Category: Uncategorized

Ok, I’ll play….

I was tagged by Christine Forgione of NY Houses 4 Sale.

Being the contrarian and curmudgeon that I am, I was not content to just list 5 things others may not know about me. I had to list 10.

1. I had a radio show on KRAB-FM in Seattle called “Surfin’ Those Cosmic Waves” and played music by the Beach Boys, Jan & Dean, the Surfari’s, Frankie Avalon and Annette Funicello.

2. I taught English in Japan. Tokyo is my favorite city in the world.

3. I’m a member of Northwest Con (Northwest Science Fiction and Fantasy Fans and Conventioneers) and at the last convention was asked to show author Harlan Ellison around Seattle.

4. I went to art school in England at the West Surrey College of Art & Design (now University College for the Creative Arts) and received a Fellowship at the National Endowment for the Arts in D.C., before returning to Seattle to finish my degree.

5. I made a pilgrimage to the Vatican to meet Pope John Paul.

6. I used to own a mobile home park. I nick-named it “Upwardly Mobile Homes”, but no one who lived there got the joke. It was condemned by the Port of Seattle for the 3rd runway at Seatac Airport in 2004.

7. I also used to own a Bed & Breakfast on Capitol Hill. However, it didn’t have any snotty or mocking nickname. I abandoned that business model for a less labor intensive “Furnished Executive Guest Suites” (so, more like “Bed & Kitchen”. Make your own damn breakfast.)

8. I helped build appropriate technology cement water cisterns in East Africa.

9. My very first job out of college was as the PR Director for the Bellevue Philharmonic Orchestra.

10. Second to surf music and Prince, my favorite musician is Weird Al Yankovic.

I’m tagging Beau Betts and Phoenix Ruddner. You’re it!

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Redfin Sales 5/31/06

Redfin Stats as of 9AM 5/31/06

CMA Report
Listings as of 05/31/06 at 9:09am Page 1

RESIDENTIAL
SOLD Properties
Address City Map Bd Bth SqFt LotSz Year Date $/SqFt CDOM Orig Price List Price Sale Price SP%LP

11313 Alton Ave NE Seattle 504, F5 2 1 1520 7985sf 1928 04/10/06 203.68 8 309,600 309,600 309,600 100.00
4816 S Mayflower St Seattle 595, F6 2 1 1660 5038sf 1909 03/29/06 209.04 21 349,950 349,950 347,000 99.20
1547 NE 171st St Shoreline 475, C7 3 1.50 1450 9458sf 1962 05/17/06 241.38 12 349,900 349,900 350,000 100.00
466 Rosario Pl NE Renton 627, A7 4 2.50 2042 7326sf 2005 04/24/06 201.52 19 412,000 411,500 411,500 100.00
606 20 Ave Seattle 565, C6 2 1 1300 3600sf 1903 04/17/06 319.23 9 414,950 414,950 415,000 100.00
1326 233rd Pl S Des Moines 715, B1 4 2.50 2316 0.170ac 2006 05/02/06 186.94 90 429,950 429,950 432,950 100.70
11727 North Park Ave N Seattle 504, H5 4 3 3000 8000sf 1928 05/26/06 147.83 95 469,500 449,500 443,500 98.70
3320 122nd Pl NE Bellevue 566, F1 4 2.50 3090 43560sf 1967 04/12/06 217.80 196 685,000 685,000 673,000 98.20
25039 NE 45th Ct Redmond 538, D7 4 2.50 3120 2.110ac 1996 05/26/06 261.22 6 789,000 789,000 815,000 103.30
5009 134th Pl NE Bellevue 536, H6 4 4 4719 43560sf 1978 04/14/06 230.98 217 1,195,000 1,150,000 1,090,000 94.80

Listing Count 10 Averages 2422 221.96 67 540,485 533,935 528,755 99.03
High 1,090,000 Low 309,600 Median 423,975

CMA Report
Listings as of 05/31/06 at 9:09am Page 2
CONDOMINIUM
SOLD Properties
Address City Map Bd Bth SqFt LotSz Year Date $/SqFt CDOM Orig Price List Price Sale Price SP%LP

2821 2nd Ave #705 Seattle 564, H4 1 1.50 1008 1982 04/14/06 391.37 225 399,000 399,000 394,500 98.90
177 107th Ave NE #1705 Bellevue 566, D5 3 2.50 1709 31259sf 1994 05/01/06 397.89 239 725,000 725,000 680,000 93.80

Listing Count 2 Averages 1359 394.63 232 562,000 562,000 537,250 95.60
High 680,000 Low 394,500 Median 537,250

CMA Report
Listings as of 05/31/06 at 9:09am Page 3
MULTI-FAMILY
SOLD Properties
Address City Map Bd Bth SqFt LotSz Year Date $/SqFt CDOM Orig Price List Price Sale Price SP%LP

10463 SE 14th St Bellevue 566, D7 0 2220 11326sf 1950 03/31/06 265.77 218 640,000 625,000 590,000 94.40

Listing Count 1 Averages 2220 265.77 218 640,000 625,000 590,000 94.40
High 590,000 Low 590,000 Median 590,000

Report Count 13 Report Averages 2243 252 104 551,450 545,258 534,773

This Information From Reliable Sources (the NWMLS), But Not Guaranteed. Listing offices must report sales within 24 hours of closing, per NWMLS rules.

