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When Software Eats the Real (Estate) World

December 28th, 2018


A great explanation of the technology changes going on in the real estate world. Not directly real estate photography but things anyone in the real estate industry should be aware of.

Also, note that the presenter in this video is a partner in Andreessen Horowitz which is invested in the companies that he is talking about.

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15 Responses to “When Software Eats the Real (Estate) World”

  • I watched this video a couple weeks ago. I have to admit that the first 5 minutes or so made me a little mad. But then I started thinking about the model of businesses buying and selling homes. Some of us are already doing that. I can see it being a bigger thing. Look at the used car market. You have Car Max and other dealers who purchase cars and sell them to consumers. I can see this happening with homes. But these dealers have not completely eliminated the individual from advertising and selling their car on their own. The real estate agent is the marketing expert who is there to guide the homeowner through the process and maximize their equity when selling.

    To be honest, it was the 6% discussion that upset me some. I do charge 6% to the sellers. I would like to charge less and even created a process for sellers to pay less, but it didn’t work out for reasons I had not expected. At this point in my 30+ years of real estate brokerage, sellers rarely ask me to reduce the commission amount. If they do, I explain why it helps them and they pay the fee, knowing they will pocket more money in the long run.

  • The big thing this presenter does not grasp is the huge inertia in changing an industry. He makes comparisions to companies (used loosely) like Lyft vs a real taxi company and how much better they are. Lyft and Uber drivers also don’t show up, they are often not in possesion of a commercial license and don’t have commercial insurance endorsed for passenger service. How is that a comparison? There are agents with very little experience that do very few transactions in a year, but that should be something an owner or buyer looks into before signing a contract with them. The same goes for any profession.

    A home may sit on the market for months, but that’s usually an indication that it’s priced too high. A buyer that doesn’t have their funding sorted out is going to miss out on a lot of homes and would do better to have a loan all lined up and just waiting for the address line to be filled in. That won’t mean that they still won’t get bumped aside for a buyer that can pay all cash. A buyer’s agent does get more commission if their client buys a more expensive home, but the same way the example was stated for a listing agent not bothering about another $1,000 increment, the buyer’s agent isn’t going to net too much and may lose the client if they are showing them nothing buy homes out of their price range. Buyer’s agents do that and also send listings to clients that are not appropriate. That’s an agent not doing their job and if you aren’t getting service from somebody you know personally, just think how fun it will be working with a monolithic company that doesn’t care about you as an individual at all.

    There are a couple of Flat-Rate offices in my area and somehow they have managed to stick around, but they aren’t well though of. They don’t pay buyer’s agents the customary 3% so most won’t show those homes to buyers and they do a very minimal job of marketing the home. 4 cell phone photos and it’s put up on the MLS with a generic description. No social media, no customized uploads to Z,T&R. They don’t work with the owners to get the homes prepped, nothing. People are just paying them to get the home on the MLS.

    Anytime something is to be sold that is expensive and has a highly varible price, there is a certain amount of “art” to the sale. Computers really suck at art.

  • @Lee Jinks…Have to agree about the 6% commission. My standard line when confronted with the “reduce your commission” mentality is to say OK, I work for 3% because as you can see (or will see), I am worth it, now how much are you going to pay the Realtor that brings the buyer – and how much will the perceived savings cost you with decreased showings/demand. I also ask them to go to their boss in the morning, tell them how much you really enjoy your job then ask for a 30% pay cut and you will still do your same great work. Begins to put it in perspective. Frankly, I wish they would totally abolish the word “Commission” and call it what it is “the seller’s marketing expense/budget.” Put it in a business perspective as the owners are the CEO with at least one widget to sell to the public. They contract with the Realtor as their Marketing and Consulting Department to generate the interest is selling the widget and completing the sale. Better yet, they are one of the few companies that doesn’t have to pay for the marketing until it actually sells, but that is also an issue as the less marketing outlay up front by the Realtor, the more the Realtor keeps. The less interest/buzz the Realtor creates the lower the actual sales price with the lack of demand – but they still get paid when it sells. Doing the math, a $5000 reduction in price directly impacts the owner, however it only cost the realtor not $150 (the 3%) but about $50 after splitting with their brokerage and paying taxes, SS, and other mandated expenses.

