A bonus Sweat the Details podcast!
We just had our annual Nest summit, where we brought brokers and agents from our 14 offices to Charlottesville, VA. We were going to send this out to just our 300 or so agents, but thought you might like it too.
In this episode, Jonathan, Keith and Jim talked about five big topics:
- Zillow’s “moon mission,” iBuyers (Opendoor, Knock, OfferPad, Redfin, Zillow Offers),
- the end-to-end real estate transaction,
- Fair Housing in light of the Newsday investigation,
- the new Clear Cooperation MLS 8.0 policy,
- smart phones and technology…and a few tangential topics woven in.
You can listen to the podcast here, and subscribe to the podcast here.
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Transcription Follows
Jonathan: With our Sweat the Details podcast, we sometimes talk about what’s happening within Nest, sometimes interview folks in other industries. We’ve interviewed, gosh, folks that run breweries, independent bookstores.
Jim: We just put one out with Greg Fischer from West Main, he’s a broker, and he’s in Denver, Colorado, the CTO there, did charity …
Jonathan: A lot of different industries that we just talk about, really it’s the … the concept is what details do you focus on in your business to help your business grow, and try to relate it in many cases back to real estate. Have we already started one with Popeye’s Fried Chicken?
Jim: Popeye’s was two weeks ago?
Jonathan: Yeah, that’s a good one. You should listen to that one.
Jim: Greg was yesterday, guest suggestions are welcomed. We always are looking for guests because apparently booking guests is one of the more challenging things that we’ve done in the podcast.
Jonathan: Yeah, it’s hard. All right. What we’re going to talk about today, we’ve got five things, great innovative topic here, but five things that we want to talk about that we believe is relevant to everybody in this room, and relevant in some cases of just like, you need to be aware of it. In other cases, you get you’re thinking about what’s happening in the world. But a lot of this is really, we’ve curated based on conversations we’ve had, industry trends, conferences we’ve been to. I was just talking to a couple of folks earlier, and what we’re trying to do with these couple of days is curate as much information from the multiple conversations and conferences that we go to across the country and really condense that information into a day, day and a half here at the summit, so you don’t have to be traveling to conferences and spending a ton of time reading online and listening to a lot of podcasts. We still recommend that, but we’re trying to condense as much of that here as possible.
Jonathan:
So five topics. Well, we’ll get started, and really the format for this is we’ll do a real quick, introduce the topic, maybe give a little bit of a presentation, and then we’re just going to have a quick conversation about what our thoughts are on it and how it affects us as Nest, and us as realtors. First topic I want to talk about is this concept of the end to end transaction. And real quickly, what is the end to end transaction? The end to end transaction is the … I should say attempt right now, attempt for certain brokerages, or real estate transaction companies, or real estate companies to really grasp the transaction from start to finish, and own every step of that transaction. Think about jumping on an airplane, the airplane takes you where they’re going, right? You get on the airplane, and the pilot flies, and they take you where you’re going, and you really don’t have too much opportunity to do much once you’re in that plane. What’s the problem with this, and we’re going to get into this in a little bit. What’s the problem that we’re dealing with in the industry? One is, the services that we’re offering that are basic are now becoming more and more expected.
Jonathan:
Consumers view our service as very transactional and specific. So for realtors, for us to get into this entire life cycle of a transaction, I’m going to show you some bullets in a second about what exactly that is. We’ve, as an industry, have pigeonholed ourselves and that people see us as playing one specific role in the transaction, and that is helping them buy or sell a house. Other than that, we’re there for referrals, and we can recommend different people and recommend different companies, but people see us as a very specific segment of this transaction. The issue is that as we’re dealing with, and we haven’t talked about this much this year, but our agent commissions continue to shrink a little bit, not as much as maybe in years past, but continue to be squeezed a little bit. Brokerage margins continue to get squeezed, so what’s happening out there in the industry is that agents, brokerages, different companies that are getting into brokerages are saying, all right, well, I can only make so much money off of the transaction, what can I do? Can I make money off of mortgage and legion, and all these other things, which is this concept of the end to end transaction of a brokerage or a company owning every single aspect of that transaction. As of right now, we just own one part of it.
Jonathan:
So, as I talked about, agents are making recommendations, but these recommendation are, fragmented. Once we refer somebody to a lender or to a mortgage company, they’re out of our control really, we don’t have control over the process. As we talked about yesterday, most agents don’t provide real value after the transaction. So, what’s this bigger opportunity that some companies are looking at? They’re trying to own every single piece of the … I shouldn’t say transaction of the process, so brokerage, insurance, mortgage title, you can read all these, everything all the way down to telecom and cable and home security. There are real estate brokerages in this country that are right now looking at, how can we make money off of home security and contractors and additional home services? One of the reasons why this is appealing is because as I mentioned, commissions and margins are shrinking, but also, the average home buyer in the US spends $10,000 on additional services related to their home within 60 days of buying a home, and that’s for the average price. You can imagine somebody buying in the upper end price points, could spend three, four X that.
Jonathan:
Companies are looking at this and saying, how can we basically stick our hands in and get a piece of that? This quote right here, and we’ll talk about Zillow a little bit today. This quote right here stands out to me, and then we’ll get into a conversation here. Rich Barton, who’s the new CEO of Zillow, made this comment recently; we are on our way with our own exciting little moon mission to transform, streamline and integrate the shelter transaction. As we talked about this at our Lead Broker Summit the other day, two phrases in here stand out to me. One, something I’ve never heard before is shelter transaction. So, they’re looking at this end to end transaction and saying, we want to be an absolutely integral part of every single part of this process, and I’ll show you a slide in a second, giving you some examples. The other thing about this, which scares us in a good way and we should all be aware of-
Jim:
It challenges us.
