Archive for April, 2008

The challenge for Realtors and lenders in the future: How do you sell to consumers who don’t want to be sold?

This is my column for this week from the Arizona Republic (permanent link). The lender in the story? Brian Brady, America’s #1 Mortgage Broker.

 
The challenge for Realtors and lenders in the future: How do you sell to consumers who don’t want to be sold?

We represented a cute couple in the purchase of their first home late last year. That much is not news: First time home-buyers are the bread and butter of the real estate business. What was interesting to me was how internet-focused they were.

The husband, Michael, is an internet adept, but his wife, Danielle, is a true wizard. Her primary interface to the commercial world is the world wide web.

They found me on the internet, of course, and I referred them to a lender that I know through the nets.

Consider this: There are 30,000 Realtors in Phoenix, and at least that many lenders. All of them are advertising at a furious pace — newspapers, real estate magazines, supermarket shopping carts, bus benches, billboards, radio, TV — plus balloons, free pens and scratch pads and coffee mugs, refrigerator magnets, flower seeds, recipe cards and Halloween pumpkins.

Real estate professionals spent millions of dollars trying to get Michael and Danielle’s attention, and all of that money was wasted. They are not paying attention to advertising.

To the contrary, if Danielle cannot completely research a product or service on-line, she won’t have anything to do with it. They never once went into the home they were buying without a digital camera. I watched Danielle crane around in impossible contortions so she could read and write down the model and serial numbers from the washer and dryer so she could research them on-line.

Looking forward, nothing changes as fast as we expect it to. But looking backward, the world seems always to be changing like dreams. Danielle is immune to advertising. She recycles her junk mail unread. She doesn’t want to be pitched, she doesn’t want to be sold, she doesn’t want to be wheedled or needled or cajoled. She doesn’t want to be closed on.

All those old school gimmicks still work — on some people — and they will continue to work — for a while. But Danielle is the future of real estate marketing. Realtors and lenders are going to have to learn to sell to consumers like her.

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Will Realtors be disintermediated by on-line tools? Probably not, but tech-savvy Realtors will supplant those who do not adapt

This is my column for this week from the Arizona Republic (permanent link):

 
Will Realtors be disintermediated by on-line tools? Probably not, but tech-savvy Realtors will supplant those who do not adapt

The big news in real estate is the market, of course. My view is that the American economy is much stronger and more resilient than you might guess from day-to-day reports.

But the other big story in real estate is the idea of “disintermediation” — replacing Realtors with some combination of do-it-yourself effort and hi-tech tools. The stock retort to this notion — and I have made it myself — is that people will never buy homes like they buy books on Amazon.

Perhaps so. But I lived through the desktop revolution in printing, so I have a different take about the dreaded word disintermediation.

If the triumphant yelp is that some travel agents and some stockbrokers still have jobs, I will point out that some blacksmiths still have jobs, too. Horses still need shoes. That much is beside the point.

Here’s my take on the matter: Don’t think in terms of disintermediation. Use the word “supplantation” instead. In industry after industry, old techniques are being supplanted by new ideas. More importantly, the old technicians are being supplanted by new ones.

This is not a necessary consequence, but it often works out that the “old hands” don’t want to make the change to the new ways of doing business. Even if they do, the “first-mover advantage” can be too great to overcome.

The same goes for everything — most especially real estate. Realtors who are not all the way onboard with the way business will be done in the future will be left behind at the station.

A real estate transaction is so complex that most people will continue to want professional advice — even as they handle many of the simpler functions Realtors might have done in the past. The work we do will be superficially similar to the work others have done in the past — but those others won’t be doing it any longer.

Will they have been disintermediated? Not if you insist that they haven’t. But they will have been well and truly supplanted.

When will that happen? Ask a blacksmith — if you can find one.

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Zillow.com’s Mortgage Marketplace brings anonymous apples-to-apples mortgage rate quotes to consumers, free consumer leads to lenders

This is my column for this week from the Arizona Republic (permanent link):

 
Zillow.com’s Mortgage Marketplace brings anonymous apples-to-apples mortgage rate quotes to consumers, free consumer leads to lenders

Wouldn’t it be great if you could get a broad array of mortgage quotes without having to make dozens of phone calls? And what if you could make a true apples-to-apples comparison among quotes? Better still, what if you could remain anonymous, making yourself known to the lender only when you are ready to do business?

Seattle-based real estate start-up Zillow.com last week released its long-anticipated mortgage lending product, called the Mortgage Marketplace, and it offers all those features and more.

Unlike Zillow’s “Zestimates,” the loan quotes are generated by real people, working lenders. Zillow will basically be acting as a hands-off intermediary between borrowers and loan originators.

Consumers using Zillow’s new Mortgage Marketplace will be able to anonymously solicit bids for loans from participating lenders. The consumer will fill out a detailed form disclosing all pertinent financial details.

The form will be submitted anonymously to participating lenders, who will, in their turn, produce estimated loan quotes, submitting them, through Zillow, to the consumer. The consumer will then have the choice to make direct contact with particular lenders to decide whom to do business with.

To a very large degree, the information asymmetry between lender and borrower will be done away with, since the loan quote will detail every fee associated with the loan. Moreover, Zillow will be implementing a reputation-management system whereby borrowers will be able to rate lenders on their performance.

In return, the lenders will receive Zillow’s mortgage leads at no cost.

What’s in it for Zillow.com? When you fill out a form requesting a loan quote, Zillow will be writing “cookies” to your local browser. They won’t be storing your financial details on their own servers, but they will be able to access those cookies in the future to target specific ads at you according to your demographic characteristics. Zillow will also be selling access to these cookies to other ad-supported sites.

So, just as with free-TV, in exchange for looking at advertising, you will get free anonymous mortgage quotes and lenders will get free mortgage leads.

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Looking for a bargain in Phoenix real estate? Add some elbow grease to your money and go for a bank-owned home

This is from my Arizona Republic column (permanent link):

In the past we’ve talked about how home sellers can command a premium price in the current Phoenix real estate market, even if they are competing with nearby foreclosure properties, by putting the home into turn-key condition.

So what’s the counter-strategy? If you’re a buyer looking for the best possible price, what should you do?

Go for the bank-owned homes, of course. Trying to buy a short sale can be heart-rending. The price listed in the MLS will be meaningless. The lender will decide what price to allow. Still worse, lenders drag their feet on short sales. If they have any hope of keeping the loan alive, they won’t let the house go. Meanwhile, your own interest rate could be spiking, rendering you unqualified for the deal if and when it finally comes through.

By contrast, bank-owned homes (you might hear them called REOs, for “real estate owned”) can race through the escrow process. Once a bank has foreclosed on a home, all it wants is to get it off its books and recover whatever cash it can, as quickly as it can. In consequence, your offer might be approved in just a couple of days, with the bank rushing the closing date any way it can.

Because of that, your loan qualification matters a lot. If you look shaky to the bank, it might pick a lower offer from a stronger borrower just to be assured of getting whatever money it can out of the deal.

And then there is the condition of the home. People  losing their homes sometimes let the daily maintenance slide. Expect to see filthy carpets, scuffed-up paint, damaged doors. The air conditioner might have been removed and sold, or the water heater — or even the kitchen sink.

In most cases, the bargain price you get for the home is going to be offset somewhat by the money you will have to put into it. But if you are handy and industrious, the profit on these expenses can be two dollars or more in value for every dollar you spend.

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