    @ Ken Brown…Good points, but listing history is a hot button for me as it works both ways. A person with fewer listing typically works harder as they don’t have the conflicting demands and can focus their effort. Those who are ‘green newbies’ will typically have a mentor (assistant broker) directing and actively supervising – at least in larger firms, and they typically don’t start in small boutiques anyway. Likewise the ones with the most are basically listing machines, gathering as many listing as they can, throwing them up on the MLS wall to see what sticks, and a offer is a paycheck “great deal, accept it” as they don’t have the time to negotiate a better price. That math noted above works on the positive side as well where each $1000 negotiated would only be $10 in their pocket. Worse, the three top listers in my area (different firms) even as a Realtor with a buyer, I can only communicate with them by E-mail.

    Double dipping is another misrepresentation to the public used as a scare tactic. Technically, it doesn’t exist however one local firm does have a reputation of trash talking you listing as they show it to direct to their listings. That is either short sighted or they are having difficulty selling their listing, but appropriately priced and marketed, they will sell. Mathmatically, it is a wash and, with the repeat possibility, beneficial NOT to double dip. Knowing you listing (House A) will eventually sell for your 3%, if a buyer doesn’t like something about the house, you don’t have to cram them in so you get both sides, they still need a house in that price range – find them House B to collect the other 3% (and if another prospect comes along before House A sells, House C). More important, you have two (or 3) happy clients who make referrals for future business and not someone who felt used as you placed the in House A that they had reservation/compromises concerning, feeling used and they trash talk you costing you future business.

    Me personally? My listing count is low as I balance RE and Photography and will not shortchange any client. I tell them that I will accept no more than 3 listings at any one time for their benefit. While I don’t state it, it really becomes a question of do they quality to be part of those 3 listings. You should see the look on their face when I turn down a listing – which was the last thing they expected. While $250K is the sweetspot for the local market, I have already screened for the $400k+ property to occupy those 3 slots, but I am not going to have someone who presents as a royal PITA micromanaging with ongoing demands that detract from my other clients. Politely refuse to list.

  • It’s amazing how skewed the so called facts are on this. Hard money lenders and rent to own have been around for years and will continue to rip off the consumer. Do a comparison of the price a seller receives from a company that buys their home vs. selling their home using an experienced REALTOR. That fact was ignored. An actual REALTOR has a fiduciary duty to their clients…the company that buys your house does not. In fact, you are completely unrepresented when selling to one of these company. With that fiduciary duty comes responsibility and judgement. So the blanket statements that all REALTOR say you must stage your house and you must use a specific stager is absolutely incorrect and insulting. Are their REALTOR who are not doing their fiduciary duties…maybe, but that is in every career…buyer must beware and be educated and choose a REALTOR who will do their duties well, just like your doctor, your lawyer, your car mechanic and your hair stylist.

  • A little background on the company that is putting out this video. Andreessen Horowitz is a venture capital firm that is well know for their spin ability. This video was not a information video, it was a marketing video. Both FlyHomes and Opendoor are large clients of Andreessen Horowitz.

    The way that the real estate industry was submitted at the beginning was a blatant attempt to outright tarnish your prescription for the remainder of the video. The presented numbers were exaggerated. And then they presented you with a “solution”, the companies they have money in.

    Take everything in this video with a grain of salt.

  • Thanks for posting this Larry. Staying on top of business trends like this is really critical for our profession. Having been involved in marketing technology since 1995, I can tell you that if you want to remain viable in a technology oriented business sector (i.e. real estate marketing), you need to stay up-to-date with the latest trends and technologies. Thanks again for posting this!

  • This video is very interesting food for thought and I find some of these new business models fascinating. However, the fact that this is an Andreessen Horowitz presentation should be added to the original post. You are watching a partner at an extremely influential Silicon Valley VC firm essentially pitch companies that they are invested in.

  • I know of several very wealthy investors who have formed cooperation’s / companies who flip homes. When the market crashed they continued buying homes fixing them up and renting them. Some have a 100 or more rentals that they are now liquidating because the interest rates have gone up. So he is not too far off about a company buying and selling homes. They have a broker who works for them.

  • I stopped watching after 8 minutes. Every other so called statement of fact in this video are incorrect and some seem to be purposely misleading.

