I don’t even know if I have any ratings at Zillow or Trulia or even Yelp. Maybe I should know? I do know they’re always trying to extract money from my pocket. And I know Trulia recently reported an $11.1 million dollar loss for the fourth quarter of 2013. Like many things in life, the more the real estate business changes, the more it stays the same. Trulia’s traffic was up, and their revenue was up, but so were their expenses. Sounds so much like the real estate business in general. I guess in 2014 it really does cost money to lose money.
But back to those ratings I don’t even pay attention to. Yes, I’m a bit old-school, but I also know that the information age is rapidly becoming the age of mis-information. And the real estate industry is onboard. Just a few years ago nobody had even heard of Zillow or Trulia, probably because they didn’t even exist. Today, buyers and sellers of real estate flock to these websites for real estate information. And not a day goes by that I receive at least one email or phone call solicitation to advertise on one of these sites (they are very aggressive). What most consumers don’t realize is that they are modern day Wall St. piranhas who care less about the quality of information they provide and more about the ad dollars they generate. It has become an all-too-familiar business model (think Google, Facebook, etc.) And in the recent age of well exposed phony Facebook “likes” we all need to be skeptical.
These companies chase and charge real estate agents, often to the tune of crippling amounts. They basically hard-sell the hard-sellers. For some agents it works, but it can become a hamster wheel. The advertising is expensive but it does generate leads. But it is easy to get behind. Many of the leads end up with the domino hard-sell. It is a new age of real estate advertising and monetization. And the suckers abound. It is all about the sale and repackaging of real estate information, and the consumers want that information. The problem is the resellers don’t really have the consumer’s interest at heart. It is just another scam to pump-and-dump the stock. (And you really thought they cared about you.)
But there are plenty of interesting sidebars to this story.
The Internet changed many things in real estate. The real change that benefitted the consumer were the inventions of IDX (Internet Data Exchange) and VOW (Virtual Office Website) just a few years ago. For the industry, it went from an earth-shattering event. It all seems rather ho-hum today. Basically, this is the process by which the key data (photos, remarks, square footage, etc.) of the individual listing in the local MLS (Multiple Listing Service) gets populated to all of the websites including the local brokers/agents and to national sites like Realtor.com, Trulia, Zillow, etc. Without the local agents permission (license), it would never happen. But the consumer demands it today. I almost laugh when people walk into the office and want “a list” today (don’t you have a phone?). That is so 1995, or even 2005. (BTW, the local brokers websites (the direct feeds) are the “cleanest” exchange of information. National sites tend to have dated, lingering and missing information.)
But what sites like Trulia and Zillow have done is marry that quasi MLS data with data from the County recorder and assessor’s offices, and any other pertinent data base they can get their hands on (like Google maps). Then they apply their algorithms to the data and can now accurately value any property. It works pretty well, until it doesn’t. And it doesn’t plenty. The robot still can’t do the job of a good real estate broker. The data isn’t comprehensive enough, and there are too many variables. Nerds aren’t good with intangibles. And even quality appraisers don’t always agree on a valuation. But these sites do give the consumer far more information than they have ever had before (and some of it is bad information). And the consumer loves it. And the Wall St. minds have created a targeted business model that has the potential to generate plenty of advertising revenue. And real estate agents are the perfect mark.
Years ago I used to spend many hours per week working on our center-spread ad in the Mammoth Times. It was a powerful (and expensive) advertising tool for more than a decade. In the beginning I had to shoot photos and take them to the one-hour photo shop. That’s a laughable scenario today. But it was before pre-internet proliferation. The sellers wanted to see their property in the center-spread, and the buyers and lookie-loos were there too. It was a lucrative account for the Mammoth Times. But there has been a monumental shift. Today, print advertising is expensive and has a dubious return on investment. So the agents are looking for glory on the internet. And Wall St. has answered the bell.
The end result (Trulia and Zillow) has been so successful that many in the real estate industry are questioning the sense of basically giving away the MLS data which is the core of the valuable information. After all, the agents are the stewards and owners of that information. They generate the key information. And Wall St. re-packages and sells it back to them at a significant expense (someone, somewhere is laughing pretty hard). Well, they’re selling it to some. And again, the consumer believes that sites like Trulia and Zillow have their interests at heart. But they are not the revenue source. The agents with their five-star reviews are the revenue source. What the consumer is beginning to understand is that the more money the agent spends to promote their five-star reviews, the harder they push to earn commissions. For some it becomes a vicious hamster wheel. But real estate advertising is like that.
Meanwhile, many in the real estate industry are wondering why the Realtors® doesn’t control the business model. So there is likely to be another iteration beyond IDX, VOW, Zillow and Trulia. Maybe Zillow and Trulia should be paying us to use the information. But maybe we should wait until they are profitable. Others in the real estate industry are envisioning public MLS portals that will be free of agent advertising, or that Google-tracking style advertising, or any advertising at all. It might be pay-for-use, but it would have clarity. And for the industry, there wouldn’t likely be those meaningless leads from drunks or insomniacs who are browsing all night and randomly hitting buttons.
So back to all those five star reviews. What does it take to be a “five-star” real estate agent? (I noticed that a couple of the big “five-star” agents in Mammoth don’t even own real estate in Mammoth––how good can they be at giving sound advice??) Besides being a real estate agent with broad market knowledge and experience, and negotiating skills, and marketing skills, and critical thinking skills (few-and-far between these days), there also needs the willingness to serve. Most real estate agents are lazy (I know for sure, I have supervised dozens of agents and brokers) and like the path of least resistance in most matters. Many agents simply want to collect all of the signatures on the myriad of forms and documents and once the secretary says they have a complete file, they get their commission check. I call them “check-box Realtors®.” Like I said, very few apply any critical thinking. I’d also like to think that a conscience would be part of a five-star agent’s repertoire. But that is up to the client to decide…….
The thing I notice about these reviews is that they normally occur shortly after the escrow closes. I’m sure I could work on my reviews this way; after some cocktails, wine and dinner I’m sure I can get my clients to say just about anything. But I don’t want my clients to be happy two days after the close of escrow, I want them to be happy two years later because they know they bought a good property for all the the right reasons. Or for sellers, they sold at a good value and there are no lingering “problems.” Recently, I had a young agent tell me that he wanted his clients “to have a good experience” in purchasing a property. I thought to myself “then why are you selling them this property?” The sale and escrow is one thing, the longer-term ownership is another.
In the end, I know if I do a good job or not. And I learned a long time ago that not everybody will be happy with the result. It is human nature and part of every business transaction (although it is not wrong to try to make everybody happy). So an agent with nothing but five-star reviews is full of horse-pucky. And quite frankly, this is just another case of “buyer beware.”
Okay, gotta go, that solicitor from Trulia is calling probably calling again. Or maybe it is someone wanting to know if his Zestimate is for real….