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Can a Muslim be a Real Estate Agent?

Not according to Mufti Monzer Kahf, unless it’s for a cash-only sale, no financing or bank mortgage allowed.

He states:

In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.

Being a real estate agent for a certain company is permissible as long as the agent avoids writing an application for a forbidden interest-based loan and avoids selling stolen property. What applies to real estate also applies to refering others to the same real estate company for the purpose of buying and selling.

Dr. Monzer Kahf, a prominent economist, counselor and mufti states the following:

Working as a real estate agent or owner of an agency is permissible because the main line of business is helping people buy and sell real estate properties. What is prohibited in the Shari’ah is taking interest, giving it, writing it, and being a witness to its contract. It is not forbidden to help people buy and sell properties. Of course, two things are haram: to write an application for forbidden interest-based loan (a buyer may be under conditions of necessity and hence its loan may not be forbidden); and to help sell stolen property. These must be avoided by any agent, whether in real estate or other businesses.

The same applies to the referral because in referral you are also helping in buying and selling, and it is none of your business how the buyer is going to finance the purchase or whether the other agent is going to help in writing the loan application; you are not required to investigate what other people (agent or buyer) are going to do or how they are going to proceed in their relationships.

Thus, in both cases your commission is halal, in sha’ Allah.

Having clarified the above, I would like to add that in referral there is another point that must be clear: When you refer a friend who comes to you on the basis of trust and confidence and you refer him or her and take commission, the referred friend should know that in referring him or her to that specific agent you will get a commission; if he or she does not know that and takes your advice as a friendly trusted advice, such a commission is deserved to the friend not to you. You can’t be a paid adviser without the recipient of the advice knowing that you are paid, that is, that you have an interest in this advice.

Islam Online – Fatwa on being a Real Estate Agent

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Tales from the Real Estate Trenches

David Losh

Submitted by David Losh of Skyline Properties, 206-523-2733

An agent in my office asked me to help with a pre foreclosure. When we got
to the property the owner turned out to be the youngest brother of a good
friend from high school. The house was a mess with several remodel projects
that were ill conceived. All in all the house wasn’t bad. The remodeling was
workable. The owner’s other brother is a house painter who I also knew.
The agent in my office had been working with the home owner for about a
month with no results. This agent is experienced and uses his computer
skills a lot in his business. I on the other hand am an older agent not very
well versed in today’s fast paced real estate market place. To me the house
was not a problem. The foreclosure notice is a problem because for some
reason the lender was already on title.
I called my lender who Zillowed the property for value. The agent in my
office had already put photos of the property on line. Between the value
from Zillow and the pictures my lender had a hard money investor ready to
correct the arrears to the property. We did all of this standing in front of
the property talking on a cell phone.
Because the photos online did not show the property in its best light our
feeling were that we could improve the equity position of the property
quickly by simply cleaning the place up. The roof was about five years old
and the basement has high ceilings with a place for a kitchen.
With me writing a scope of work for the property with a budget of less than
ten thousand dollars we felt the property could sell for $299,950. The owner
owed $189K including paying the arrears on the mortgage payments.
I wish this story had a happy ending, but the agent in my office is intent
on listing the property at a fire sale price. The fact is though that Zillow
gave this property owner an opportunity he may not have had with a Real
Estate agent involved.

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Green Seattle

Two factors, “Price” and “Lifestyle” are macro trends that have significant implications for housing, according to industry analyst Mike Luis. However, not all players in the field agree on the best ways to accommodate future home buyers, he acknowledged at a recent meeting of marketing professionals from architectural, engineering and construction firms.

With that premise, the Seattle Chapter of the Society for Marketing Professional Services invited four panelists with different perspectives to join moderator Michael Luis (who is also the manager of The Housing Partnership), in offering insights on residential trends.

Panelists included:

Kevin Capuzzi, director of land acquisition at D.R. Horton
Dan Lungren, vice president at D.R. Horton
Denny Onslow, executive VP and chief development officer at Harbor Properties
Kristen Scott AIA, principal at Weber + Thompson
To set the stage, Luis pronounced “You don’t solve an affordability problem with a lifestyle product,” then opened the discussion with a question about green building.

