The anonymity of the internet has made real estate more personal

HouseIt might not be a revelation that the initial news about Zillow’s acquisition of Trulia reverberated among the analysts as a game changer for the real estate industry. But you might be surprised that some commentaries, such as Brad Stone’s of BloomburgBusinessWeek.com (How a Zillow-Trulia Merger Could Finally Change the Business of Real Estate), expressed that the transaction of buying and selling homes has not really changed since the inception of these internet giants.

Compared to 2013, decreased sales volume has made 2014 a challenging year for many in the real estate industry. And contrary to what some believe, the Trulia acquisition may not necessarily be a sign of strength; but rather, it may be sign of continued weakness in the industry. Tim Logan comments on the acquisition in his July 28th Los Angeles Times article (Zillow deal to buy Trulia creates real estate digital ad juggernaut), “Neither is yet profitable separately, but they hope to save $100 million a year by joining forces and cutting duplicative costs.”

Regardless of the economics behind the acquisition, the significance of Zillow and Trulia (and other similar websites) cannot be underestimated. And although many believed these sites were to have changed the real estate industry in a manner similar to how the internet changed the travel and retail industries; Zillow and Trulia have been leaders in transforming the home buyer and seller experience. And instead of minimizing the importance of the real estate agent; MLS aggregators have become facilitators and part of the home buying/selling process by packaging syndicated MLS feeds and other related information to consumers in a convenient and eloquent way through the internet, while selling services to real estate professionals vis-à-vis subscriptions and advertising.

The general process of buying and selling a home is still somewhat the same as it has been for decades. Before internet access became prevalent, real estate agents mostly met with their clients in person to review available home listings, discuss financing and other related matters. Although many used the technology of the day (fax machine and telephone), the preferred meeting was face-to-face. As the internet flourished, technology adopters were able to correspond with clients via email, text messages, and Skype. And as the technology evolved, so too did the daily business of real estate. Searching for homes became increasingly streamlined, and the flow of documents became more efficient.

Some have made the argument that the internet and related technologies may have been an enabler of the real estate bubble of the early to mid 2000’s. However, the reality may be that the real estate bubble facilitated the growth of real estate aggregators and the use of internet technologies. The proliferation of information at that time, along with the effective use of new technologies, fed house hungry buyers who wanted to be the first to know about a home for sale before other buyers. Internet and cell phone applications were developed to automatically send listing alerts to buyers’ emails and cell phones (technology that is commonly used today and even useful in hot markets where homes sell quickly).

Buying and selling a home is still a personal business. Instead of eliminating the real estate agent; websites such as Zillow and Trulia may have forced the agent to evolve from the information gate keeper to the local real estate expert who can interpret information for clients into meaningful data that can be used to facilitate the buying and selling of homes.

© 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. This article was originally published the week of July 28, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

When selling a home – pictures more important than descriptions

ColonialThe maxim “beauty is in the eye of the beholder” seems to be applied universally. But the meaning that different people are attracted to different characteristics may be also applied when viewing homes online. Recent research confirms how visual cues can either increase or put off a home buyer’s interest in your home.

Seiler, Madhavan, & Liechty’s 2012 ground breaking research on home buyers’ attention to visual cues deviates from the usual valuation models that focus on the perception of a home’s features (Seiler, Madhavan, & Liechty. (2012). Ocular tracking and the behavioral effects of negative externalities on perceived property values. Journal of Housing Research, 21(2), 123-137). Their study used ocular tracking technology to follow the eye movements of people viewing internet home listings. They found that people tend to spend more time viewing a home’s photos than reading about the property’s features, agent comments and other information; study participants viewed photos 60% of the time.

They concluded that the “percentage of time a person spends looking at the photo of the home” is more indicative of a person’s interest in a home than reading about the property’s characteristics or reading the agent’s descriptions; and it could be inferred that the longer a person looks at a home’s pictures, the more they might be interested in viewing it in person. As a result, the authors recommend that “real estate agents exercise great care when taking good photos of the property before listing a residence for sale.

Additionally, the study reported some interesting findings about a home’s value relative to negatively perceived features. Negative features that can be changed easily and inexpensively (such as carpets or paint) were not viewed by the study’s participants as a reason to significantly discount a home’s value; however, viewing negative external features that cannot be changed (such proximity to transmission lines or cell towers) is perceived to lower a home’s value.

