenders of America.  The purchase is said to boost Zillow’s “Offers” program, offering mortgages for home buyers making offers on the site.  However, GeekWire reported (Zillow acquires Mortgage Lenders of America, posts $325M in Q2 revenue, up 22%; geekwire.com; August 6, 2018) Zillow’s CEO Spencer Rascoff as saying in the company’s second-quarter earnings call:

We’re taking our huge advantages, which are our audience and our brand and our resources, and expanding into other business vertically… .”

And it’s not just big tech that wants your data.  Traditional companies are realizing the potential of behavioral modeling and guiding consumer behavior.  Inman reported earlier this year that co-founder Gary Keller proclaimed Keller Williams a tech company (What the hell is Keller Williams doing? Lingering questions from the Vision Speech; inman.com; February 28, 2018).  Keller proclaimed:

“We are a technology company. No. 1 that means we build the technology. No. 2 that means we hire the technologists … We are not a real estate company anymore.”

Big tech is losing touch with the average consumer.  Home buyers and sellers don’t want to be told what to do.  Rather, they want to make organic decisions. While large real estate brokers seem to be moving away from actually selling homes to be real estate big tech, home buyers and sellers are turning to human real estate agents.   Instead of algorithms, buyers and sellers value trusted Realtors to help with the process.

Copyright© Dan Krell
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Protected by Copyscape Web Plagiarism DetectorDisclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Mortgage Choice Act good or bad?

Mortgage Choice Act

Mortgage Choice Act
Choosing a lender (infographic from lender411.com)

Monday’s Reuters “exclusive” report about the Consumer Financial Protection Bureau dropping their investigation on the Equifax data breach caused quite a stir in DC (Exclusive: U.S. consumer protection official puts Equifax probe on ice – sources: reuters.com February 5, 2018).  The exclusive cited unnamed sources.  However, a spokesperson for Transunion (a credit repository) suggested that cybercrime is not within the jurisdiction of the CFPB.

Later that day, Reuters cited Democratic Senators’ concerns and outrage over the alleged investigation pullback (Senators urge Trump administration to resume Equifax probe; reuters.com February 6, 2018).

The next day, Reuters reported that Treasury Secretary Mnuchin desired to meet with CFPB’s Acting Director Mick Mulvaney, based on its initial reports of dropping the Equifax investigation (Treasury’s Mnuchin says he wants answers on Equifax breach; reuters.com February 6, 2018) .  In the same report, Reuters cited the CFPB’s spokesperson saying that the CFPB was working with other government agencies on the Equifax data breach.

The veracity of Reuters’ unnamed sources in the report is not clear.  However, there may be something to the fact that cybersecurity falls under the domain of the FBI and Homeland Security.  Additionally, there are many other agencies investigating the Equifax data breach, as Housing Wire reported on Monday (CFPB reportedly pulling back from Equifax data breach investigation: Reuters reports that bureau is not aggressively pursuing investigation; housingwire.com; February 5, 2018).  The FTC appeared to be the lead agency investigating the matter when the data breach became public news.  Additionally, the House and Senate Financial Committees, as well as all fifty states attorney generals are investigating.

Mortgage Choice Act goes under the radar…

News created drama, such as the Reuters’ CFPB story, allows real consumer issues to fly under the radar.  Consumers should take note that the once dead Mortgage Choice Act has come back to life.  Much like a scene out of Tin Men, the revived legislation is being promoted by the likes of the National Association of Realtors® under the guise of being good for the consumer.

According to the CBO (cbo.gov/publication/53497):

Under current law, a ‘qualified mortgage’ has certain characteristics that make it more affordable…To meet the qualified-mortgage definition, certain costs that are incidental to the loan and that are paid by the borrower…cannot exceed 3 percent of the total loan amount. Lenders offering “high-cost mortgages” (home mortgages with interest rates and fees that exceed certain thresholds) must make certain additional disclosures to borrowers and must comply with restrictions on the terms of such loans.”  The Mortgage Choice Act “…would exclude insurance premiums held in escrow and, under certain circumstances, fees paid to companies affiliated with the creditor from the costs that would be considered in determining whether a loan is a qualified mortgage or a high-cost mortgage.”

The NAR is urging support for this legislation, as well as issuing an open letter to Congress.  The NAR’s rationale is that the Mortgage Choice Act:

“… will enhance competition in the mortgage and title insurance markets, and ensure that consumers will be able to choose the lenders and title providers best suited for their home buying needs.”

This sounds virtuous, but in reality it’s a play to allow broker affiliated lenders and title insurers to charge consumers more without additional disclosures.  NAR says that lenders and title insurers would still be subject to RESPA (which prohibits steering and kickbacks).  But charging consumers excessive fees and affiliated businesses giving kickbacks are not mutually exclusive.  Meaning that a lender charges can be excessive independent of the lender providing a kickback to the broker.  (the CFPB has recently fined brokers and lenders for kickbacks).

Is NAR interested in building consumer trust?