Storm water ponds at subdivisions are not always aesthetically pleasing, Luis suggested, adding, “How are environmental and marketing concerns balanced?” Architect Scott said the solution often depends on a project’s size. Also, she said, new materials are becoming more affordable and landscaping can help mitigate unsightly retention ponds.

Capuzzi said his company tries to make such set-asides a community amenity, which is achieved in part with buffers and landscaping. He acknowledged soil conditions in the Northwest are such that things like retention ponds are not always ideally situated from a marketing standpoint.

Luis also asked the panelists to comment on “Green Building” as marketable features.

Using the Alcyone Apartments on South Lake Union as an example, Onslow said their research indicated only about five percent of the renters were aware it was a LEED (Leadership in Energy and Environmental Design) certified building, but once they understood it, “they embraced it as a source of pride.” Asked if that meant the renters would pay more, Onslow said no, but added he believes that will change.

Scott said the growth of green building is a big design driver, noting the Weber + Thompson architectural firm has experienced a spike in inquiries in recent years. The firm is even embracing green building principles for its new four-story, 40,000-square-foot headquarters building that is slated for completion next year. Located in the South Lake Union area, the environmentally friendly building will feature “passive cooling,” distinguished by no air conditioning, instead using windows that open, special adjustable blinds and high performance glass shades. It anticipates energy savings of 30 percent and is seeking to earn LEED Gold Certification for the building from the U.S. Green Building Council.

Lungren said that while there is a growing trend for sustainable building, buyers in general aren’t demanding it. “It’s an ongoing education process,” he believes. Nevertheless, D.R. Horton is striving to “build green” without adding to a home’s cost. He cited Issaquah Highlands as a good example of a joint commitment to environmental stewardship by more than a dozen home builders. At that planned community every home is designed and constructed to Built Greenâ„¢ rating standards.

Built Green is well accepted among luxury condo buyers, according to Onslow. A recent survey revealed about 45 percent of that segment is aware of Built Green and three-fourths of the buyers were willing to invest in environmentally friendly building by paying a premium on the price.

Buyers of Built Green products will get a payback of their investment over the dwelling’s life cycle, Scott emphasized, noting the U.S. Green Building Council documents numerous benefits, whether measured by cost savings, enhanced productivity or healthier work and living environments.

Moving the discussion from green building to land, Luis said GMA (Growth Management Act) “completely changed the way the land works.”

Onslow agreed, saying he’s observed a 100 percent increase over four years for land in the urban areas. “A lot of land is underutilized,” he remarked, a situation he says is often tied to ownership issues.

For D.R. Horton, overcoming high land costs has meant casting a wider net. Until recently, most of that company’s home building in Washington state was concentrated in King and Snohomish counties. Now, it has projects in Pierce, Thurston and Whatcom counties and plans to add Clark and Lewis counties as well as areas in Eastern Washington.

With land prices skyrocketing, maximizing densities is critical, according to Capuzzi.

Scott agreed, using Crofton Issaquah II as an example of how buyers are becoming more accepting of new ways to use scarce land. Developed by The Dwelling Company, that project of 107 homes is described as a “self-contained urban village.” Seven home styles are offered, ranging from 1,054 to 2,085 square feet.

Scott said parking garages may be 150 feet from the bungalows, carriage houses, town houses, row houses and cottages. “It took a while to catch on,” she recalls, but says people now see positive tradeoffs of shared green spaces that promote community connectivity. She believes appraisers need to change methodologies so evaluations are not based solely on square footage.

Citing work by a Harvard economist, Luis said buyers pay for location rather than extra land. In response, Onslow agreed, saying proximity to services and the character of a neighborhood can be important drivers.

Turning next to what he called “the legendary baby boomer,” Luis asked the panelists “if we have figured out what they want.”

Scott said condo designers must always be mindful to two segments, empty-nesters and singles looking for security. Offering upgrades is important, along with flexibility, such as designing rooms that can be used for multiple purposes as needs and seasons change.

“Not all boomers are empty nesters,” cautioned Capuzzi. For example, he stated, some have boomerang kids (who move back home) and some choose to locate in areas where their kids and grandkids will want to visit.

Capuzzi also said as prices rise, opportunities change. “What didn’t work a few years ago now does.” As an example, he said D.R. Horton recently released 15 triplexes it built at Horizon Pointe in Thurston County and all sold over one weekend.

“Master down” plans, with the master suite on the main level, are another way builders are appealing to aging boomers while still building a two-story product.

Panelists were also asked to discuss mixed use buildings and whether they are planned for aesthetic or economic reasons.

It depends, Onslow replied. In an urban setting, anything that adds to the energy is an ultimate goal, but cautioned, “With joint uses come challenges.”

Scott agreed, emphasizing there needs to be a clear demarcation of residential and non-residential spaces in mixed use buildings. Even psychological boundaries that help create transitions from commercial spaces to the sanctuary of a home can be effective, she believes.