Jonathan:
Challenges us, that’s a better term, this phrase moon mission. Originally, you could look at that and say yeah, big, well. But think about this, if you have a moon mission, you don’t take three dudes and stick them in a room and say, “Hey, can you solve this problem?” Moon mission is a core company focus, and clearly, they want to transform, streamline and integrate the shelter transaction. They have plans to … within reason … I mean, I still think they believe in realtors and they’re still utilizing realtors, but this whole concept of a moon mission, and they’re really focused on really taking over this whole process, and making money along the way.
Keith:
Yeah. Also, I want to point out that the shelter transaction number one, I think it’s funny that Rich Barton capitalizes his own statement. I think we may find that he’s actually trademarked this term for Zillow use for the future. But when you look at Zillow, their customer base is not just a home buyer, their customer base are realtors, their customer base are lenders, their customer base are everybody that currently exists in the Houz market frankly. It’s also buyers and it’s tenants and landlords. And so, this idea of shelter, they’re looking to solve the problem, not just for your clients, but for the new college graduate who is looking for a rental apartment. They’re looking to become a part of a transaction and a relationship long before they get into a home buying process. I think the best way to think of the core model of where we’re trying to help with the end to end is that is the wedding coordinator.
Keith:
The wedding coordinator controls the venue, the caterer, the bridal gown company in some cases, they put everything together, and I think we’ve always wanted to be that wedding coordinator, but understand that now Zillow is jump-starting you, and on their first date they’re getting involved with Zillow. And it’s no longer waiting for the home buying process for them to start looking at this shelter transaction, it goes way, way back.
Jim:
No, I think one the thing Zillow is trying to do as well, and they’ve done a really good job is, they are becoming the voice of real estate in many ways. I think that’s something we need to be mindful of is, their governmental exploits are significant and they’re outpacing NAR and a lot of ways, so being very aware of how they … I mean, the research that they put out is beautiful, and it’s mostly accurate, and it’s something that I think we need to be very cognitive of, is they are the ones that consumers are looking to as the experts in this space. It’s not something to be afraid of, is something to be aware of and to leverage it as best you can.
Jonathan:
That’s right. Their content, they’re putting out, we’ve used the term, we’ve used it before, Clara used it yesterday. This report they put out every year, it comes out with some amazing-
Jim:
That’s fantastic.
Jonathan:
What Zillow are doing right now, this is the process where they are right now. They’ve got Dotloop, which is transaction management. So, as soon as the transaction started, and somebody puts it in to Dotloop, they have all the information. They have the home, the home price, the buyer names, the seller names, they’ve got all that information. They’ve got it, and they can do a lot with that. They’re also doing Zillow Offers. We’re going to talk about Zillow Offers here in a few minutes, we talk about the iBuying, I wouldn’t call it a phenomenon anymore, but the iBuying process. Zillow Offers is what I alluded to a little earlier in my talk is that they are going in and offering to buy houses, sight unseen in some cases and making offers online to folks to buy their houses, and then they take them, and then they pseudo flip them, but there’s some additional services that they’re offering, and then we’ll talk about from an iBuyer standpoint.
Jonathan:
Now, they have Zillow Closing Services, and Jim, how many States are they licensed in?
Jim:
Three or four States right now.
Jonathan:
Three or four States right now. Right now, Zillow Closing Services only applies if you’re selling your home through Zillow Offers, or buying a home. I guess you could also buy it from Zillow. So right now, Zillow Closing Services, they’re only working with Zillow Offers transactions, and they also have Zillow Home Loans. And so, they’re trying to get into arguably the most profitable part of the real estate process, is the home loan or home loans, and so they’re getting into that. The other part that I have here at the bottom, I couldn’t find a logo for it, but they have a form about it, Zillow AI, which is predicting when your clients are going to buy and sell houses. So, they’re trying to predict when they’re buying sell houses, then when they do buy and sell, they have all the information, the transaction management and they’re going to try to take them through this entire process.
Jonathan:
One last slide here real quickly, Zillow is not the only one that’s trying to do, slide into every part of the transaction. This is an email I got last week from Amazon, and a lot of you may have gotten it too, Amazon Home Services. They were offering holiday light hanging, they offer carpet cleaning, they offer all these different services. So, we talk about what the value of a realtor is. Clara mentioned yesterday, and I’m going to bring her up a couple of times because I just thought she just did such a great job, but she had clients call her because … there was some …
Jim:
Peacock.
Jonathan:
Peacock, right. An animal, a peacock, and so they called her. This is a type of situation where you want your clients calling you for, who do I call for a carpet cleaner?. I know the big challenge we have in Charlottesville is we need folks that do carpet stretching, and so that those emails fly around a lot. So, all these services that Amazon’s getting, they’re trying to weasel their way into your after the transaction trust value proposition. And so, it’s unbelievably important for us to realize that in this case, we’re potentially competing with Amazon and they very well could be getting into this-
Jim:
I mean, I get calls from Amazon multiple times a week. They go to spam, but asking me to join their Amazon network to be one of their partners. I’m still convinced that eventually Amazon’s going to buy Zillow.