The NAR has for years tried to influence public opinion of Realtors® and the industry.  The NAR Code of Ethics has been used as a focal point to increase positive sentiment towards Realtors®.  However, NAR’s desire to implement a Code of Excellence may have been a beginning shift towards building public trust.

The Code of Excellence, like the Code of Ethics, is a desire to increase competence and proficiency.  But research has demonstrated that showing off accolades and awards doesn’t instill value, nor does it increase sales (Valsesia, Nunes, & Ordanini: What Wins Awards Is Not Always What I Buy: How Creative Control Affects Authenticity and Thus Recognition (But Not Liking). Journal of Consumer Research. Apr2016, Vol. 42 Issue 6, p897-914).

Value, along with quality and price,  has much higher regard than ethics in a consumer’s mind.  This was demonstrated by Carrigan & Attalla’s ground breaking consumer research (The myth of the ethical consumer – do ethics matter in purchase behaviour? The Journal of Consumer Marketing. 2001.. 18(7),560-577.)

If the NAR is truly interested in building consumer trust, the NAR leadership should get on the correct side of this issue and provide value to consumers instead of giving lip service.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Consumer data breach

consumer data breach
Consumer data breach (infographic from breachlevelindex.com)

If you haven’t heard of the Equifax consumer data breach then you’re either uninformed or you just don’t care. Regardless, this breach of personal and private information should make you very concerned.  If not for your own personal data, then for our economy.  The Equifax breach was a massive data heist that included names, birth dates, addresses, phone numbers, and in some cases driver’s license numbers.

Besides causing personal harm, this data breach has the potential to wreak widespread economic havoc.  It was reported that the hack could impact up to 143 million consumers (almost half the country’s population is at risk).  If only 1 percent of the 143 million are not able to buy a home as a result of this data breach because of identification fraud or other credit report problems, that would be about 1,430,000 fewer homes sold, which is about 26 percent of all the existing homes sold in the US last year.  To put it in perspective, there was only a 20 percent drop in existing home sales from market peak (2006) to trough (2009) triggering the worst housing market since the Great  Depression and wiping out much of the country’s real estate wealth.

Let’s be clear, this is not a wake-up call.

The wake-up call came years ago when consumer data breaches and hacking first got the attention of the public and government.  Since, the snooze alarm has continually been reset.  According to the Privacy Rights Clearinghouse (privacyrights.org), since 2005 there have been 7,671 data breaches totaling to 1,070,164,636 records breached.  The clearinghouse only counts the data breaches that “have a high chance of exposing individuals to identity theft.”

One of the first consumer data breaches to draw government ire and fines was the Choicepoint breach in 2005.  The 145,000 consumers affected by that breach pales in comparison to the Equifax consumer data breach.  Choicepoint was fined $10million by the FTC as well as having to provide $5million for consumer redress.

Since Equifax’s public announcement of the consumer data breach, Congress and the Consumer Financial Protection Bureau has called for hearings.  Of course, hearings take time and are a knee jerk reaction to the damage that has already been done.  But the hearings will address the many questions surrounding this incident, such as: how the hack occurred; why it allegedly took Equifax two months to reveal the hack; and why were Equifax executives allegedly allowed to sell company stock before the data breach announcement?

And because of the potential financial and economic impact of hacking and consumer data breaches, the questions that should also be asked include: Why hasn’t government taken steps to protect such information prior this data breach?  How will government protect consumers moving forward?

Are consumer data breaches becoming acceptable?

Equifax’s incident is not the first of its kind, and unfortunately, nor will it be the last.  But it is the largest breach of private and personal information to date.  This incident should make you wonder if the stewards of our private and personal information, along with the government agencies and bureaus, are incapable of or not totally invested in protecting the consumer.

Be vigilant.

Equifax has set up a site to check if you’re affected by this data breach, however many have demonstrated that it does not work properly.  It may be best to assume you’re at risk and take necessary actions to protect yourself. The Federal Trade Commission (www.consumer.ftc.gov/blog/2017/09/equifax-data-breach-what-do), the CFPB (www.consumerfinance.gov/about-us/blog/identity-theft-protection-following-equifax-data-breach) offer tips in protecting your personal and private data.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Real estate BS detector

real estate BS detector
Become a real estate BS detector (infographic from visual.ly)

DARPA issued a recent request for information seeking ideas about how to create automated capabilities to assign “Confidence Levels” to scientific studies, claims, hypotheses, conclusions, models, and/or theories.  In other words, the Defense Advanced Research Projects Agency wants to create a BS detector.  First reported by Adam Rogers for WIRED (Darpa Wants to Build a BS Detector for Science; wired.com; July 30, 2017), DARPA doesn’t look at it as rooting out “BS” but rather establishing the what, why, and how scientists know stuff. Imagine how this could be applied as a real estate BS detector!

The Defense Advanced Research Projects Agency’s stated mission on their website is “to make pivotal investments in breakthrough technologies for national security.”  So, chances are that if they are able to devise a real working BS detector, you won’t know about it.

