Matthew Ferrara just left an interesting comment about Realtor.com Home Values…

…that reminded me of this video from the previous head of REALTOR.com:

[Ferrara’s comment]

“…Instead of just copying everyone else, maybe REALTOR.COM (and by extension, NAR) could make some decisions based upon market realities. And the reality is that Zillow (and other similar tools) are really inaccurate because the “conditions” on the ground are always so fluid that “estimates” based upon “market data” which is always stale because of “time” are really bad education for consumers. REALTORS should know better. Many consumers buy homes “regardless” of their estimated market comparable – and many sellers are able to sell for higher (or can’t sell nearly the same as a computerized estimate) because of all sorts of NON estimated items – like poorly performing schools, local tax changes, crime, etc – NONE of which can be accurately reflected by a computer. Only by REALTORS who keep up with “the full marketplace” of issues that impact homes.

If I interpret this right, Ferrara thinks that realtor.com should not offer such an AVM product, but should instead focus on helping real estate professionals educate consumers on  the fact that AVMs aren’t worth the digital real estate they’re printed on…

My guess is that Ferrara has his pulse on the finger of most realtors and they’d love to hear this… but at the same time, Zillow has single-handedly changed the public’s expectations.  Consumers now expect free home valuations when they go online and if they don’t get it from a realtor, they’ll go elsewhere…

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Dustin Luther

Current lead up the team managing Brand and Influencer Engagement programs for Dun & Bradstreet. You can find me on Twitter (@tyr) or LinkedIn (DustinLuther)

11 thoughts on “Matthew Ferrara just left an interesting comment about Realtor.com Home Values…”

  1. Great follow up – and I totally agree. Zillow has changed the public’s expectations and caught the real estate industry with its pants down.

    In fact, that’s what most of these “so called” industry changing companies do: They just go around the slow-moving, stay-in-the-same-lane REALTORS and go direct to the public. REALTORS really do a very poor job of even RESEARCHING the public – I ask in EVERY CLASS whether ANY of the attendees has purchased NAR’s Profile of Home Buyers and Sellers – and NONE OF THEM EVEN KNOW IT EXISTS! So how are they going to invent anything – a pricing tool, a marketing tool, a new service – if they don’t know a thing about the consumer themselves.

    For two decades, while internet and technology companies have wreaked havoc on the industry, the COMMON theme amongst REALTORS was “hunker down” and close the shutters! Notice the San Diego MLS this week’s “latest technology” was to create another security barrier against – GASP! – customers getting into the MLS!

    So copying the “estimator tool” is still silly – because it means that REALTORS won’t actually stand up and say that the “zestimates” are wrong; Instead, they’ll say, “Hey! If you want wrong estimates of your house values, we’ll give them to you TOO!”

    And around and around we go… where we stop, nobody knows!

    – MF

  2. I agree with Mr. Ferrara, data is rearward looking and as you would find in any investment prospectus… “past performance is not an indicator of future results”.

    This is the logical argument.
    However “consumers” are rarely rational.

    In fact “irrational” actions have put our housing market into the compromised position it is in today.

    But the argument on this blog post is not about the marketplace, it is about what actions Realtor.com should take in reaction to the competitive pressures to maintain top billing as the search portal of choice for the public.

    Keeping the issues relegated consumer expectations v. reality.

    Since Zillow has irrecoverably changed the consumers expectations on how home values should be delivered… via the internet for free.

    The reality is that we know these estimates are a loose interpretation of value and should really be prefaced with… “the following statement of value is an estimate, for a more accurate measurement of value, please contact your local real estate professional”.

    What are the chances of Zillow doing that? (lol).

    But what should Realtor.com do?

    1. Play into the “gravity” the Zillow exerts and give credence to their model by building their own online value estimation service.

    2. Or fight a very tedious uphill consumer education battle to make the public aware of Realtors value in determining home prices.

    Pandora’s box is open… embrace it.

    Clearly there is no way to erase the consumers mind that Zillow is out there and for all practical purposes works… they get an instant estimate of value as opposed to nothing.

    But to create a similar value estimation service on the Realtor.com for the benefit of the consumer could be a boon to the site and the Realtor brand, especially with the right public awareness campaign (Realtor and general consumer)

    I don’t think it has to be an either/or debate.

    Do both. Build and Educate…

    (I make this statement I assuming Realtor.com’s technology plan and capabilities are equal to or greater than Zillow and other private endeavorers)

    To do nothing, gives us more of the same…

    Eroding confidence in the value of the Realtor, decline in web traffic to Realtor.com, and a ever widening gap through which new technology companies will push through and exacerbate our current dilemma.

    To conclude my thoughts lets look at what history tells us.

    Microsoft v. Google

    We are Microsoft.

    We built an industry, provided the protocols on how things get done, and became a pervasive force in defining an ear of business practices, influencing laws, and shaping the American dream of home ownership for millions of people. We did an awesome job, but the times have changed.

    The future is Google.