During Q&A, audience members asked about overbuilding condominiums and making downtown Seattle more appealing for families with school age children.

Onslow thinks there is little risk of overbuilding in the short term. Scott acknowledged that while there is an upper limit, their firm’s research indicates “we’re in for a 10-year run.”

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Build Green Seattle

Sources & Resources

Built Green Washington http://www.builtgreenwashington.org/
Built Green Washington, a cooperative of Washington’s regional green home building programs, is organized to help home builders and home buyers get the information needed to build and buy green! For builders, general strategies for green building include:
• Developing the site to preserve natural water flow;
• Reducing construction waste; and
• Designing buildings and using equipment and materials that support good indoor air quality and the efficient use of natural resources and energy.
Online home owner resources cover the topic areas of Site & Water, Energy, Materials and Wastes, Healthy Homes, and general materials

Built Green is an environmentally-friendly, non-profit, residential building program of the Master Builders Association of King and Snohomish counties, developed in partnership with King County, Snohomish County, and other agencies in Washington state. This website provides consumers with easy-to-understand rating systems, which quantify environmentally friendly building practices for remodeling and new home construction, communities and multifamily development units.
Built Green (King and Snohomish counties) http://www.builtgreen.net/

http://www.builtgreen.net/conference.html

8 a.m. – 6 p.m., Washington State Convention & Trade Center.
Fees vary, visit Website for details.
This daylong conference features nationally acclaimed authors, a half day of educational programs and an expo of more than 40 exhibitors. Keynote speaker is Sarah Susanka, nationally-renowned architect, speaker and author of The No So Big House. Also featured is David Johnston, author of the best-selling book Green Remodeling, Changing the World One Room at a Time, and founder of the Passive Solar Industries Council in Washington, D.C.

March 17 Innovative Green Site Tour of Shamrock Heights in Renton www.builtgreen.net . Two sessions offered (8 a.m. – noon or 11:30 a.m. – 3:30 p.m.). Shamrock Heights is an innovative sustainable green community of 3-5 bedroom homes developed by CamWest. As King County’s Low Impact Demonstration community, it is one of three developments permitted to use conventional approaches to storm water under King County’s 2001 Low Impact Development/Built Green Ordinance. Shamrock Heights has over 30 acres of sustainable storm water features including Rain Channelsâ„¢, rain gardens, greenbelts, parks, ponds and wetlands. The community also has two beautifully furnished eco-friendly model homes that will be Built Green 4-Star and Energy Star® rated. Click Here for Shamrock Site Map.

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Madison Lofts

Sales Event Coming March 22nd

You are invited to attend the Madison Lofts sales event on Wednesday, March 22nd, where you can get information about purchasing a home at Madison Lofts.

With several hundred people on the priority database for the 20 homes at Madison Lofts, we have been working to develop a sales process that will create a fair and level playing field for all interested parties. Rather than sell the homes on a first-come first-served basis, we are doing something that will result in an open and equitable process for all potential buyers, giving everyone a fair chance to make an offer on the home or homes of their choice.

To create this level playing field, MJR Development, along with marketing consultant and listing agent Miller Condominium Marketing, will conduct an online auction that allows all potential buyers the opportunity to purchase their desired home. The homes at Madison Lofts will be offered through this innovative online auction process, giving every pre-qualified buyer a chance to access the auction site, see the current sales price for your home of choice and decide whether you want to place a bid, from the comfort of your own home. In short, we will not make you wait in line, pressure you to make a quick decision, or sell homes before you have a chance to bid on them.

Key Information to be Shared at Event on March 22nd

If you wish to participate in the online auction of homes at Madison Lofts, please plan on attending the sales launch event:
Wednesday, March 22nd
By Appointment in 45 minute increments from 5:30 to 9 p.m.
Cafe Flora: 2901 E. Madison Street, Seattle, WA 98112

At this event, you will view:
— the full details about the timing, instructions, requirements and rules of the online auction, including how to sign up to participate in the auction
— an online, real-time demonstration of the online auction
— the virtual fly-through of Madison Lofts
— picture-accurate renderings of the Madison Lofts living room, kitchen and master bath
— color boards with actual material samples
— opening bid prices for all homes

The event will be open by appointment only. To get on the guest list, RSVP by Friday, March 17th by e-mailing stacy@mcmcondos.com or by calling Stacy at (425) 519-4266. Please indicate total number of guests when you RSVP. If you have a Realtor, you are encouraged, but not required, to bring your Realtor so that all questions may be answered. Catered hors d’oeuvres and wine will be served.

Those interested in participating in the auction, or wanting more details about the Madison Lofts features and starting prices, should plan on attending this event. We look forward to sharing more information with you then, and we hope that you are as excited about the upcoming auction as we are.

