by Ellen Shaughnessy, Broker of Free Bridge Realty.
Third party portals blaze forward to ‘reinvent the wheel’ of selling real estate and valuing properties. Zillow, Trulia, Realtor, Homes, etc etc. I’m talking about property ‘valuation tools’ such as ‘zestimates’, or AVMs (Automated Valuation Model). The third party real estate search portals purchase data dumps from county courthouses and local mls feeds, nationwide. Many smaller mls / Realtors’ associations, some Brokerages, and even a few large mls markets do not share their mls data to all these feeds. So what you are seeing on some of the regionalized or national real estate portals is not the true ‘full picture’. This gets interesting, along the ‘borders’ of one mls/association, where one is included in a regional portal vs. the neighboring one that is not a participant.
Internet data-sharing is affecting many industries, and our real estate industry is certainly one that’s enormously affected by portals over the last couple decades. But does that mean that real estate will someday no longer be ‘local’? Incomplete data sets get skewed. A portal of data is really only as strong as its data integrity. Data such as: number of sales, what broker sold them, how many one brokerage sold, whether that portal bothers to distinguish a Realtor individual vs. an entire ‘team’ (way-skewed), what prices properties sold for, etc. This data comes from each local Realtor associations’ mls. So – when one mls association does sell their data to a third party real estate search portal and another does not, or when some courthouse data is mis-categorized – the end-user is not seeing ‘the full picture’.
What if a regional portal decides to ‘count’ a 6-person real estate ‘team’ as just one person and ‘Jane Doe’ team shows on the portal as selling 100 properties in the last year while independent agent Joe Beef who works by himself is just showing 15 sales in that neighborhood. What if Joe Beef is on the very ‘edge’ of that mls border and belongs to two mls associations, and doesn’t have the time to ‘double-enter’ each sale in county x mls and adjoining mls county y? When there are no ground rules yet for portal regulation / definition of an individual Realtor vs. a Realtor’s name with multiple team-members, could that be mis-leading – or even mis-representing the local real estate market to a consumer? It could definitely affect perception and maybe hurt the smaller / single Realtor’s marketing when an untrue or skewed picture is presented in a regional portal.
I’ve had calls from consumers finally wanting ‘the real answer’ from a local agent while they are looking at a third party portal. The consumer finally needed to pick up the phone and dial an actual local broker to get the REAL story: some properties that are flagged at the courthouse to *maybe* go for sheriff sale are portrayed as active on the market on the third party portals, but they are not actually available for sale. So the local realtor needs to do the research on the local mls, when the third party portal falls short and drops the ball. Yes they have some great mortgage calculators and search tools – but incomplete data is not super-helpful when you are making one of the biggest purchases of your life.
AVMs – helpful to property owners that are selling?
Beyond Realtors – third party portals are now attempting to be value experts as well. Is that better than a local appraiser who’s licensed and needs to keep up with state standards and continuing ed. and market nuances? Maybe not. In order to come up with a property AVM (or zestimate for instance) the third party portal uses machine-generated algorithms to generate a number that is based on what non-complete data they have on that market. Incomplete or inaccurate data, and a lack of finesse can lead to some very skewed and rather annoying AVM ‘values’ on properties. What still holds true from the dinosaur days of DOS? Garbage in – Garbage out.
What if you are trying to sell your home, and it’s a very special 1930s tudor with triple-pane windows, a super-sonic kitchen, a geothermal ultra-efficient hvac system, and hand-carved mahogany staircases? What if a licensed real estate appraiser or a licensed Realtor found a market range value of $400,000 but a third party portal site is spitting out a number for that address of $300,000? Would buyers believe that AVM number is ‘real’ on the value? It’s happening here. Finally someone is bringing a suit: https://therealdeal.com/2017/05/12/zillow-under-fire-for-zestimate-system/
This should be interesting to watch!
