Net neutrality?

net neutrality
Net neutrality (infographic from historymaniacmegan.com)

The National Association of Realtors has always championed net neutrality as a means of internet fairness for small businesses and consumers.  A recent article for Realtor Magazine (the official magazine of the NAR) by Robert Freedman hits the same talking points of many recent NAR articles and statements (How FCC Plan to End Net Neutrality Hurts You; realtormag.realtor.org; November 21, 2017).  Freedman wrote that a reversal of net neutrality rules would “make it harder for real estate companies, multiple listing services, and property data aggregators to provide their services in a cost-effective way.”

The NAR takes the position, like many net neutrality advocates, that net neutrality is good for business and consumers.  A December 15th NAR press release (nar.realtor) stated:

NAR has actively supported net neutrality for years.  We are concerned that a rollback of net neutrality rules could raise costs on business owners, like real estate professionals, who make heavy use of technology and online platforms. In particular, NAR notes that paid-prioritization models and other anti-competitive practices could put small businesses at a significant disadvantage. For example, NAR said, larger companies could pay for internet fast lanes that deliver content to consumers faster on some websites than from others.

But a recent article for the Foundation of Economic Education by Dr. Kyle Swann (Net Neutrality Isn’t Neutral At All; fee.org; December 14, 2017) lays net neutrality’s real issues.  He argues that the growth and innovation of the internet happened during the twenty years prior to FCC regulation.  Prior to the net neutrality rule, internet service providers (ISP’s) and edge providers’ (internet content providers and platforms we use daily) services were offered “subject to mutual agreement.”  He also points out that the FCC’s “primary function” is to regulate media content, and that the FCC’s Open Internet rules “expressly permit ISPs to block, filter and curate content.”  Rolling back the 2015 net neutrality rule shifts ISP oversight from the FCC back to the FTC.  Swann’s answer to an open internet is to promote ISP competition, giving consumers a choice.

During the net neutrality rule, ISP’s were no longer exclusively accused of censorship, fast tracking content, and promotion for payment.  Some content providers were also accused of similar practices.  Rana Foroohar writing for Financial Times (Why Big Tech wants to keep the net neutral; ft.com; December 17, 2017) calls attention to how the larger content providers (FANG) actually benefited from net neutrality.  Some of these FANGs have seen exponential growth in the last several years.  Foroohar, like Swann and others, expresses her opinion that an application of real internet equality and consistency should be consumer driven.

Contrary to NAR’s point that rolling back the 2015 net neutrality rule will make it more expensive to do business on the internet: the cost of doing business on the internet has already become expensive and cost prohibitive for many Realtors.  Some have argued that the prominent real estate content providers have greatly expanded their market share during net neutrality.  These content providers promote the agents who can afford the service the content providers offer.  Needless to say, this paid arrangement does not guarantee home buyers and sellers a competent, ethical or consumer oriented agent.  And it’s not necessarily cost-effective either, because advertising costs are usually passed on to the buyer or seller in the form of admin fees and higher commissions.

The answer may be, as many argue, is competition.  Not just with ISP’s, but with content providers as well. A truly open internet will allow for innovation and increased competition, allowing the consumer to choose the winners and losers.  Dr. Swann is correct in saying in the article mentioned above, Whatever side of this you’re on, it’s quite probable that the people you’re demonizing want the same things you want.

Copyright© Dan Krell
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Industry disruptors changing real estate

Reat estate industry disruptors
Reat estate industry disruptors (infographic from nar.realtor)

Buying and selling homes hasn’t really changed much over the years.  It still requires a buyer and a seller.  Getting them together often requires a real estate agent or broker.  Sure, technology has changed the brokerage relationship dramatically.  It has also forced players in the real estate industry to change or get out of the business.  A new trend of real estate brokers are embracing technology like never before.  Will these real estate industry disruptors change how real estate services will be provided in the future?  Will these industry disruptors drive a new enthusiasm for “real estate technology brokers“?