************************************************************************************

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Redfin Gets $1.25 Million

Seattle aerial View



Redfin announced today that it just received a $1.25 million dollar cash infusion from Madrona Venture Group today.

In case you haven’t heard of them before, Redfin is a real estate agency with a website that has an interactive aerial search function.

It started out trying to hook up buyers with independant agents, but then moved to having their own in-house agents. Over time, it became almost hostile to other real estate agents and burned some bridges in the process. They now have one broker and one real estate agent to handle incoming leads from their website.

Founded by techies, they realized they had a nice search function, but were feeling around for ways to make money with it. Obviously, neither approach pulled in the dough that they wanted. They turned to finding a big name to bring on board, and then to getting some venture capital to keep the business up and running.

The problem is, do they have a sound business model?

At this point, they’re just another small real estate firm with an average sales record.

According to NWMLS records for 2005, last year Redfin had 24 home sales. Based on an average 6% commission (or 3% to the sales office), that is approximately $270,000 income for the year. It may have even been less, as they’ve been known to discount their listing fees. According to their website, they have 4 managers. They also have two real estate agents licensed by the State of Washington, for a total of 6 people. I’m assuming they also have additional staff, but just going on their listed 6 employees, at $270K a year, that’s about $45K a year income per person. That’s not counting overhead such as office rental, computers and such. That probably brings it down closer to $35K a year income per person. Wow. And now they’re talking about moving down into California. WHY? If they’re not making any money here in Seattle, why expand? If it won’t work here, who go down there?

How on earth did they talk Madrona Venture Group out of a million bucks? If their income was what I’ve surmised, then I’m guessing most of that $1.25 million is going to pay the new CEO’s salary.

Glenn Kelman, co-founder of Plumtree Software, has been hired as the chief executive officer, and Brian Marsh, a senior manager from Amazon’s community group, is the chief technology officer. Redfin founder David Eraker will continue to lead the company in business development and product strategy.

Glenn mentions in the Seattle Times 1/9/06 “when looking for a home, he used Redfin.com.” He may have seen the listing there, however, records indicate it was listed and sold with Windermere, not Redfin. I won’t mention the sales price (though it IS a matter of public record), but I will say that it sold for almost $30,000.00 more than asking price. You can draw your own conclusions about all this. But if Windermere was the listing and the sales agent, exactly how did Redfin make any money on this sale? I think the answer was, they didn’t. As this illustrates, just having a fancy website does not guarantee one will make money from it.

On an interesting side note, a press release from the company dated 1/9/06 states that “After more than a year as Seattle’s most popular site for residential real estate…..” I thought that this statement didn’t ring true, so I thought I’d try to check. Though I don’t have access to a specific number of hits, I can make some inferences using some web tools. For instance, using the Link Pop check on MarketLeap.com, Winderemere comes in at 133,076, Coldwell Banker Bain at 5747, www.SeattleDreamHomes.com at 4769, and Redfin at only 1770.

Using their Search Engine Saturation function, I found Windermere to be at 14,640, www.SeattleDreamHomes.com to be at 2,684, Coldwell Banker Bain to be at 1,378 and Redfin trailing at 393.

One can use the Alexa rating, but that it very limited in scope as it only tracks those that have the toolbar. They look at all of the traffic numbers and then put all the websites that are out there in order. So if you are #1 that would mean you had more traffic than any other site out there per the numbers Alexa collected (again limited data).

Here are a couple of examples:

Redfin has a ranking of 49,636

Windermere has a ranking of 3,343

So, this would mean Windermere is more than 10 times more popular than Redfin.

These numbers are really easy to manipulate as it tracks such a small amount of websurfers that one person could spend an hours on their site clicking on a bunch of pages and push themselves to a pretty high number. Worse you can use a bots to visit your site and boost the numbers. But, with that said, it is a way to get a very general idea of the traffic a site might be getting.

So is Redfin the “most popular site for residential real estate”? Hardly. Hyperbole and puffery is not new in the world of real estate!

Here’s a great interview with the new CEO of Redfin by John Cook. Be sure to click on the audio interview! John Cook’s Venture Blog

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“Redfin Direct” Unveiled




Redfin unveiled its new service today “Redfin Direct”, an online service for making an offer on a house. Redfin refunds a portion of its commission back to the buyer if they use their services. However, they will not show the house to the buyer, the buyer has to go in at an open house or through the listing agent. Apparently, they are making forms available online for the Buyer to write their own offer, though they are not available for review without registrering with the company first.

Redfin is taking the “Buyers Agent” commission, though they do not appear to be representing the Buyer in the writing of the offer, nor offering any advice or assistance beyond presenting the offer to the Seller’s agent.

For an experienced real estate buyer who already knows what property they want to buy, this might be an option to explore. However most regular agents will also offer some special considerations if the buyer doesn’t require a lot of extra services, property showings, neighborhood tours, lunches/latte’s bought, listings previewed and forwarded, research, emails, telephone calls, contract writing, negotiations, advice and general hand-holding.