Jonathan:
Who knows? Scary. Thoughts on that?
Keith:
Well, I mean, I think again, anyone who thinks that Amazon’s not going to be in our industry where we are is missing where Jeff Bezos goes. He sees a much bigger picture of how to include, and to enclose the entire consumer experience, and if he can do that through partnering with local boots on the ground, then he’ll do that. If it requires a partnership with Realogy where he’s making referrals out to Realogy, he’s doing that. I mean, this is just the start of where that goes, but it does speak to the concierge services as well, and things that your sellers are looking for, and ways to increase the value before the transaction as well.
Jonathan:
Before the transaction and after, I mean, we’ll continue to drill his home, and hopefully that’s one of the key points that everybody takes out of here. I know just looking around the room, a lot of you do a phenomenal job of it, but just figuring out what you can continue to do to just be that trusted advisor during and after the active transaction process. And so, you want to talk about these concierge services, Jim?
Jim:
Yeah. Most of us will go into our sellers houses a couple, two, three, four weeks and months and years even, and help them determine what those projects are that they need to accomplish before we take the pictures to list the house. Curbio and Redfin Concierge, and Compass, they are now in the process of systematizing this, where they will go in, they will provide the bridge loan for that $50,000 of renovations, and then get paid back when you successfully close. If you look at some of Curbio studies, the case studies on their site, I mean, they’re going in and they’re spending 150 grand, and then the sellers are making back 250 when they sell. I mean, it’s something that we need to be very mindful of as well, is that eventually these guys are going to come into each of our markets, if they’re not already, and I think there might be opportunity for us to be more aware of what they’re doing. Because I think Curbio, Redfin Concierge, they’re going to impact our markets, and as a service that they offer that we’re competing with.
Jim:
If you go into a listing presentation and say, “You need to do these things,” and the seller says, “Well, how am I going to fund this?” It’s a different conversation.
Jonathan:
It could also be that Curbio could be an asset too.
Jim:
Absolutely.
Jonathan:
I think if we fast forward to the days of us walking into a listing that’s like, ah, this is a rental property, it’s in pretty good shape, let’s just put a price on it and go. Those days could be gone, that we need to really look at it and say, “All right, I got to go through here and bring my contractors through, and we’re going to definitely repaint.” I know a lot of us are doing this right now, but the more and more that we deal with this HGTV effect and Zillow Offers and Offer Pat, and all these other companies that are going in and buying houses and fixing them up and refreshing them. People are going to go into a house that’s been a rental property for the past three years and see a bunch of dated equipment, and carpet that needs to be stretched, and walls need to be painted, and they are going to either low ball the you-know-what out of it, or they’re just going to turn around and walk away.
Jonathan:
So, talk about expectation, you walk into an Apple store, what do you expect? And then you walk into a store with nothing on the shelves, and we just turn around and walk out of the door with that type of store.
Keith:
Yeah, and I think the other pieces that as we work with buyers, we know that there are buyers who are looking for opportunities to do flips and to do remodels. I think they’re starting to seek out sellers directly, people with rental properties will regularly get calls about, do you want to sell a property that hasn’t been maintained fully? They’re seeking it out before it’s on the market, whereas the general buyer is now looking for properties that they can move into, and not feel like they need additional cash. They’re going in cash trap, they’re putting everything they can into the down payment, and into closing costs, and they’re not that interested in dropping another 75,000 to do a kitchen and two bathrooms, and paint the entire house. And so, this is really just setting yourself up where someone can come in and be able to get a mortgage on a property that’s turnkey, instead of dated and needing the work for the first six months they’re living in that house.
Jim:
Which is going to lead to higher sales prices and faster sales prices, reduces that friction as we’ve been talking about.
Jonathan:
Anything else on this we didn’t talk about or move on?
Jim:
Think we move on.
Jonathan:
Move on. Number two, big topic right here, which is affecting, I think really affecting three of our markets right now. This iBuying, and we’ve talked about it.
Jim:
How many of you all have had firsthand experience with iBuyers?
Jonathan:
So Charlotte, Triangle and Atlanta are really the spots where this is affected right now. It’s still a new concept, and I alluded to it a little earlier with these new models that are coming in and essentially what’s the iBuyer process? The iBuyer process is these companies, and we’ll show you in a second and give you some specifics on what’s happening, really interesting stats. But they’ll come in, and they’ll say, “Hey, look, your house is worth X amount, I’ll pay you a little less than X amount, but you get to pick the closing date, and … Actually, I have a slide right here.
Jonathan:
The direct buyer, which is the iBuyer, they’ll come in and offer you essentially a cash offer, how many days to close, the seller gets to choose, typically anywhere from five to 90 day close. So you talk about certainty, this is certainty, what they’re offering is certainty. How many days to prep and stage? None, because they’re buying it as is, how many showings? None, you don’t have to deal with showings, and the fee right now is typically 6 to 13% that they’re charging. Traditional sale, there’s a lot of question marks there because in some cases we don’t know, and in some cases we do now, but days to close or how many days to close, that’s not days, that’s months, but two to three months. Days to prep and stage, about one to two weeks right now typically, and I’m making some just general assumptions. How many showings? I mean, if we only knew how many showings it would take for just every house, and our fee, typically for Nest here is in the five to 6% range.
Jonathan:
This whole concept of certainty, which they’re offering is appealing to some people.