  • This sounds a lot like a story I heard on NPR about Zillow buying and selling homes. Quick search came up with “Zillow Offers” – https://www.zillow.com/offers/

    But I agree with Neal that this video is much more marketing than informational, and would definitely be skeptical of his many claims. At the same time, I do think we should all be as well informed as possible for any large shifts that might come into the industry. Economically speaking Uber and Lyft happened in a blink of an eye. And long built relationships with agents could dry up in a hurry if all this marketing goes in-house.

  • I have been selling real estate in a small ski town in Central Oregon for 15 years now. I built my business upon the fact that I take great photos (and now create my own videos). When I started, 99% of the realtors in this area used crappy photos so everything I did differentiated me from the herd. Things have changed somewhat, for sure. I would say that now 50-60% of the realtor in my area hire someone to take photo of their listings. But that leaves a large number who are simply too cheap or arrogant to do so. I have read, with great interest, about Zillow and now other companies that are going to “change the face of real estate sales.” Good luck – is all I have to say to them. I am in the middle of a transaction now where I represent the seller of a 40-acre parcel in a small town near me. The seller has two domestic water wells, an irrigation well holding 1896 senior water rights, and 38 acres of water rights granted in the 1920’s and delivered through a local Irrigation District. Then there is the irrigation equipment to value, farm machinery….the list goes on. And these properties are abundant here. I’d like to see this one put through the company described in the video. Here in the American West there are thousands upon thousands of properties that don’t fit into the “suburban/urban neighborhood mix. No “remote real estate robot” will ever be able to deal with all the issues that can come up when selling these. On the other hand, I deal with residential properties selling for $350K that come with problems all their own. The deals can be in danger of imploding right up until the close of escrow. I’m worth every penny of the “commission” I charge a seller or receive representing a buyer. If someone doesn’t agree with that it’s simply because they are ignorant of what goes into getting a deal from the offer to the close of escrow. Just my 2 cents.

  • Everything said in this video was wrong. I actually typed out a 8,500 word manifest breaking down why each of the points he makes has zero chance of making any real change in how the real estate market operates as a whole. Then I went back through it and realize that nobody would read it as a comment.

    The guy is a essentially a silicon valley groupie who’s entire perception of the world is completely warped by living an working in San Francisco. Those people literally believe that they are leading and the entire world is going to follow their trend. The reality is that they are completely disconnected from how the real estate market outside of their bubble works. The points that he made…they themselves show how disconnected his thinking is from the reality of the situation.

    Five years ago I got into a row in the comments section of some financial publication (Forbes?) with someone else. The guy was like, “Dude…are you CRAZY? Realtors are dinosaurs. Agents charging 6% will all be gone in 18 months. The writing is on the wall!!!!”

    I literally bookmarked that post and set a reminder for me to go back to that article every November and post a nice, snarky little, “Hey…dunno if you’re still getting updates….but Reatlor are still the dominant force and they’re still charging a little less or a little more than 6% on average.” It’s been 5 years…and nothing has changed. And here’s the deal….

    Nothing is GONNA change.

    Not in any of these big ways these “disruptors” are predicting. Let’s bread down some of the reasons why…

    1) Sellers are NOT Cool With “Virtual Agents” – we had a company try that nonsense in our market. No real agent escorting buyers. Agents would sit in an ivory tower and “appear” on a phone app when the buyers showed up at the house….give the buyer the LOCKBOX CODE so they could let themselves in…and “virtually escort” the buyer on the tour of the house. This was supposed to be so cutting edge because the buyers are all wanting everything on-demand and app-driven. Uber for home shopping. Except the sellers killed it. As soon as word got out all the sellers have been telling their agents NO VIRTUAL SHOWINGS. And now that is on every listing’s showing notes. That “disruptive” broker model is now deep sixed. Good riddance if you as me. So that’s never gonna happen in our lifetimes.