A concern with this new service of Redfin’s is the property showings. They state in their online FAQ’s, that the buyer is to preview the home first at on Open House or through the listing agent.

Most agents will not, for safety and security reasons, meet strangers at a house. Why would they take that risk? The murder of Mike Emert of Windermere (Bellevue office) is still fresh in most of their minds, and there is word almost every month of some agent raped, threatened or killed at a house showing.

I’m sure no Seller would want an agent to take a risk like that, and, understanding the situation, what Seller would want their agent letting a complete stranger into their homes? Open Houses are still a risk, but, being on a Sunday afternoon with other people constantly coming-and-going, there is less chance of someone peforming a crime of opportunity without getting caught.

Sellers rely on agents enlightened self-interest to only allow qualified buyers into their home for a private tour, for both their safety and the safety of their agents, so I’m not sure how this will work in practice, but it will be interesting to watch and see. This may be a great way for Buyers to go trolling and make a number of lowball offers to see if they get any bites. However, a buyer who makes more than 10 offers in a 12-month period will have to start paying for them.

So trolling for deals might work for a house that has been on the market for awhile, but if the house is competatively priced and it’s a hot market, I wonder if using the Redfin online wizard will be enough to get a buyer the house? This may not work very well in a competative real estate market.

If anyone uses this service, please let us know and give some feedback and if they’re happy with the process.

The Seattle Times article Redfin offers one-stop shopping also offers some additional information.

Though many Buyers Agents just worked on a handshake, agents now would be advised to get Agency Agreements signed with each of their buyers.

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Zillow Talk

pillowtalk1
Zillow is a new start-up, based in Seattle, which recently raised $32 million in venture capital. It’s headed by Richard Barton, founder of Expedia.

Expedia didn’t kill the travel agency per se, but it was definitely one of the nails in the coffin. Since 1995, many travel agents have exited the industry. Of the ones still in business, some have abandoned the “brick and mortar” agency for a home-based business to reduce overhead, and those who remain have managed to survive by promoting other travel products like cruise lines and train excursions, or by promoting their ability to aggressively research and assemble complex travel packages on a moment’s notice (essentially acting as a very advanced concierge).

Many people are expecting Zillow to shake up the real estate business in a similar fashion.

According to this article in The Wall Street Journal, Mr. Barton said major change in home selling is inevitable over the next five years or so because there is an unsustainable disconnect between the commissions charged by most agents and the value of their services.

So, I can just see these guys sitting around a table talking
“We went to Harvard Business School and are only making $XX a year and these real estate agents just went to some public university or even worse, a community college, and are making just as much as we are! Let’s use our superior intellect and design a better website and skim their customers off the top and then sell their clients back to them, for a price! That will show them to mess with business school grads!

They are perfect Capitalists, not making the wealth themselves, but figuring out a way to skim profits off of other people’s labor.

Are they going to schlep around from house to house in the evening and on Saturdays and Sundays, in the rain, perhaps with the Buyers kids in tow, week after week, month after month, searching for a dream home? No. But real estate agents do it, and those business school grads and real estate repackagers and website designers and computer programers want a cut of the agents labor.

It’s interesting that the majority of real estate agents are female, as they seem to excell at this “people-person” type of job. The skimmers at Zillow and Redfin are all males, at least the ones listed on their mastheads. A lot of real estate agents are women who have entered the workforce after their children are grown. They are people-people, not strategists, not computer programers, not business school grads. They are attracted to the business for a variety of reasons but if you ask them, a lot will say they like to help people.

What stupid women! Silly housewives! They should have been busy learning html and computer programing and search engine optimization and java script and stuff like that, instead of driving people around to look for their dream home!

Homegain is owned by Classified Ventures, LLC which is a strategic joint-venture 100% owned and funded by six large media partners. They are Belo Corporation, Gannett Company, Knight Ridder, Inc., The McClatchy Company, Tribune Company and The Washington Post Company. These are also mostly ran by men. Middle-aged white men. Homegain is also a “skimmer”. They have a partnership with Zip Realty to appropriate the MLS’s listings, lure the buyer in, and then sell that lead back to agents again. For a percentage, of course.

HouseValues.com and its sister site JustListed.com, has 18 managers listed on its Executive Team. They are quite progressive as it appears that 2 of these are women. Congratulations! (The CEO is, of course, a male Harvard Business School grad)

If you don’t make it worth an agents while to be available 24 hours a day to go run out and preview the latest listing or to write up a sales contract or hold a first-time buyers hand through the whole sales process, the good ones will leave the business and you’ll be left with idiots not up to the task.