One the largest players in the real estate industry is Zillow.  Although Zillow has a number of services that can bring home buyers and sellers together, they are mostly a technology company that serves to provide consumers information.  The company generates revenue by selling services to real estate brokers and agents, as well as mortgage companies and loan officers.  Many consumers visit Zillow’s websites to view information about homes for sale or rent that are listed with brokers or the homes’ owners.  Consumers don’t pay Zillow a fee or commission for the service.

Over the years, many have talked about how Zillow’s technological influence will predict the real estate industry’s future.  Those real estate prophets foretold a time when home buyers and sellers will be able to do business on the internet without a real estate agent or broker.  But in reality, Zillow’s influence only cemented the necessity of a broker or agent to facilitate the transaction.  Zillow’s success has generated millions of dollars in revenue, but the company has struggled to post an annual net profit.

Redfin is another real estate company that has a significant internet presence.  Some think of Redfin as a technology firm offering real estate services.  But the reality is that it is a real estate brokerage built around technology.  Redfin has built its brand, and went public this year.  Although the company generates millions in revenue, the Seattle Times reported that Redfin’s IPO offering indicated that the company has yet to post an annual net profit and has accumulated losses of $613.3 million (Seattle real estate company Redfin files to go public; seattletimes.com; June 30, 2017).

Companies like Zillow and Redfin are not the only players in real estate know for technology, but they may be the most well-known.  These companies are part of a new generation of companies that strive for a huge internet footprint to drive business.  But Zillow and Redfin demonstrate that technology in and of itself is not a guarantee of profitability, nor has it been an absolute “game changer” for the real estate industry.  Instead, technology has been the catalyst for change.

Industry disruptors and real estate

Consumers probably don’t realize the subtleties, but the rapid changes in real estate technology has forced real estate agents and brokers to change how they engage their clients.  Since companies like Zillow and other real estate aggregator sites have propagated the internet, the role of the real estate agent and broker has shifted away from being the source of information to being the source of a meaningful analysis.  Agents and brokers have also shifted their roles from information keepers to transaction managers.

What better way to be a real estate change agent and industry disruptor than to build a business around technology.   Redfin is probably the most poised to make major impact to how consumers are served in the real estate industry.  With all of its tech goodness, Redfin’s contribution to the industry hasn’t been as much technological than financial.  The brand will likely be known for being instrumental in reducing real estate commissions.  In markets where Redfin has been successful in establishing its brand, agents have been under significant pressure to lower listing commissions and/or offer buyer rebates.

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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.

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Real property disclosure

property disclosure
Top home issues found (from cincinkyrealestate.com)

Finally, there is a new resource to get real property disclosure for home buyers. Home buyers can access property information that is not always readily available or hard to find.  A July 19th RealtyTrac (realtytrac.com) press release introduced Attom Data Solutions, their new parent company.  The introduction described what the company offers to the real estate industry and consumers.  Attom Data Solutions’ (attomdata.com) self-stated mission is: “to increase real estate transparency by arming businesses and consumers with the property and neighborhood data needed to make wise decisions.

You may recognize RealtyTrac as being the go-to resource for foreclosed homes.  But what you may not realize is, like other real estate websites it is an aggregator of information.  RealtyTrac describes itself as “the leading provider of comprehensive housing data and analytics for the real estate and financial services industries…” by providing information on over 125 million properties.

So the idea of aggregating property information is not new.  However, until now, there has not been this amount of information available for each property located in one place.  The size and scope of Attom Data Solutions’ aggregated information is mindboggling.  RealtyTrac’s press release revealed that the new parent company’s database of property information (called “ATTOM Data Warehouse”) holds more than 9 terabytes of information!  (One terabyte is 1 trillion bytes).  Putting the jargon into perspective, the data represents 99% of the U.S. population.  And it features “enhanced and standardized data for more than 150 million U.S. property parcels.”

Before the ATTOM Data Warehouse, you would have to check a number of websites and make inquiries to several local agencies.  The aggregated info includes: a property’s historical and current public records, ownership, mortgages, foreclosures, neighborhood information, demographics, environmental issues, natural hazard information, potential health hazards, and property features and neighborhood value information.