    2) Crazy Models – the FlyHomes and the Divvy and all the other “innovative” approaches that the guy outlines in the video? The only way those things work is if sellers are willing to take crazy low-ball offers. They call them “competitive” offers…..but sellers don’t see them as competitive. Zillow “Instant Offers” has run right up onto the rocks with this. Why? Because sellers are not wanting to sell their homes for 70% of fair market value of less. And the ones who ARE willing to do that…they go ahead and pull the trigger becuase Zillow screwed up and “guessed” that the home is worth more than it really is. They think they’re offering $105k on a house that they believe is worth $140k when really, the best buyers in the world is only going to pay $100k. So the people filling out the instant offer forms are mostly pissed that they are getting offensively low offers and thus say “No thank you” and the ones that do say yes….Zillow is overpaying for the homes and is now stuck with inventory they can’t sell. A nice, fat problem that real estate INVESTORS have had to deal with for years. These other programs are different versions of those and here’s the reality….sellers want ALL the money. And more. Talk to any listing agent. The HARDEST part of their job is to be able to TACTFULLY speak to sellers in a magic way that they adjust down their expectations of how much their house is worth. They pretty much ALL think it’s worth 3% to 5% more than what the best buyer will pay. And they try to GET that money. That’s like…90% of all sellers. These people will NEVER entertain low-ball 70% of market value offers. So those companies will never make a serious dent in how the real estate market works.

    3) The ONE Thing – what I’m about to share with you is the ONE thing that will keep real estate in America rolling the way it does now. It’s is the PRIMARY factor in how business is done and once you read it you will understand why no APP…or anything else coming out of Silicon Valley is going to change anything anytime soon. That thing is…. The Psychology of Women.

    Let’s me explain…

    Whether it’s politically correct or not to say, of all the forces operating in the world of buying and selling homes…the WOMAN is far and away the most powerful. Women have an oversized presence in the rubric of when the family unit is going to move, WHERE they’re going to move, the kind of home they’re going to buy, which schools district…the list goes on and on. Sure…men are not absent from the equation and single men buying homes obviously are making the decision without women involved…but they are a minority force. All we need to know in order to verify that this is true is this…

    Man Cave

    There is no “woman cave” in the public consciousness. Everyone understands the concept of the “man cave”. The fact that everyone understands that the man is lucky to get a partitioned off space in the basement and the women gets the rest of the home is all we need to know in order to be able to certify that women are the primary force in the world of home buying and selling.

    Now that we know that…we simply have to look at how women choose to go about buying homes. And they tend to do it by…

    Shopping

    First online….and then in person. Women like to SHOP for things. Men tend to just want to GET things and get it done. Surgical strike. Get in the store, get the item needed, and get the heck OUT as fast as possible. Women SHOP. Everyone has seen the meme about going into Target to get some toilet paper and $200 later they’re walking out with a full cart. I’ve seen that story posted on Facebook multiple times. It’s always posted by women. Never by men. Because women shop…and guess what?

    They want to SHOP for a house.

    They don’t want to GET a house. Single men want to GET a house. Their approach is “How much money do I have in cash and financing? What’s available? Let’s look fast and PICK one so I can get it under contract, get to closing, get moved, and get back to the important stuff in life….like my work…and fishing.

    That is NOT how women buy homes. They shop. And here is the GOLDEN NUGGET…the “takeaway truth” of this whole thing….

    Women Want To Shop for a House….With a FRIEND

    That’s right folks. Ever wonder why it is true that that vast majority of Realtors only close 6 transactions per year? That’s amateur hour, isn’t it? Why are buyers choosing to WORK with these people in the first place? Why isn’t it the case that they all go to the “BIG GUY” in town? The #1 professional? After all…if he (or she) is the one closing all the business…shouldn’t every put their trust in that person and shun the little guy?

    Yes. It is true. And yet buyers don’t go that way. They don’t all flock to the “big” agent in town. Instead a HUGE majority of people just hook up with “Aunt Peggy” or “Uncle Joe” or “Friend Bob” that they know from bagel hour at church.

    Why do people do this again and again and again? Because women want to go shopping with a FRIEND. Not a hard-core, hard closing salesperson.

    You see…most women, when they begin…are not 100% sure if NOW is the right time to move. Maybe it’s not. Maybe the KIND of home they want isn’t really available. Maybe they should hold off. There’s a LOT of uncertainty and that uncertainty makes them want to “dip their toe in the pool” first before jumping in headfirst. No need to get everyone excited and riled up about moving if the “right” place isn’t out there.

    That’s pretty much everyone. And that is why they don’t call Mr. PowerAgent. Because if you call Mr PowerAgent on his 800-number he advertises on the radio, TV, billboards, and everywhere else…you are admitting to yourself that you ARE moving. Nobody calls a bankruptcy attorney if they are not going to file bankruptcy and nobody calls Mr PowerAgent if they are not SURE they are moving.