Keith:
Yeah, and I’ll interrupt also. I spoke to a friend of mine who’s from college who had a coworker who did sell their house at Zillow. He was dumbfounded, he took 20,000 less than I would have thought the house was worth, and he paid a 10% fee at closing to get rid of it. But the reality is, we go in and we fight for our commission rate at six, or really at three, the reality is Zillow is going in and saying, I’ll do it at 13%, and people are willing to do it because it means, I know that I’m going to sell my house for this amount, there’s not a question of what do I need to go through to get this done. I’ve got a job offer in California, I’m ready to move, let’s just get on with the next stage. And so, there’s definitely a cost involved for the seller in this, but it definitely has takers.
Keith:
Is this right for everybody? Absolutely not. But there are certainly going to be more and more sellers who are there and that’s going to put Zillow into a position, and these other owners into a position to collect seller leads to be able to sell, even if they don’t-
Jim:
I mean, this is going to this is going to affect every aspect of what we do. I mean, I read a story this morning on Deloitte, about how they project that by 2021, in the markets where Zillow Offers are, or iBuyers are, they’re going to be 10% of those respective markets. So, it’s not for everybody, but I think it’s going to be a significant piece of what we’re faced with.
Jonathan:
And right now, just a term that’s used in the industry with iBuyers is this concept of a buy box. A buy box is essentially the type of house that these iBuyers are looking for, and it’s price, location, age, size, they’re trying to figure out this magic algorithm on their part. They’re trying to figure out this magic algorithm of what properties they can buy, in what neighborhoods. And really, it’s like cookie cutter houses right now, so this is really big. Phoenix is the hotbed of the US right now, and I don’t have the stat on the top of my head right now, but I think what I saw last year is the sub 250 market in Phoenix, that’s 7% of all sales in the sub 250 market was iBuyers. So, pretty big number for just a brand new concept.
Jim:
And it’s only about 18 months that they’ve been there.
Jonathan:
Yeah, it’s not a long time.
Keith:
I was going to say, the other piece of this is you think about where Zillow is or the other iBuyer groups, all of us have struggled to find leads for sellers. We know how to find the buyers, the buyers are found through open houses, they’re found through advertising, and all of our IDX’s that we put on our websites. That’s how we capture the buyers, so people shopping for homes. But the sellers always been elusive, but with Zillow is now done, is they’ve set up a thing where you can call in, someone can give you a price on the house. Well guess what? As soon as they give you a price on the house, even though only 5% of those individuals are ever going to participate in an iBuyer program, they now have those 20 leads for the one house they bought, they’ve got 19 additional clients who now need sellers agents to participate in a transaction, and they now are in a position to sell that lead out to you.
Keith:
Additionally, what they’ve done is they’ve said, we’re going to continue to keep our best agents, and we’re going to pick the listing agents when they do sell, when Zillow buys house, and then subsequently sells it, they are listing with a full real estate firm, and they are asking for services of realtors, which means not only do they have the 19 seller leads to sell, they also have a house to sell, and they are the perfect company to be able to identify who the best realtors are in the market, for days on market, for price to sell, and they’re able to select those and go after them as premier agents, and to be able to collect even more fees from them. So, it is this amazing circle of-
Jim:
When you say it like that, it sounds scary.
Keith:
It’s terrifying.
Jonathan:
Well, the other part, and I’ll just … this flows right into this next slide. The other term that they use is called a synchronous seller. A synchronous seller is essentially an iBuyer seller who also wants to buy a house. So what they’re doing is they’re providing bridge loans and making money off of that, or referrals, they’re sending the referral from a buyer to someone. They found that 64% of sellers are also buying in that same marketplace-
Jim:
I mean, that part makes the iBuyer program fairly appealing, because I think if you have a buyer who is able to come to you and make an offer on a property that is not contingent because they’ve sold it to Zillow or Opendoor or Knock or whomever, I mean, that’s a good buyer to have. I think there are multiple sides to all of these conversations, Perch, and there’s probably three more that just popped up this morning.
Jonathan:
Ribbon, there’s a few others that are out there.
Jim:
I mean, I think it’s, again, it doesn’t matter whether it’s scary or anything, it’s a thing we’re going to have to deal with in all of our markets eventually. So, I think being aware and mindful and informed as to what we’re dealing with, I think it’s a good thing.
Jonathan:
Well, that’s a good point right there, because we can look at this and be scared, and be shivering our boots, we also can look at this as an asset for us. If you’ve got a property that you’ve got buyers or that you’ve got sellers and they want to buy a house, but you just can’t get the house sold, if an opportunity like this is there, where somebody’s going to come in and just buy it within a reasonable price, it allows that seller to go and buy a new house. Instead of having zero sides, you get the buy side and your clients are happy and you move forward. So, we can get into this now, but I’ll use Rich Barton again, he’s the CEO of Zillow, and he may be posturing a little bit when he says this, but he truly believes, and I can understand this, he believes that by reducing the friction of a home sale through iBuying, he believes that the number of transactions on an annual basis is going to increase.
Jonathan:
So right now, there’s about 5.3 million transactions in the United States, and he was saying that there’s an opportunity for that to increase to over 6 million transactions because somebody who’s thinking about selling a house may say, all right, well, if I go the traditional route, I’m not sure if I’m going to sell it, I’m not sure what the price is going to be. There’s all this uncertainty, but if I can just click a couple buttons and get a price, I may not get the price that I want, but it’s going to allow me to just move on. And so, people may be more likely, instead of right now, it’s every eight to 10 years, maybe it’s every six to seven years that they may want to buy.
