Open Letter to Real Estate Consumers by a REALTOR®

Open Letter to Real Estate Consumers by a REALTOR®

Dear Real Estate Consumer,

Whether you own a home, rent a home or want to own or rent, most people at some point have or will be, a real estate consumer. I would venture to guess that by the age of 30 more than 95% of American’s will fall into these categories. This letter is to you all, not all of you are those that need to read this but you will probably know someone who should. Please share this.

I am a REALTOR® and a Real Estate professional. I help people buy or sell houses, sometimes I help them with rentals or leasing, but my focus is on helping people. I offer a service, expertise, passion and commitment – my goal is to help people navigate the waters of the largest financial decision that most people make in their lives.

I care, we care. I chose real estate because I have loved what it represents since I was a child, I remember peering over the wall of my parent’s pool cabana and watching an open house at my childhood home. It was fascinating, I wanted to be inside and to watch what happened, how people reacted, what they did and looked at, I wanted to get inside their heads to understand the thought process, how they made a decision.

We are REALTORS®, we are professionals.
We are REALTORS®, we are professionals. We have invested time and money to become licensed real estate salespeople and sometimes brokers. We have rules and regulations we must follow in how we work, behave and disclose. We have federal guidelines to observe and respect, should we fail heavy penalties could be levied against our Brokers and ourselves.

We are primarily independent contractors, we pay our own social security (double what you would see deducted from a regular paycheck), we pay our monthly fees (including that website you are using to look at houses), we pay annual fees to be members of the National Association of REALTORS®, we pay for Errors & Omissions Insurance, we work for Brokers, in most States we are also paid by the Broker, and we pay a lot more, in many ways.

We answer our calls at all hours of the day or night. We are frequently greeted with contempt and a tone of distrust from some consumers who call our cell phones or offices. We are the “lowest of the low” in the minds of some, and in the manner in which we are treated. We work every day to fight the public opinion that we are “not necessary” or “anyone can do it, why should I pay a commission when all you do is list my house and nothing more” are the type of misconceptions we encounter on a daily basis.

We don’t get a paycheck, no one pays our expenses, we get no payment until after a closing, and then the time varies depending on how the broker pays an agent. When we work with a client we commit to them, to not show another person a house they might be interested in, to put their needs first, to act as their Agent and at their direction and consent. When we make a commitment to work with you we are choosing you over countless other clients in a market area. It is not ethical to create a competitive situation for our own clients.

There are days when we may forget that our “jargon” isn’t your “jargon” and that plain English and explanations might be necessary, but we all have our expertise in our professional fields. When you don’t tell us “I don’t understand” but instead stop communicating or walk away, we are left feeling rejected, we worked so hard for you and we will never get that time or money back, or more importantly enjoy seeing your excitement when you get the keys to your American Dream.

The Value of a REALTOR®
Our industry has failed to make the value of our industry clear, it has become convoluted in the mindless media message of “real estate sales are sales” at best it is a misnomer. We don’t sell real estate, we consult and facilitate the purchase of real property and the improvements (the house and structure) on that property. We help facilitate the American dream of home ownership.

It is not always an enjoyable experience, it is fraught with drama, nail biting cliff hangers, and tremendous amounts of nervous anticipation. We know this, but sometimes we might forget to tell you this. We are not only your REALTOR® but we are your therapist, talking you off the cliff of “buyers remorse” because we saw the excitement in your eyes when you first stepped into the place you want to be your new home. We are market experts and can make that dream come true.

It is not just about completing some paperwork and calling it a day. Our job as a REALTOR® is to make the process SEEM easy, effortless and as carefree as possible. If you think it is effortless to buy real estate then we have succeeded, but that success brings with it a price – the blatant and rampant disrespect for the professional qualifications and experience that goes with the name REALTOR®.

This is our fault, to some degree. We spend so much time fighting to prove our value, that the message of what that value is becomes lost. We don’t teach you, the consumer, enough about how the industry works. Who likes to discuss money? You see the big picture and think we are “overcompensated” and a bunch of “Rich REALTORS®”. It might be helpful for us to open the books, to share the secret doctrine of the industry. A REALTOR® could possibly be the smallest cog in the wheel, but the most important, it is our efforts that bring the business to the Broker, it is our efforts and opportunities that make the transaction happen for your American dream.

Our value as a REALTOR® is many fold, but simply put – it is making the largest purchase of your life be the smartest purchase of your life. Helping you navigate the process from weighing the choices, to writing the contract, to protecting your interests and making sure the contract is not breached. Through the inspections, negotiations, and then the final walk-through, to the closing table, and beyond a REALTOR® is there for you, to be your advocate and your expert, without compromising our obligations to protect your interest, confidence and our obligation to be your Agent – your eyes and ears in the process. We are REALTORS® and real estate professionals, all of us.