The study’s findings about visual cues seems consistent with a 2008 Realtor® Magazine article (“How Photos Help Sell Homes”; realtor.org) which indicated that a home’s days on market is drastically reduced when there are multiple quality photos: “A property with a single photo spent 70 days on the market (DOM) on average, while DOM fell to 40 with six photos, 36 with 16 to 19 photos, and 32 with 20 photos…” The same article also reports that your home will probably sell for more if your agent posts multiple quality photos compared to posting only one photo; “listings with one photo sold for 91.2 percent of the original price, while homes with six or more sold for 95 percent of the original price…

So it seems that Seiler, Madhavan, & Liechty’s findings confirm the conventional wisdom to make your home look its best prior to listing it, as well as well as having the best quality photos posted to your listing. If you’re planning a home sale, consider asking about and comparing agents’ marketing concepts – including photos and video. It is customary for many agents to hire a third party to take and post pictures for the MLS listing and virtual tour. However, even though the posted pictures are high resolution, many MLS photos are distorted and/or do not depict the best viewpoint. To increase interest in your home – ensure that your hi-res photos are high quality by using the proper perspective and highlights the home’s features.

© 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. This article was originally published the week of July 21, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

Reality TV and real estate – is the genre shaping buyer and seller expectations?

homes and expectations

Reality TV has been a part of our culture since the 1990’s, and chances are that you’ve watched Reality programming at some time. Reality TV has benefited from the booming housing market of the early to mid 2000’s, when the number of real estate reality shows grew exponentially. Today, real estate related reality TV is prevalent, and you could probably catch one at almost any time of day.

What is it about reality TV, or more specifically – real estate reality TV, that draws us in like a moth to the light? Matthew Wilkinson and Paul Clark suggest in their research (2014. Pay No Attention To The Man Behind The Curtain: The Rejection Of Artifice And The Culture Of Choice. ASBBS E – Journal,10(1),132-143) that our affinity to reality programming is our culture’s desire for “fluid, ambiguous, and amorphous experiences.” And before I embark on their philosophical explanation based on “postmodernism” and its implications, it apparently boils down to our search for “authenticity” and the notion of participation.

Alternatively, Alex Weprin reveals that there is a feeling among programming executives that audiences have become bored by “forced, trite reality shows” and are attracted to TV shows that “feel more ‘real.’” But there’s a limit to “authenticity,” even in reality shows. Weprin quotes Animal Planet President and General Manager Marjorie Kaplan, saying “I don’t know that every nonfiction show is going to be authentic; clearly there is room for wonderfully inauthentic reality TV that we all watch and wink and nod and know is contrived….” (Jan 10, 2010. Cablers target laughs, authenticity, geeks. Broadcasting & Cable).

And why not? “Reality” TV is an escape from monotony and lets us perceive we are participants; real estate reality programming helps us imagine how our homes, our lifestyles could be different. Since the airing of MTV Cribs, we imagined how we could live like celebrities. Home renovation, real estate investing, buying foreclosures, house flipping, luxury homes, and home shopping: there is no lack of real estate related subjects on TV today – and they all seem to make it all look easy and exciting.

But there is a concern by some in the real estate industry that reality TV is doing more than entertaining viewers, it is also shaping consumer expectation. The real estate related reality format is typically a condensed version of the process that highlights only parts of the consumer experience; the portrayed drama in this sub-genre can range from the very subtle to the outrageous.

A recent Realtor® Magazine article highlights professionals’ thoughts on the matter (June 16, 2014. Reality TV Skewing Home Remodeling Picture?); and the consensus is that some consumers demand a similar experience to what they see on TV. Some real estate agents have also expressed concerns about home buyers and sellers whose expectations are not realistic; they want more in an abbreviated span, losing perspective on the elements and time that the home buying and selling process requires.

Maybe the entire genre is misconceived; maybe real estate Reality TV should be more realistic, where the drama is drawn out over weeks and months documenting the excitement and tedium of the real estate transaction. But then again, maybe T. S. Eliot was correct in the characterization (Burnt Norton): “…humankind cannot bear very much reality.” TV may not be genuine about being real, as much as it is about entertainment value.

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By Dan Krell
Copyright © 2014


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.

Buying a home – is it a product or service?

house for saleIf you’re like many home buyers, your home search is focused on a home’s specific features that are limited to your price range. Your search may seem “product” directed, at least initially. And unless you plan to go it absolutely alone; you’re likely to be using a number of real estate related services as well.

Before the multiple list service existed, when card catalogs were used to keep track of homes for sale, real estate listings were proprietary and buyer agency did not exist. Cooperation between brokers was not guaranteed; and as a result, real estate brokers mostly sold their own listings. Because the broker was the source of information about the home, as well as the home sale/purchase process; the real estate broker’s services were perceived to be one and the same as the product (the house for sale).