Jim:
I mean, there’s a value as we said, there’s a value in certitude, and there’s a value in being able to say, I know my house is sold, I can go buy that house. I think that we’re going to-
Keith:
Let me go to the slightly less expensive asset, but one we still trade, and at least probably once a decade or twice a decade, how many people have ever sold a car or had it priced at CarMax? All right, so about half the people in here, and I will say the last three cars I’ve sold, I have always gone to CarMax before I begin any shopping experience just to get a baseline. Okay, here’s the number, this is where we’re going to start, anyone that offers me less, I’ll just go back to CarMax. That’s the Zillow position, that’s the homeowner who knows I can get 285, and I’m guaranteed 285, and that’s my baseline. I think that’s where you’re going to start seeing a lot of shopping going on.
Jim:
And I think Zillow’s going to set the market. I mean, we said this a decade ago that eventually Zillow is going to get the point with those estimates, that they are the definition of market value. I think we’ll get there eventually.
Jonathan:
Well, I just want to go through a couple of quick case studies as we wrap this section up, just to let you know how two main companies are doing in the iBuying standpoint. I will tell you that I didn’t put it on this slide, I need to give some recognition to the T 360 Group who did this study and put a report out recently with us. I’ll give them their due with that.
Jonathan:
Opendoor in Denver, which is a big spot that Opendoor is operating, the average days on the market were 32 days to sell a house, the average purchase price of homes that they bought was 365, so they bought houses at 365, and they sold them at 368. Not super profitable. The average increase in purchase for a house they bought and sold was $2,500, so not a lot of increased value there. There’s a caveat here, this number actually isn’t that bad, but there’s a caveat. Opendoor lost 1.67 million on 216 homes during the time period mentioned here. That being said, that is just directly on the transaction, that does not include any marketing, admin, technology, anything behind the scenes. So over a course of … what is that? 10 months or so, they lost $1.67 million on homes. Check this one out. Zillow Offers, from January to June 2019, 1,200 homes, all your revenue, costs or revenues, sales and marketing expenses, tech and development, general admin, all those interest expenses, everything related to Zillow Offers, buying and selling a home, they lost 106.7 million on those 1,200 homes it purchased from January to June. So it’s not very profitable yet to say the least.
Jonathan:
But I think it would be a little bit too pompous of us to just say, “Hey look, they’re going to lose 100 million on every 1,200 homes. It’s a low margin, high volume business. It’s still in its infancy, and as I said, it’s not profitable right now. The model addresses consumer pain points, certainty, reducing friction is there. And then for some of these iBuyers, and this is the part … I mean, I’ll say the word scary, because I will. For some of these iBuyers, because they’re looking at this end to end transaction and they want to get a title and mortgage and all these other services, they’re using the transaction as a loss leader. Think about that, our core value proposition in many cases is being used by some companies as essentially a loss leader to get their hands in the pockets of some other sides of the transaction.
Jim:
Okay, that’s scary.
Jonathan:
And that’s the part that I think that once again, and we’re going to … We have, for the last 11 years, if you’ve been with us and for the next 50 years, are going to continue to hammer away, that customer service experience is a huge piece of what we do, and if we think of our process as purely transactional, and we just drag our clients, buyers and sellers through the process, then there’s other companies out there that are using, and will use brokers as a loss leader to get revenue from other spots. So, these ancillary services are offering additional revenue to iBuyers.
Jim:
I think that that highlights that we need to focus on what we do. I mean, I think that from a representational perspective, I don’t necessarily find the homes for my clients anymore, I represent them, and I listen, and I empathize with what they’re going through, and a lot of what we do is listening. As of right now, the Zillow people who answer the phone at Zillow don’t listen to what the buyers are going through, they don’t listen to what the sellers are going through, they’re not sharing the pain. I mean, I think a lot of what we do, we all do this, we’re all psychologists, psychiatrist, counselors, marriage and divorce, et cetera. I think that it’s something that finding homes is a thing that we do, but it’s not the thing that we do. I think just highlighting where we are really good at what we practice, focus on that. I mean, the iBuying is something that we can’t … good or bad, is here, and just going to have to deal with it. Zillow is going to do what they’re going to do, we need to do what we need to do.
Jonathan:
We’ll keep this conversation going just to keep educating you. Clearly, it’s directly affecting some in this room, and not directly affecting some quite yet, so we’ll keep the conversation and the education going as we learn more. All right, we’re going to talk about this briefly. You want to kick this off?
Keith:
Quick show of hands, how many people have read the article that came out in Newsday in the last two weeks? Okay. If you haven’t read it, I implore you to get with your lead broker and get the web address or just Google Newsday-
Jonathan:
We’ll send it out, we have some recap-
Keith:
… in Long Island, find this article and really spend 45 minutes, an hour or more reading through it over and over again and getting a hold of it. This is a three year study that was done by Newsday, where they sent shoppers out, testers out into the market and interviewed specific agents, recorded them on camera, recorded their audio, and found how they were treating their clients throughout the market and documented just enormous amounts of discrimination in the marketplace. Some of this was overt, some of this was quietly, not even probably noticed by the agent themselves when they’re doing it. Differences of locking your car door at certain showings and not locking your car door at other showings, showing some steering, piece of saying, you ought to stand and watch the bus stop to see the mothers that are hanging out on the corner before you buy a house. There were people who were saying, you want to buy in that neighborhood, really you want to buy in this neighborhood, because this is going to be more fitting.