I am a real estate professional but most importantly I am a REALTOR® meaning I took an oath to go above and beyond the rules of most states that govern real estate sales, I follow a higher standard with the REALTOR® Code of Ethics that is over 100 years old. I have spent 15 years helping people buy/sell/lease real estate, I have spent countless hours and thousands of gallons of gas driving around to show people houses who then decide to call someone else to buy a house. It is time to realize what a REALTOR® offers and the valuable partnership that exists between the consumer and their REALTOR®.

Not every REALTOR® will be the right fit for a consumer, we all have to recognize this, and consumers need to freely communicate this. It is a partnership of the most important fiduciary kind, a symbiotic relationship that makes the American dream come true. We are Professionals, we are experts, we want to help, we are consumer advocates, we are passionate about truth and justice, we are REALTORS® and we want to help you.

Thank you for your trust, your time and the opportunity to serve your needs. We are grateful to have the opportunity to prove our value to you, and if you don’t see it – if it looks effortless, then we did our job properly – the job of a REALTOR®.

Humanize to Connect in Real Estate

Humanize to Connect in Real Estate

Real estate agents are quick to adopt the latest social networking platforms, and almost as quick to abandon the same platforms. The advantage for the real estate agent who “gets” social media marketing – a lock on lead generation that costs nothing more than just being human and connecting with people. You need to humanize to connect with consumers on social media.

Humanize to connectReal estate agents are some of the earliest adopters of many of the most successful social networking platforms, but what differentiates those that “make it” with social media and those that do not? The answer is simple: Persevering at being human, flaws and all.

People want to connect with people they can relate to, I have preached this for years and will preach that until the end of my time. Social media is about building community, one human being at a time. Common interests are what unite us with others, and what builds a community. It is no different on social media, so why do so many real estate professionals treat it differently? The silver bullet myth.

Everyone wants a silver bullet, one that will solve all their problems and bring them to the pinnacle of their business, but there really is no such thing. You might subscribe to websites, worship at the altars of so called “social media guru’s” or even buy into the latest coaching or training product to cross your desk, but what substantiation do you have on the success of any of these? Usually that answer is – you never asked, you rely on word of mouth marketing (how ironic, since that is what social media is also about).

The key to build a successful presence on any social media platform is to be real, be authentic, be yourself. No one is perfect, I have gained more followers by sharing my failures, missteps, and foibles than in any other way. People enjoy knowing that they are not alone in the glory of the imperfections of day to day life.
Stop fretting about what you should share, and start sharing those moments when you have to laugh at yourself, or else you might cry.

Be real, and be connected.

Real Estate and AVMs: The Deviation from Reality

Real Estate and AVMs: The Deviation from Reality

If you have been a REALTOR for more than a week I am sure you have had to overcome the “AVM Objection” or as some call it the “Zestimate Objection” from a client or consumer. Whether Buyer or Seller, it’s a fact of real estate today – the consumers trust the Zestimate far more than we trust a real estate agent. The best way to overcome the danger of the Zestimate mystique is to better understand what an AVM is and why the RVM is your best tool to help you demonstrate why an AVM isn’t the be-all-end-all of real property valuation.

I am going to attempt to keep this simple, so it’s as easy as possible for us all to embrace and master our nemesis – any AVM really, but mostly the AVM’s presented on consumer facing websites which then in turn sell advertising.  I will try to explain some of the methodology behind the process, and also the “median error” or the “acceptable” margin of error that’s in the “small print” most people don’t read.

AVM or Zestimate?
The Zestimate is a form of an AVM, so to understand it lets first look at what an AVM is. AVM stands for Automated Valuation Model. It is a computer software program that combines data which is publically available such as assessed value for taxes, public records of property transfers or sales. The program calculates a value for a property based on the data collected.

The use of AVMs began as a business tool to automate the process of valuing a real estate portfolio. Governmental organizations, high-volume mortgage lenders and Freddie Mac were some of the first to implement use of AVMs. This led to the consumer facing models of the AVM when media companies (such as Zillow) saw the opportunity to monetize the data, by presenting an AVM as a “fact” on consumer facing websites, intrigued consumers were more likely to take the “bait” and request more information, leading to the pay-per-lead model or advertising models that we are familiar with today.

The high consumer demand that began in about 2003 to know what the “true value” of real property was led to the growth and reliance upon these consumer facing AVMs. The problem with these models is that they don’t take into account the “local” nature of real estate values or the actual condition of a property, it would not be efficient to customize the AVM for each market, so a general model – frequently based on broad top level categories like zip codes – is used with a much higher “acceptable” (to the website owner) margin of error.

The problem with the use of public data is that it has two critical data issues:

  • Timeliness: There may be a lengthy delay in public reporting of property sales and transfers.
  • Availability: If there is a lot of data available the AVM can have a better success rate, whereas in an area with few sales or transfer, it can be incredibly inaccurate. In some non-disclosure states it is even more difficult to get an acceptable accuracy score.