    So they call Aunt Peggy. Almost everyone does. This is key…don’t lost sight of this. They call Aunt Peggy and go “shopping” for a house.

    And look at that. They FIND one. How amazing. Almost ALL of them “find one”. And then the gears shift. They have to “get serious” real fast or they are going to LOSE OUT and someone ELSE is going to be living in THEIR house.

    Now it’s panic time. They need to get the offer in (hopefully they at least got pre-approved first…but half don’t because the Aunt Peggy’s of the world don’t hard-close REQUIRE it… so they have to get the mortgage process started up too) and once that home is under contract…now they have to sell the CURRENT home.

    Question 1: Which agent is MORE likely to be able to get their home sold FAST and for a HIGHER PRICE? Mr PowerAgent or Aunt Peggy?

    Answer: Mr PowerAgent

    Question 2: Which agent is the client MORE likely to use – Mr PowerAgent or Aunt Peggy?

    Answer: Aunt Peggy

    That is the wrong choice…but they almost ALL make that choice. And why wouldn’t they? What kind of JERK is going to go shopping for a house, get it under contract with Aunt Peggy and then tell her, “Hey, we’re glad you helped us BUY this new house Aunt Peggy…but we’re gonna use Mr PowerAgent on the sell side because…well…he’s far more likley to get us better results and more money in our pocket because of all that he has doing in his operation.”

    Who’d gonna say that? Nobody.

    And THAT RIGHT THERE friends…is the thing that keep the real estate market rolling the way it does. THAT state of affairs is the reason why no “disruption” is on the horizon.

    Women are going to continue to DRIVE the real estate market. Women are going to continue to want to “dip their toe in the pool” when it comes to “shopping” for a house. Their desire to “not get too serious too fast” is going to have them calling Aunt Peggy. Aunt Peggy, wanting one of her 6 commission checks for the year is GOING to find them a house. They are then going to HAVE to get really serious really fast about selling the CURRENT house. Aunt Peggy is going to get the listing-side business because the clients are not jerks. And the process continues on as normal for the rest of the natural lives of everyone reading this.

    When the PSYCHOLOGY of the average American Woman in regards to how she wants to go about buying a home changes….THAT is when we’ll see change in the real estate market. Since that is unlikely to happen in our day and age…the smart money is betting on the real estate marketing staying pretty much the same fore the foreseeable future. No matter what Silicon Valley elites have to say about it.

  • Some of us remember the “lions over the hill” speech by Nat’l Ass’n of Realtors president Bill Chee – 25 years ago – predicting the disruption of the industry.

    https://www.youtube.com/watch?v=CyKFXVQwAPA

    How much has really changed since then?

  • TO Brian Kurtz:

    I haven’t had such a great laugh in a very long time. Think of the money that Alex Rampell and his buddies at Andreesen Horowitz could save if they would quit trying to think they are so damn smart and just asked you about the real estate world. I actually wrote to Mr. Rampell and suggested that if he was going bear hunting he might take a moment to study a few bears and talk to a couple of seasoned hunters. Fact: females are responsible for 80% of the home-buying decisions. This millennial nut-job simply doesn’t have a clue. Two years ago we were all told that buyers would no longer have to leave our office to look at homes. Just put on the GOGGLES and tour homes while you sit in a chair. Didn’t happen. Won’t happen. Even for buyers from out-of-state. Sure, I may do FaceTime with an out-of-state buyer, but eventually they are going to make a lists of homes to see and fly out to spend time with me to see them in person. They want to see the street, the parks, the town – and find out if the home smells like 30 cats have been living there. Prospective buyers will use their phones and iPads to LOOK for homes. But sellers want someone like me to meet with them, make suggestions about staging, be blunt and honest, usher the process through the professional inspection bear traps, and on to a successful closing. This clown in the video starts out by disparaging real estate brokers and taxi drivers. I’ve had an Uber drive not show up. I had a Lyft driver in Virginia show up in a filthy car. This kid is a misguided loon. May he go out of business quickly and completely without hurting too many others financially on the way out. Thanks again, Brian. Well said.

  • I was going to make a comment, but then I read Brian Kurtz’s post. . .no more needs to be said!!!

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