Keith:
I mean, I think the big takeaway for me is, this is not a long Island problem, this is an American problem, this is a real estate problem, this is an equity issue, and it’s something we’re going to be focusing on and taking unbelievably seriously here at Nest, and I think you’re going to find that your realtor organizations, they’re going to have to do something and not just put an equal housing logo on your marketing pieces and say, I adhere to fair housing. That’s not fair housing. It’s a great start, it’s a wonderful thing, but that’s not fair housing.
Jim:
That’s good lip service. I mean, I think that what, and I spent hours on this thing myself as well, from a practitioner perspective, I challenge and I question everything that I say to every single person with whom I associate on a daily basis, way more so now that I’ve spent time on this. I mean, just the things that you say can have a profound impact on whether that buyer chooses to live on this side of the street or that side of the street. There’s no way to minimize the potential damage that we do when we’re representing clients as to how they’re going to live, and where they choose to buy a house, if they have kids, will impact the rest of their kids’ lives, and this is affecting generations of Americans. I think just the only takeaway I would say for this is, question everything that you say, spend time on this and challenge your peers. If you hear something, call them out on it. I mean, this is not something we can do in a vacuum.
Jim:
I mean, we need to be mindful again of, if I hear somebody say something that I think is wrong, I’ll wait till the client’s gone, but call him out on it, because we need to work together to solve this. You said the term fair, because my 15 year old daughter’s fair is way different than Keith’s, I think it’s treating everybody equally. If you’re a butt head to everybody, be a butt head to everybody, that’s me. But be reasonable, and treat everybody the same, it’s not hard to do. I tell my clients, I don’t discriminate because it’s not nice, profitable, or legal in that order. It takes a lot of energy to discriminate I think. So just spend the time, we’ll send it out, and man, think about what you say before you say it. Because this is something that affects all of us and affects the future of our country.
Jonathan:
My comment on it is, I know everybody in this room, either I know you’re a lead broker or I know you, and so I trust everybody in this room has the right … excuse me, intentions behind everything they do, and I’m not saying that we’ve got a discrimination problem at Nest because I have no thoughts that we have that. I think the key for all of us to think about is just like what Jim said, is think two steps ahead for everything that you do. If somebody calls you up and says, “I want to see a house,” if you say to them, “I need a prequel letter,” then the next person that calls you up, you better say you need a prequel letter. Just be consistent, and this is just you looking out for your business, and not having a misstep and all of a sudden putting yourself in a situation where you shouldn’t be.
Jim:
I mean, hypothetically, because we’re being recorded, 10 years ago, I would tell people, if you want to know about our neighborhood, drive through when the school bus has come through. Because most of my clients who have kids want to live in neighborhoods with kids. I don’t intentionally try to discriminate based on that, I don’t say that anymore. I mean, I’ve said for years drive through neighborhoods at various times of the day and night to get a sense of the neighborhood, but now I do not explicitly say drive through when the school buses are coming through. Even though I know my clients do, I’m not going to be the one that guides them to take that time.
Keith:
I think I just want to go back to one of Jim’s comments, don’t stop having the conversations with fellow agents. Talk about things that you’re seeing in the marketplace. I will tell you there was a house in Charlottesville that was on the market in a great kind of in town, close to schools, really sweet house, and the neighbor had Confederate flags all over the property. It’s really hard to show that property, it’s very hard to be able to represent a client and say, “Oh, you’ll be fine, the neighbors are great,” if they’re not going to be felt to be comfortable in the house. That’s an extreme, but look around and look at how you are treating clients, look at what are those things that may be said that may not come across in the way that you intend them. And when you’re looking at your listings, make sure that your listings are accessible to all people, make sure that there is nothing that is instantly offensive within the house that could easily just, hey, can we take down that one picture, and … It’s a question of how do we make things open to all people, and how do we make this real estate transaction available to all of your clients and anyone who wants to be in the neighborhoods?
Jim:
Yeah. This story is, I think they interviewed 89 agents or surreptitiously interviewed 89 agents, hundreds of testers, there’s tons of words and video and sound, spend the time. I mean, you’ll do better practicing real estate on a daily basis and your clients will benefit and we all will too.
Jonathan:
All right, we’ll send that link out as part of our recap of this event. I think a lot of you have heard about this clear cooperation policy, and Keith, do you want to … one of you guys want to take this one?
Jim:
This is MLS 8.0?
Jonathan:
MLS 8.0.
Keith:
Yeah. In November at NAR, NAR voted for rule 8.0, which basically in its simplest form, it says that anytime you publicly market a listing, you must put it into the MLS within one business day. This is going to be an ongoing discussion that we’re going to see all through next year. I think it’s effective date requirement is May 1st, every association will be addressing it in their own way, and so I don’t want to try, and say, oh, this is how it’s going to happen in your community. But I will say, in the Charlottesville market, we’re already in the conversation and the Richmond market. I know I’ve already had folks reach out to me about what the policies are in other areas because it’s going to play out. And basically, all I can say and our thought at Nest is, this is, again speaking back to the last slide, and we were talking about equality and housing, being able to fully market a property is about fairness to a buyer. It is about buyers knowing everything there is in the marketplace that’s available, having equal access to all properties.