Today, everyone turns to the internet for answers, which has become the “go to guy” for information. It seems as if the information found on the internet is treated as gospel, even when it is not verifiable. And this is particularly true for real estate. Home buyers, sellers, and owners use the internet to search all types of information including: homes for sale, home values, property tax, and the home buying/selling process.

Like some other service industries, you could say that the internet has contributed in separating the product from the service; consumers are no longer required to go directly to the real estate broker to search for a house or other real estate information, and consequently get their services too. Finding and viewing homes for sale without your agent has become easier; as is selling your home FSBO (for sale by owner). The resulting sentiment is the obvious questioning of the value of the real estate agent.

When asked what an agent can bring to your real estate transaction, the consensus is that they are housing market experts. Real estate agents are invested in knowing local listing and sale activity, as well as networking within the industry to keep on top of the latest trends. They can interpret the home sale data to help you formulate a buying/selling strategy (including price and terms). Experienced agents also typically have developed the ability to easily connect with buyers and sellers having a greater capacity to understand their specific needs to facilitate a smoother transaction. And although agents are often thought of as transaction facilitators; your Realtor® is a fiduciary, obligated to protect and promote your interests (while also obligated to treat all parties honestly). Agents are also required to be up to date on legislation that affects home buyers and sellers, which will help when structuring your transaction, including compulsory disclosures and obligations.

Unlike the consumer experience back in the day when there was little choice in real estate services, you now have the luxury of choice. But choose your agent carefully; agents are not all alike. Recent research indicates that veteran agents positively affect your transaction and are more efficient compared to rookies. Additionally, full-time agents have better outcomes than those who consider themselves as “part-timers.”

Savvy home buyers and sellers benefit from their agents’ experience and commitment. Smart consumers understand that experienced agents offer intangible services such as understanding the nuances of the housing market, as well as having an increased ability to engage the parties in the transaction.

© 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. This article was originally published the week of July 7, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

Oil prices and housing, is there really a link?

Oil and housing

It seems that anytime there is turmoil in the Middle East, there is concern over disrupting the oil supply and spiking energy prices – notably at the gas pump. Spiking gas prices not only makes everything seem more expensive, it has been thought to compel people to re-think their home buying strategies as well. Is the chaos in the Middle East and increasing oil prices coinciding with a shift in home sale trends?

Gregory White, of Business Insider (businessinsider.com), stated that “The simple reason why a rise in crude prices could tank the housing market is that it has done it before.” This is not a recent story; no, White wrote this in a March 6th 2011 piece titled: “Barclays On How The Oil Price Spike Could Crash The Housing Market Again.” The article was a brief commentary on Luca Ricci’s (who was at Barclays at the time he was quoted) analysis of the possible consequences of the surge in oil prices to the U.S. housing market.

Ricci was quoted to say, “The main effect is on consumption via gasoline and energy prices. As consumption generally accounts for 60% of GDP, the effect is large. In oil exporters this effect will be offset by windfall revenues from the higher oil prices, so the overall effect is unclear. In our view, the oil price increase in 2008 significantly contributed to the recession and the financial crisis in the US, which then spread globally. By raising CPI inflation, it reduced real disposable incomes and, hence, the purchasing power of the average households, leading to a contraction in real consumer spending and lowering the ability to repay mortgages.”

Indeed, a 2008 sharp increase in gas prices and road congestion was a factor for many to re-think their home location. It was not only those living in suburbia whose idea of an ideal home shifted toward saving fuel costs; home buyers at that time, who did not put their housing search on hold, looked for a home that was closer to their work or easily accessed some form of mass transit. A National Association of Realtors® (realtor.org) study reported that 28% of home owners surveyed indicated that high fuel costs were a decision to sell their home, while 40% of home buyers surveyed indicated that high fuel and commuting costs offset the higher home prices closer to the city center.

How much could you save by moving closer to your office? Based on the Washington Metropolitan Area Transit Authority Savings Calculator (WMATA.com), eliminating 20 miles of daily driving can save over $224 per month or $2,688 per year (estimates at the date of this article). And if gas prices peak like they did in 2008, savings from curbing your driving could be double – or more!

However, while the immediate focus may be on saving on energy costs, urban living could have a trade off in higher property taxes and housing costs. And as much as increasing oil and gas prices may have an indirect effect on the housing market, the urbanite trend may be more about convenience and a healthier living style rather than saving money on gas and commuting costs. Nonetheless, the urban living trend surged in 2010, when sales soared in planned walkable communities with embedded shops and services. Market demands resulted in suburban renewal, where planned urban villages were built (and are being built) in convenient locations; which have also become destinations for the community’s restaurants, shops and offices.

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By Dan Krell
Copyright © 2014

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.