One can’t buy a house over the internet like one can buy a book or a new IPod or a pair of slacks. Someone has to get the Buyer into the house, probably into lots of houses, over the course of many weeks or many months. They have to be tour guides, counselors, financial advisors, entertainers, sometimes babysitters, negotiator, and friend to many people. To say that has no value is wrong.

The subtext of what these real estate repackagers are saying is that the average real estate agent (most likely a woman who has entered the business after her children are grown) makes more money than she deserves, and they want a cut of the pie. And they know how to get it, by building superior websites to lure the new, young buyers who are entering the real estate market and who are used to researching and ordering everything online.

There’s lots of buzz out there surrounding Zillow. For some of the best dialogue, check out these websites:

Business Week Online How Scared Should Brokers Be?

Ravenna Houses “Zillow’s Infrastructure

Zillow Stories on Rain City Real Estate Guide

John Cook’s Venture Blog Zillow’s New Riches

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Rebuttal from Trulia CEO to the New York Times

Dear Editors of The New York Times Magazine:

Real estate agents are an endangered species? Ha!
Real estate agents will never be replaced by technology. Buying and selling a home is
not straightforward and quick like buying a ticket to Boca Raton. I should know, I was
the first employee of travel website LastMinute.com and am currently the CEO of
Trulia.com, the online search engine for real estate.
There are too many variables at play during a real estate transaction to warrant Levitt’s
comparison to the travel agent’s demise. A better comparison is to the daytrading
phenomenon of the late nineties.
Real Estate as the new Daytrading?
Just because you have the tools to do-it-yourself doesn’t mean you should. In fact, we
don’t have to look that far back to see how the right tools in the wrong hands can lead to
financial disaster for the novice consumer.
The advent of online stock brokerage companies, like Datek Online, Ameritrade and
ETrade, suddenly gave the average consumer access to information that had previously
been accessible only to professional stockbrokers. Armed with this new data, consumers
now had the ability to buy and sell stocks themselves, eliminating the expensive middle
man and his fees.
Thousands of people took their life savings out of traditional brokerage firms and poured
them into new online accounts. Some even quit their jobs to manage their money full
time in a new profession known as daytrading. “How hard could it be,” they thought.
“Armed with all this information I can research, buy and sell the stocks I want, when I
want, without going through a broker.” But buying and selling stocks looks deceptively
simple. It proved to be exceedingly difficult. Even when armed with all the new internet
technology, real time trading capabilities and access to information, thousands of people
lost their life savings.

Buying and selling stocks seems easy and cheap with online brokerages. What is missing
is the expertise necessary to make good investment decisions. What people learned is
that there is a lot more to trading stocks than meets the eye. Today, mutual fund
companies, money managers, personal financial consultants and stockbrokers are back in
vogue. Ultimately, the internet and technology didn’t eliminate the stockbroker as Levitt
contends, it eliminated inefficient and unsuccessful brokers who “jumped on the financial
bandwagon” during the internet bubble. The internet and technology makes for a better
stock broker today and a more informed consumer investor.
Now with the proliferation of real estate information online, the press is calling for the
demise of the real estate broker. Sound familiar?
The internet is a wonderful tool that gives everyone access to information and brings
transparency to previously obscure real estate transactions. Today’s real estate
companies know this and spend hundreds of thousands of dollars creating user-friendly,
award-winning websites so their consumers can have access to information previously
seen only by real estate brokers. This is wonderful for both the real estate broker and the
end consumer. An educated home buyer, just like any educated consumer, is a better
customer. But with all this information, it is like trying to drink water from an open fire
hydrant. Who has the time to make sense of all this information? We are a country with
an extreme deficit of free time. Do consumers really have the time to continuously troll
the internet to find the home of their dreams? Are they capable of buying advertising,
marketing their homes online, hosting open houses and making sure while people are
looking at the kitchen, someone is not stealing Aunt Millie’s pearls from the bedroom?
Do you really want to pay real estate brokers by the hour?
Let’s take Levitt up on his offer to eliminate the commission-based model and replace it
with hourly billing, like that of the legal profession. We pay lawyers by the hour with no
guarantee they will win our case in court. Do you really want to pay your real estate
broker by the hour with no guarantee they will find or sell your house? Are customers
prepared to pay for all the work that goes into these transactions, even if they don’t find
the home of their dreams, or their house does not sell? Not likely.
Real estate brokers provide a deceptively simple service of helping consumers buy and
sell homes. But Levitt’s unsubstantiated estimate that it takes 40 man hours to sell a
house is woefully and shamefully off the mark.
When consumers bear the brunt of paying for all advertising and marketing costs that real
estate brokers now pay out of their pocket without seeing a penny of remuneration until
the closing, they will quickly see the “hidden cost” of buying and selling a home from
which they are now sheltered with the commission-based structure. In addition, they will
pay for the hours spent on research, creating marketing and advertising, photography,
changes in lighting, paint, furniture needed to get the best selling price for a home, the
endless hours of showings, and finally working closely with lawyers, mortgage brokers
and the buyer and seller to get all the paperwork ready for a closing. And that’s if it all
doesn’t fall apart at the eleventh hour as it so often does.
As the CEO of an online real estate technology company, I am here to tell you that the
real estate broker is here to stay. At the end of the day, we still need a professional to
help us make sense of all the information available to us both off and online and to carry
out all the duties necessary when buying or selling a home. Ask yourself this, do you
really have time to learn an entirely new profession on top of your own life
responsibilities to buy or sell one house? How much is your time worth?
I have looked at the data and crunched the numbers. At the end of the day, the real estate
agent is worth every penny. As an economist, Steven Levitt shows that he knows the cost
of everything and the value of nothing.