Keith:
So, it doesn’t matter what agent you’re working with, the house at 123 Main Street, if it’s on the market, your client will know about it, and have somewhere to go. This is a fairness question, this is a fair housing question, it’s an equity question. And NAR, whether they’ve done this to try, and get ahead of this justice department investigation or whether they’re doing it for the right reasons, it’s irrelevant because the end result is that what they’re trying to do and the purpose behind this is to provide equal access to housing, and to stop the double siding and the quiet marketings that have led to two more difficult transactions. And again, back to Rich Barton, and he is reducing the friction in the marketplace, this is part of that friction; knowing what agent to talk to, was a friction in the marketplace. MLS 8.0 is trying to do away with that.
Jim:
When’s that going to come in?
Keith:
It’s required by May 1st, but your association will likely have a implementation date that’s preceding that time.
Jim:
I mean, I think it’s simple. It’s one of those things that it doesn’t really matter what we think in a lot of ways because it’s going to come down, and we’re going to have to abide by it. I think that, it’s like I tell my kids, you do it because you have to. And so, I think it’s the right thing to do, and I think if you want to have influence on any of these things, get involved on your local state national committees, that’s where they stack these things. National sets the agenda, and local are the ones who implement it typically. So, if you want to have a voice, then sit at the table.
Audience Member:
What about Zillow and Coming Soon? Will our clients be required to follow the rule?
Keith:
There are two parts to that, and I can’t answer one of them with any authority. I can take some guesses, but I’m not sure how it’s going to work. First off, let me just say that the MLS rule, or the NAR rule rather, is leaving it up to each individual market, how they handle coming soons. Coming soon, if it goes into an MLS, it is distributed equally, will be considered entered into an MLS. So, there will be an opportunity to have a coming soon period still, they’re not trying to change the business practice of pre-marketing. What it is saying is, in most MLSs, in their coming soon practice, will say, if you are allowing a single showing, that is not coming soon. If you’re having an open house, that’s not coming soon, that is active on the market, and must be listed as such. So, I think for those markets that do have coming soons, you’re going to see a very tight reading of that, and those will translate to coming soons on Zillow.
Keith:
But Heather’s question to, can your sellers put it in Zillow before it is listed, my bet is that the way the MLSs are going to read that is, if it’s in Zillow and you have a listing agreement, you are in control of that listing and that is your problem and you are in violation. I think that it is highly likely that that’s how MLSs, will come down on that, but I think until you see the actual rules, I’m not sure how that’s going to play out.
Jonathan:
Yeah, it’ll be … go ahead.
Audience Member:
Have they clearly defined what they consider marketing, like having conversations with other agents through private Facebook groups or anything like that from marketing will be like-
Jim:
I think that would be.
Jim:
My understanding is if it’s outside your office, it’s marketing. So Facebook is marketing, even if it’s a private group, it’s still marketing.
Jonathan:
This does not apply if it’s within your office, this is like, you can have an office exclusive and tell your office about it, and market it in your office, but once you go outside and market it to any group outside your office … I think the question we don’t know is what happens if you run into somebody at ABC Realty at the grocery store, and say, “Hey, I’ve got this house coming at 123 Main Street”, we don’t know-
Keith:
I think that’s going to be the big question. They’ve already said if there’s an email blast, if it’s on any social media of any kind, even if it’s in a closed group, that is public marketing. Public marketing in the rule is also defined, if you are an agency that puts flyers up in the windows, that’s public marketing. As soon as it goes up, that’s public marketing and must be in the MLS. Anywhere that you might put something that someone in the public might come across, that’s-
Jim:
Keith, how much was the fine that Bright was saying?
Keith:
Oh, right. This is going to be the big what if.
Jim:
And this is why you’re going to follow the rule.
Keith:
Yeah. Bright MLS, which if you don’t know, it covers, basically, it starts at Fredericksburg and goes up through Delaware, Pennsylvania, Maryland. It’s one of the largest MLSs out there. They came out before the NAR vote even took place, Bright announced they were going to implement the rule regardless of what NAR did, they were going to make it a December one in action period. The fine for the first violation of missing one business day was going to be a $5,000 fine, the 5,000. The second is going to be-
Jim:
That’s why you’re going to follow the rule.
Keith:
The second is going to be 10,000, 3rd and subsequence are 15,000 per violation. That’s not a cost of doing business, that is a, you better do business the way Bright wants to have it done. Now, Bright also has now said, if your MLS is in our market area, even if you’re not a member of Bright, we’re going to fine you, which I’m not exactly sure how that’s going to work out. We’ll, figure that one out in the courts, but Bright has since back down a little bit, they’ve said they’re going to hold off on the implementation at least 30 days, and I think we’ll probably see … My bet is by the end of the year, they’ll come out with what their deadline is, and what their new fine structure is.
Keith:
But the MLSs are going to have to come up with a number that they either determine it’s 100 bucks, and therefore they’re not worried about the rule and it’s going to be a cost of doing business, and people who want to quietly market are just going to pay $100 every time, or they’re going to implement this like Bright is doing and saying, this is a fine that we’re serious about, this as a rule we’re serious about, this is something we, as an association, are going to deal with, and they’re going to enact it, and it’s going to be painful if you do it wrong.
Audience Member:
Isn’t that really kind of screwing the Mom and Pop brokerages that have limited numbers of agents.