Besides being able to help you decide on which home to buy, Attom Data solutions’ reports may also help you decide on price.  Additionally, home sellers may find the information useful as a form of disclosure, to answer many of the questions that are often difficult to find.  Attom Data Solutions is reportedly offering data licensing to the industry, however the information is also available via their consumer websites RealtyTrac.com, Homefacts.com and HomeDisclosure.com.

The idea of consolidating property information into one location has been trending for several years.  There have even been hints of creating a national MLS.  Several years ago, the National Association of Realtors® created the Realtors Property Resource® (narrpr.com) to assist Realtors® in providing detailed reports to home buyers and sellers.  Besides offering details on neighborhood comps, the generated reports incorporate data from various sources. Buyers and sellers are informed of analytics, trends and other factors. Of course, RPR is exclusive to Realtors®.  But if you receive a report from your agent, they can help you with the analysis.

The amount of information about any given property seems to be ever increasing.  However, an ongoing issue echoed among professionals and consumers is that the data is not always reliable.  Even information that is pulled from public records are not always current. Verify the veracity included in any property report by cross checking several resources.

Copyright © Dan Krell

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Real estate agents getting back to basics and focus on relationships

real estateDon’t be surprised when you’re getting more real estate agent phone calls, or seeing more agents at your doorstep. You may be surprised to know that in this increasingly tech dependent world, agents are getting back to business basics; which is founded in personal introductions, building relationships, and providing personal service.

You see, many real estate agents (like the rest of the population), are realizing the limitations of the internet. What was once the promise of a new market place for products and services has become a super-saturated arena of information, advice, and “content” clamoring for your attention; and is a growing disappointment for many due to the increasing irrelevance of information, not to mention the surge of fraud and hacking.

The National Association of Realtors® (realtor.org) has reported on the growth of internet use in real estate over the last fifteen years in their annual Profile of Home Buyers and Sellers (the 2014 Profile indicated that 92% of buyers “use the internet in some way in their home search process…”). And although the statistic is astounding, it is becoming clear that is still not wholly understood how home buyers and sellers use the internet.

You may not be surprised to know that home buyers and sellers don’t entirely rely on the internet for choosing their agent. In fact, many choose an agent through friend/family referrals, personal introductions, and even serendipitous meetings (such as visiting an open house). Furthermore, buyers and sellers are increasingly aware of the internet’s limitations as well; as one home buyer’s recent statement of “…this home is not what was advertised on the internet…” illustrates the type of misleading information that is often found.

Although many are just waking up to the fact that “point and click” does not sell homes, “big housing data” knows it generates online revenue by capturing your information and selling it to real estate agents, loan officers, movers, and others. Last year’s acquisition of Trulia by Zillow was thought by many analysts to be an industry game changer by merging two of the most visited real estate portals. However, many did not consider that the move was to increase traffic and revenue for two companies that were reportedly not “yet profitable” on their own, by “grabbing a bigger slice of the advertising market” (Logan, Tim. “Zillow Deal to Buy Trulia Creates Real Estate Digital Ad Juggernaut.LA Times. 28 July 2014.<latimes.com>).

More recently, HousingWire’s Ben Lane reported on Zillow’s downgrade by Barclays (“Is Zillow in Trouble?” HousingWire. 20 July 2015. <housingwire.com>), referring to a slowdown of traffic due to saturation and competition. Months after the major acquisition, growth of the online real estate portal is “slowing significantly.”

Just as the growth of the internet created markets and changed how real estate agents conduct business; personal needs and attentions are changing how consumers view the internet, as well as producing voids left by agents and brokers who heavily relied on the internet for business.

The NAR’s recent DANGER Report misses the mark by highlighting perceived shortcomings in Realtor® ethics and competency.  However, the real issue may be more about the lack of professional intimacy; which is necessary for commitment, integrity, and building trust. While some already know it, others are waking up to the notion that the quality of the professional relationship is vital to the consumer’s satisfaction – and it all begins with an introduction.

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