    Using the platform Microsoft created (personal computing in people’s homes), Google began leveraging that existing infrastructure to give away services for free (searches, email, google docs, mapping) to create a totally consumer centric business business model and eroded the value of some of Microsoft’s core offerings.

    The facts.

    Microsoft isn’t dying, it’s just trying to figure out how to reevaluate it’s position as once former monopoly for computing…

    Which means we need to “think different”.

    – JZ

  3. I may be way off here but I think that Realtor.com’s attempt to emmulate Zillow’s model is only 1 of several problems at hand.

    I can advertise my listings, branded with my information, pictures, virtual tour, etc., all over the internet; that includes Zillow. I can do that for free.

    Yet, I have to pay hundreds of dollars annually to do the same on Realtor.com (supported by the very membership I belong to).

    If Realtor.com is worried about the content they provide to consumers, in my opinion, they are jumping a bit ahead.

    Give the consumers full and rich listing content from agents. Right now, too many agents opt not to enhance their listings there due to the expense when it is free in so many other locations.

    Realtor.com needs to start here. With the already strong traffic they get, this rich content is a minimum.

    The estimates will continue to be disputed. Not many professionals like them (I hate them) but they likely aren’t going away so there is no use fighting it. (Metallic with Napster comes to mind). Sharpening our skills and educating our clients is part of our responsibility.

  4. Linsay,

    You bring up a bunch of great points… The real catch to your idea of making all “enhanced” listings on realtor.com free (and/or cheaper) is that there is an incredible amount of revenue on the line… And as a publicly traded company, they can’t just drop a huge revenue generator without something else to replace it with.

    How do you think realtor.com should monetize the site?

  5. How are other sites doing it? I would assume that you could create some premium services (additional advertising, higher placement) and advertising from other industry related companies.

    It just seems to me that they can continue to tightly hold on in a short sighted fashion, but they will, and are, loosing their audience to the full and rich content on other sites. Instead, I would think they need to revisit their business model and ask themselves, ‘What is the best way to serve our Realtor members and serve the consumer?’

    Instead of innovative thinking, they are chasing others and forcing their own members into ridiculous fees. As agents refuse to front those costs, the value of the site continues to diminish.

    No quick answers – but for the first time in 7 years, I’m considering not paying the fees upon my renewal.

  6. Some interesting points on this one. I think it is a challenging issue on a few fronts for sure.

    1. I am a big fan of online models for pricing. I think the neat part is they can all take a different approach and come up with different answers. Maybe realtor.com can take more of current inventory into account in their formula since they get the feeds from all the MLS systems. It would help them to differentitate themselves among the others that used closed sales.

    2. Realtor.com pricing model – I have never been a fan of them charging us on all fronts. After all we pay to get the customer, then give them the data, then pay to enhance displaying the data we already paid for??? Always been a tough pill to swallow, but when the customer push for it, we have paid for it.

  7. I think the complaints about paying for enhanced listings indicate that Realtor.com has not done a good job of closing the sale. That is, too many realtors are not yet convinced that in exchange for the extra enhanced lisiting fee, the phones will ring more often and more customers will flow into the realtor’s office.

    Google, on the other hand, has done a better job making a case for their advertising value. Their earnings numbers indicate that customers are willing to pay signficant pay-per-click fees. I assume they are getting the results they wanted.

  8. Dustin,

    R.com is looking at losing their revenue stream. The question revolves around how it will be lost, and when it will be lost.

    Here are the basic options:

    They can stop charging (NAR member) agents to put on their site that which is free everywhere else. This puts them in a big bind with revenue immediately, but if they can build better content for consumers, the traffic will remain or possibly even increase.

    They can continue to charge for features that are free elsewhere, and see an erosion in those willing to pay for the upgrades. As the content quality slides, they will lose traffic… and at the same time lose revenue from agents. The revenue bind won’t be immediate, but will be MUCH harder to recover from.

    Perhaps it is time for the NAR to end the lease of the name. Maybe the time for the big monetization of the site is over for a while. I’m sure that they could develop ad revenue, but I doubt they would be able to get as much immediate revenue as they currently get from subscription.

    But, R.com is kind of symptomatic of the NAR in general. The world around them is changing, and they don’t want to see it until they can’t look away any more. And instead of trying to get in front of the changes, they are just trying to not be too far behind. That means they will always lag.

  9. Zillow has changed the landscape. In fact I think it adds a level of conversation to the value of the home. There are still far too many variables to take into consideration to create an exact price but these AVM’s do provide the conversation that future sellers, current sellers, and home owners want and that is, they want to know the value of their asset.

    Matthew makes a great point in that it is about education. My brother(James) and I couldn’t agree more that it is the level of education for real estate professionals that must change with ever increasing speed.

    Should realtor.com create a new AVM? I think they are a bit late to the party and not sure why they shouldn’t focus money elsewhere for the agents they represent (I am a member of NAR).

    Education and training will win but let’s see what happens.

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