Proving the True Value of Real Property:
AVM websites know their accuracy rate is low.  As an example, Zillow rates their accuracy on a 1-4 scale. The scale is tied to the Median Error for a specific geographical area. The AVM is run whether or not there is enough data to produce a reliable result. The Zillow AVM assumes average condition for all properties, to normalize the results. It is unable to take into consideration improvements, or deficiencies in a specific property.

Definition-MedianAs of May 19, 2015 Zillow lists that their current Media Error is 8% but then further down the page they state it is 6.9% – to read the entire explanation you can go directly to that data on Zillow.com or I will try to briefly explain what it means. If you remember “Mean, Median and Mode” from high school math, then you will understand what Median means.

Median in mathematical terms is the middle number within a particular set of numbers, this means that there are an equal amount of results before and after the median result. Without stepping into the mathematical argument of whether the median or mean is the “better” (depending on purpose) number typically when a Mean (average of the data) is calculated the Median (middle number of all available data) will be a “better” result for the desired purpose. So if you wanted to spin information to appear more accurate you might not want to go with an average, or the Mean.

Zillow-8percent-05192015

Click to view full size

Median Error Points Based on the information Zillow Provides on their Website:

  • Whether the correct number is 8% or 6.9% that means that 50% of Zestimates on properties are within 8% or 6.9% of the final selling price of the property, and the other 50% of the Zestimates are further off (above) the indicated percentage of 8% or 6.9%.
  • Zestimate Within 5% of Final Sales Price: Zillow states that rate is currently 38.4% (61.6% therefore are 6% or more off final sales price)
  • Zestimate within 10% of Final Sales Price: Zillow states that rate is currently 63.6% (36.4% therefore are 11% or more off final sales price)
  • Zestimate within 20% of Final Sales Price: Zillow state that rate is currently 83.1% (16.9% therefore are 21% or more off final sales price)

What does that mean? That means that they have a REALLY HUGE acceptable margin for error, in my opinion one that borders on inane and unacceptably inaccurate. Are consumers reading this information before they start waving the Zestimate flag? Is Zillow actively promoting their acceptable Media Error rate? Of course not. A side note, Zillow lists that they have 110 Million properties in the system, that statistics was dated in March of 2013.

How-Zestimate-Calculated-051915 (Note: I emailed Zillow CEO Spencer Rascoff on 5/19 to ask for an updated number as of May 2015, a PR representative from Zillow replied later that day inquiring what my deadline was and was researching and would get me results the next day. I did tell her I did not have a deadline but as of 19:15 EDT 5/21 I have heard nothing further, I will update with a footnote when the information is received)

The National Association of REALTORS to the Rescue!
I know I am not the only one who has had a hard time demonstrating why the AVM is not the definitive answer, even Zillow recommends that consumers consult a real estate professional for more detailed and accurate pricing and information, but people don’t read these days. So how can we best overcome the Zestimate objection with a more accurate AVM model and our area expertise? Quite simply with the RVM and RPR.

A Little History: The Birth of RPR and the RVM
In 2012 RPR became a dues-funded member benefit for all REALTORS. The development of the RVM was focused on creating a modern AVM model that could help REALTORS accurately identify, visualize and convey accurate and current market information and trends to use in their business. By incorporating the MLS data – which includes historic records, as well as the most current information the RVM has proven to be the most accurate AVM available.

As of today, RPR is showing that it has over 129 Million parcels in the data, 1.8 Million Active Listings and 222,000 distressed properties, all ONLY available to REALTOR Members.

The RVM overcomes the two critical data issues that AVMs have:

  • Timeliness and Availability: The use of the real-time MLS data via strategic partnerships with MLSs ensures accuracy that has never before been available to an AVM model.
  • Accuracy: With the RPR provided tools, REALTORS can refine an RVM to properly and accurately reflect the value of a property. By being able to make adjustments for property condition, market condition and improvements, you are then able to portray the true story of a property’s value.

RPR-129-051920
By using the RVM as a starting point, we are able to refine the value – make adjustments and present a powerful report – choosing from a few options. There are Sellers Reports (similar to a traditional CMA), Buyers Reports (which include Neighborhood data which is derived from sources such as The United States Census data showing a variety of demographics that are usually of high demand to your clients).

So the next time someone tells you what their Zestimate is, be sure to know what the Median Error is for your area, and perhaps even print a copy of that data onto a PDF and keep it on your phone to show the consumer. With the RPR Mobile application you can pull up any property and if it has an RVM you can refine it and create a CMA as well as email it to your client all while you are in the subject property.

The value of data is in the accuracy of the data, but the marketing can trump true value and lead to the “Rule of Perception” overcoming truth and creating trust. It’s a danger of the digital age. Now, hopefully, you are better equipped to handle the conversation.

The Zestimate is a registered Trademark of Zillow Group.
Source materials include The National Association of REALTORS Realtors Property Resource materials;  Zillow Group.