When it comes to real estate, people sometimes bend the truth.  Additionally, real estate agents are known for “puffery” and are generally not trusted because of the salesy techniques they employ.  But having a real estate BS detector would be huge breakthrough!  Imagine being able to weed through the BS and nonsense that many real estate agents spout when they are clearly trying to sell.  Wouldn’t it be wonderful to check your real estate BS detector, when an agent is pontificating about a house or themselves, to know if the agent is wasting your time?  Unfortunately, the real estate BS detector is not a real device.  However, there are strategies to help you detect real estate BS.

“Luke, trust your feelings.”  Ok, there’s no such thing as a Jedi, but empirical research has demonstrated that intuition can be used to weed out lies.  Many say they rely on their gut instincts to protect themselves.  But the truth is that many ignore or don’t trust their intuition because the rational mind takes over and dominates.  Increasing your intuition could help you detect the real estate BS and prepare for (and maybe prevent) regretful situations.  Becoming more aware about your “gut feeling” can increase your intuition.

Being cynical can also help detect real estate BS.  Don’t be rude of course, but questioning what others say helps you clarify and understand them at a higher level.  It can also reveal untruths.  Question all claims and over-the-top statements.  For example, if you’re dealing with a real estate agent, ask for support to any assertion they make about themselves or their services.  Ask to speak to their references.  Also, ask for additional information that support their opinions on the housing market and deciding on a price to sell or buy a home.

Do your due diligence to discover real estate BS.  After asking questions, take what others say or do during the real estate transaction at face value and take it upon yourself to verify it.  It can save you a headache down the road.  It’s easy to verify many aspects of the real estate transaction, because many local jurisdictions have their databases online.  However, making a call or two to a helpful government employee is straightforward and can provide bonus information.  Verify licenses of real estate agents, loan officers, and even home contractors.  Verify permits of home improvements.  Verify the local schools and the home’s zoning.

Finally, don’t feel pressured to do anything.  The BS artist will make it seem as if you have to act immediately.  But if you are not comfortable with the situation or are not yet ready, take a pause.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Home listing syndication is big business

home listing syndication
Home listing syndication (infographic via trendmls.com)

Your home listing is a hot commodity!  Not just to home buyers looking to buy, but to those who buy and sell information on the internet.  MLS home listing information syndication is big business.

Much of what you see, hear, and read on TV, radio, and the internet is syndicated and distributed through a broad network of affiliated outlets.  The purpose is to have as large of an audience as possible.  The larger the audience, the larger the advertising revenue.  Syndicating and distributing media content has been around for a very long time, and has been very a lucrative industry for those involved.

Internet syndication is no different and has become sophisticated, such that websites will pay for licensed content.  The content attracts visitors and generates revenue via ads and/or pay-per-click.  Needless to say, internet syndication has developed to become a multi-billion-dollar industry.

When you think about making money in real estate, you probably think about buying and selling property, not the internet.  Most people don’t realize that real estate information generates $billions on the internet.  Real estate portals generate revenue by publishing content that attracts home buyers and sellers.  The sought after content, of course, is your home’s MLS listing.  Websites generate income by selling real estate and other professionals access to consumers who visit their sites to view your MLS listing.

You may not know this, but your home’s listing is copyright-protected by your agent’s Multiple Listing Service.  The content is licensed and syndicated to internet real estate portals and other publishers for a fee.  How much do websites pay for MLS licensed content?  Heck, you’d be hard pressed to find that information, much less acknowledgement that there is a fee paid at all!  And I suspect that information is not readily disclosed because consumers would be up in arms if they knew.

However, an article by Natalie Sherman appeared in the Baltimore Sun on January 27, 2015 (MRIS looks to partner with Zillow) gives a hint about the monetary relationship between MLS boards, syndicators and publishers.  Ms. Sherman wrote:

“Under the current system, Zillow pays to receive listings from Listhub.com, which has agreements with hundreds of multiple listing services, including MRIS, to provide syndication services to sites such as Zillow. Earlier this month, Zillow and Listhub said their existing deal would not be renewed.

A representative for Zillow, which has been working to establish more direct relationships with brokers and listing services for years, said a new deal would help keep the site more up to date.”

The article refers to the 2015 shakeup of real estate listing feeds to specific websites, such as Zillow.  At that time, Zillow sought direct deals with individual MLS boards, such as our local MRIS (now part of Bright MLS), to get MLS home listing feeds.

Chances are that you are unaware that the information about your home that is uploaded to the local MLS (including pictures of your home) become the property of the MLS.  Much less, you may not know that the information is licensed to others for a fee to be used on other websites.

Even though the MLS boards charge subscription fees to agents for the privilege of uploading and viewing content, they might argue that the fees generated by licensing and selling your information helps maintain the MLS system.  However, not disclosing this aspect of the real estate listing poses some ethical questions that must be addressed.

Of course, there are real estate brokers who have opted-out of syndication of their MLS listings.  These brokers want to retain control of  home listing information to ensure accuracy and maintain professionalism when presenting your home to the public.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.