Keith:
Yes, it is.
Audience Member:
[inaudible 00:44:11]
Jonathan:
Potentially, potentially. I mean, if you want to promote it within your … if your seller says, I just want to promote it within the office, then potentially that’s the case. But if you’re mass marketing it to your entire market, then it doesn’t matter. There’s definitely edge cases where there’s positives and negatives with this, and look, whenever a rule is implemented, we don’t know the repercussions until after the fact. Kind of joking, I woke up this morning, and you’re not allowed to have food or drink in this auditorium, and I woke up this morning and I was parched, like totally dehydrated, and I didn’t even think that was going to be the case. So, you don’t know what issues come up until after the fact. So, we’re going to run into cases like what you’re saying, that may or may not be … yeah, we may-
Jim:
The take is there are winners and losers with everything, be aware and abide by the rules, otherwise you’re going to be paying a lot of money.
Keith:
Yeah. I think the other piece that’s undetermined at this point is, is Keller Williams nationally one brokerage, or is Keller Williams office an office exclusive? I think we’re going to find that it’s office exclusive means truly what that is to your office, but if you are Nest Wilmington, who has an office in Carolina beach and Wilmington, that are the same principal broker, the same … is that going to be one office? I think that’s where we’re going to have to figure out how that plays out.
Jonathan:
We’ll talk about this more, we’ve got some plans for ongoing education and communication about this moving forward. This last point, we’re not going to beat a dead horse with this, because this was touched on a lot yesterday as expected. I just want to talk about this whole concept of immediacy and trust right now, and so talking, to start with about … I mean look, we all know this, this is nothing new to us, about how important smart phones are. Smartphones have infiltrated every part of our life to this point, I think the top 10 uses of a smartphone, the phone aspect is not even in the top 10 anymore, so it’s dropped down to number 12 or 13 in terms of how people use their phones. But black Friday, 2019, there were $7.4 billion in online retail sales, 2.9 billion came from a smartphone. So, almost 40% of purchases on black Friday that were made online are made from smartphone. So, more and more and more people are using their smart phones because it’s right there and they can do it.
Jonathan:
One other stat, which is terrifying, terrifying, 39%, and this is in 2018, 39% of smartphone users said that they did online shopping while driving, for a total of $230 billion in online shopping. That’s terrifying. People, us all included, we can’t get rid of these things, they’re attached to our fingers and our ears in some cases at all points in time. So, this whole concept of immediacy and how people get response time within five minutes is important. The other interesting thing that I read recently is search. People are now searching open now, like restaurants open now, three times more than they were last year, and searches for store hours has dropped off the map. People don’t search for Domino’s pizza store hours, they’d say pizza stores open now. And so, what this tells us is an immediacy. People need things immediately, like iBuyers, that’s why it’s so appealing. They can get their money almost immediately and close and be done, everything is at our fingertips, we know this, I’m not going to beat a dead horse-
Jim:
One thing I’ll say on that is I had a client years ago reach out to me, and I asked him how they found me, and he said, I looked for a realtor near me.
Jonathan:
That’s a search.
Jim:
It’s a search. I answer the phone, and I don’t know if I sold him anything or not, but I thought it was an interesting stat that he came to me because he’s searched for realtors near me.
Keith:
I will say, just if you think about just what the meaning of that search term differentiator is, it means that the primary interest is where can I do something at this moment. So if you’re looking for shoes, it’s no longer that I want to go to a specific store and find out when I can, it’s that I want to do something at this exact moment, I don’t care where it is.
Jim:
Which again, for me, it’s a reminder to make sure that Friends of Nest is updated all the time because I don’t want to be an immediate realtor. A client called me today, asked if I could do something in five minutes, I said, “No, I can’t do it in five minutes.” But I think that build our relationships and our networks so that we have clients who want to see us in a couple of days.
Audience Member:
Will Envoy be available as a mobile App?
Jonathan:
We have, yeah. We talked about it, it’s probably not in the 2020 plans whereas we worked through, but absolutely. The point of this conversation, and it doesn’t need to be a long conversation, the point of this conversation is we believe as we’ve talked here, the only way to fight this need for immediacy from your clients is to have that trust and that relationship and be adding value. So really, the whole talk of yesterday ties into this, is our wrap of our conversation here is, if you’re adding value and you’re staying in touch with your client after the transaction process, they’re much more likely to trust you to wait for you to respond more than five minutes on a call or wait for things from you because they know how amazing you and your services are. So, as the world gets faster and response times have to get faster, our relationships are the only thing that we can do to combat that need.
Jim:
The one thing I’ll say on this is listen to the podcasts … I consumed media within memory, and it said that a disconnected phone, even a silent phone disconnects you. Something I do with my clients is, when I go into a meeting, I make a point of saying, I’m putting my phone away because I’m here for you. The clients don’t care about your 27 other clients, they want to make sure that you have clients, that you’re good at what you do, but you put … I mean, I put away my phone and I set expectations. If I’m negotiating one contract, if that person calls, I’ll take it. Everything else, I’m here for you. I think that as our phones are glued to our hands, I mean, we both have our phones right there, I think that something that they can get an immediate response from anybody, but once you have them, they want you, they want your expertise, they’ve come to you to help them through that thing that they’re working through. So just be mindful of technology. It can be a great thing when used appropriately, but God, it can make it a lot harder to do what we do.