Licensed appraisers are trained to use the very best ‘comps’ and make $ value adjustments based on a lot of local nuances, such as condition of property, whether there are trends of distressed sales; loads of other factors. Their training and experience is much more precise than a computer model that spits out a number for free. Is there value in local knowledge and real estate experience, vs. a regional portal of incomplete resold data? This has got to be very confusing to consumers. My point is – yes, portals and online research and obviously great tools to learn more about where you will live – but once you have pinpointed an area where you will move to, then your local mls and local Realtors are the most accurate source for real estate information.
Many buyers and ‘looky-loos’ alike prefer the very user-friendly interfaces of zillow.com, realtor.com, trulia.com, realtor.com to look at real estate. Realtors must be licensed in their state, take continuing education courses, abide by many rules and ascribe to a code of ethics. Regional cross-state portals evidently do not have to do these things. These portals are enjoying many ‘potential buyer’ eyeballs and with that comes a sweet revenue opportunity: Sell back this ‘buyer lead’ info to local Realtors and Lenders!
How portal business models work
What’s sad is many local brokers now feel ‘bullied’ into having to buy unqualified ‘leads’ from the third party portal real estate search engines. Yes, that friendly smiling-face that pops up when you are looking at 123 Main street in Conshohocken is a paid ad. This ad that that particular broker bought comes at quite a hefty price; that broker purchases the zip code in order for their face/contact info to to pop up then next to your search (so the broker has to send $100s out to California to buy these ‘leads’), just like google ads or the very artificial-intelligenced facebook ads. Not that there’s anything wrong with that; I’m all for fair free markets – but is this ‘fair’? That ‘buyer lead’ money takes money from local brokers, and puts that money into the pockets of the portal owners, many of whom may be sitting in a very nice office in California.
Am I being naive? I don’t think so… The internet is certainly a powerful vehicle to communicate and share date — but this also smells a little bit like the cheapening of yet another profession (a la legalzoom, webmd, etc.) where the regional portal does not have to play by the same state licensing rules. Is that a competitive advantage? Is this how the Rockefellers, Vanderbuilts, and Carnegie’s of America’s foundation got to become monopoly titans? De ja vous, online — except that the resource being exploited here is not exactly a monopolizing resource unless it’s the whole picture… and you are not getting the whole picture.
Will artificial intelligence replace Realtors, and consumers will just check off boxes on a facebook-like order form for a property purchase? Can a computer model figure out every possible pitfall and glitch that could go wrong in a real estate transaction and adjust? There are no lack of glitches or surprises that can de-rail deals. Do consumers appreciate having a licensed experienced professional at their side to help them navigate the real estate process?
I’m not panicking just yet. The real estate portals are a nice way to dip in a toe when your real estate search starts, but then when you get serious about buying it makes sense to switch gears and get into the local level nitty-gritty and get the best most accurate data, and work with an expert licensed Realtor who’s on the front lines with you in a fiduciary relationship, looking out for your best interests in the real estate.
More articles and viewpoints regarding these matters, plus what’s wrong with ‘warehousing’ appraisals. Feel free to comment and share more:
The Low Appraisal “Hassle” is a Symptom of a Broken Mortgage Process
Our www.GreaterLehighValleyRealtors.com public-facing mls site is going to get a facelift later this year. Have a look when you have a little time – we welcome your input to make it a more valuable resource as a robust and accurate local portal for you to find a local real estate broker, to find properties, and to provide the best tools help in your real estate search for Lehigh, Carbon, Northampton and bordering counties.
this is not exactly real estate portal-related; but does tie in to the David vs. Goliath small biz vs. giant enterprise challenge: http://try.harrys.com/lp-welcome-back-k/?utm_medium=Display&utm_source=LiveIntent&utm_campaign=LiveIntent_Reboot_2_3&utm_content=1x1_lp-WelcomeBack-Kyle%20-%20for%20Creative-Specific%20Tracking%20Pixels%20-%20Tracker&hid=l1-us:en:display:liveintent:ihp:hry:pro:raz:mtd:LiveIntent_Reboot_970x250-JAM-Truth-KF&crid=11252202305909-t-1×1