Sincerely,

Pete Flint
Co-Founder and CEO of Trulia.com
all real estate… one search
pete@trulia.com
650.804.8267

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House Values Stock Tumbles





The Seattle Times published a story about Kirkland-based HouseValues’ stock plunging last week, one day after the Kirkland company forecasted 2006 financial results that were far below Wall Street expectations.

Shares of the online real-estate services company sank $3.79, or 28.1 percent, closing at $9.71 on trading volume almost 10 times the recent daily average.

John Cook of the Seattle PI, in his Venture Blog, asks if it’s because of new competitor of online house valuations, Zillow.

Robbie Paplin at Rain City Guide asked some good questions and provides a link to this great website, The Rip-Off Report. Robbie asks : “Does management think an upcoming war with Zillow is going to hurt HouseValues earnings? Is the slowing housing market at fault? Have enough people seen Ardell’s “Bottom feeder post” to cause this market cap hemorrhaging? Can TheLoanPage.com mount a credible threat to LendingTree.com? Can Batman & Robin save us?”

I think the answer may lie in their business model, how they currently generate income, and the possibilities for continuing to do this in the future.

HouseValues started out selling entire zip codes to agents for a few hundred dollars a month. Civilians would click on a link that would generate a lead to an agent. That was a profitable business plan for awhile. But then HouseValues went public and had to generate increasingly more income for stockholders, they had to figure out a way to increase that cash flow. So, they started splitting zip codes. But kept the price the same or increased it for inceasingly smaller geographic areas. In exchange, HouseValues promised a certain number of leads to the agents, sometimes just two or three a month, depending on the amount spent and the geographic area.

The problems for agents are that “bad” leads are still counted as a legitimate lead (as far as the numbers promised), and most of these “leads” are months out, as far as becoming customers or clients. With individual agents spending hundreds of dollars a month, with no clear benefits in terms of listing and sales, agents get frustrated and discontinue service. There are just enough success stories to bring more naive agents into the system, but the pie (the geographic areas being sold) is finite. Unless HouseValues continues to carve up the areas into smaller and smaller geographic slices, and just starts selling certain streets, the number of geographic areas it can sell remains the same.

And some areas will never be viable as far as leads go. Rural areas where the concentration of computers could be small, let alone online shopping for a real estate agent or real estate. Certain suburban areas. Low or middle-income areas. In Seattle, this would mean that only certain zipcodes in the metropolitan area would be “saleable” and again, certain zips on the Eastside. The rest of the area would probably be pretty worthless.

Multiply this by XX across the country, and you’ll see that penetration for HouseValues may take years.

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Squeezed?





Squeezed

Today’s Seattle Times has a front page real estate article entitled “Agents Feel Squeezed by New Sites”.

Upon reading the entire article, the headline seems to have nothing to do with the story, but does make a cute tag for the (also unrelated) accompanying illustration. And it does make for “compelling” journalism.

Like other blogs have noted, hits go up when we write about Zillow, so I guess in order to keep my traffic up, I’ll have to do that again.

Zillow is a new real estate portal, now making money by selling advertising. What’s “threatening” about that? Good luck to them.

Redfin is an older real estate brokerage founded in October 2002. The company launched its real estate search site in October 2004 and they raised its first venture capital in September 2005.

They’re a little more “threatening”, but I’d have to say its because of their historical hostility to real estate agents rather than their current business model.

Last year, I estimated that they made approximately $270,000.

This year, as of today, I don’t think they’ve made any money at all. According to available statistics, they’ve not closed one sale in 2006. None. Nothing. Zip. No income from sales. They may have a deal or two in escrow, but no closed sales. They also may also have made some money referring buyers to agents outside of King County, but no income from commissions on the sale of real estate in Seattle that I could find.

They have had plenty of expenses, however. And apparently, they continue to hire more engineers. I’m not sure how many employees in total, but they have 4 managers listed, a public relations person, and 3 agents. With no actual income, they’re going to burn through that $1.25 million pretty fast.

So, no “squeeze” felt from them, either.

It will be fun to see how this all plays out….

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