Michael Bastos Online Writings and Resume


The Open Realestate Firm

Using the book by Jeff Jarvis called “What Would Google Do?” as our standard, we will look at different companies currently existing and go over what you could do if you are trying to compete with the big guys. This week we take apart the Real Estate business to learn how to make it better in a new more open format.

What is the Current Market Analysis? The real-estate business survived for a very long time on both lack of knowledge and or access to the MLS listings. If you wanted to buy a house you had to either hire or know someone with a real estate license so that you can see which houses are being sold in your area or put your house for sale on the Multiple Listing Service. The agent was essentially a middle man bargaining between the buyer and seller and this worked for many years and in some ways still works to this day. The problem is we now live in an information based economy and in this environment anyone who sees himself as a middle man is in dangerous territory. As consumers are getting smarter and smarter about what they pay for because of the internet, no longer can a real estate agent rely on just access to private information as a selling point for his clients. Ever since the MLS was forced to open it’s doors to less experienced agents or they would face anti trust regulations, the market has flooded with websites that will not only help you buy or sell a home, but a potential home buyer can reasonably do all the research they want long before they actually even need an agent to “show them the home”. Yet when the home owner needs to buy the home they have all the tools at their disposal to do it themselves and the only thing keeping them from skipping the middle man is a lame contract that most sign to even prevent the home owner or seller from going that route. This has to change.

What is the Current Market Problem? Since there are so many services out there that will both help you and or teach you how to buy and sell a house yourself and give you in depth information about both the current price of your house and or an estimated price of the house you’re looking to buy, real estate agents can no longer claim to be the only source for this information nor can they claim to be the best at it anymore. With sites like Zillow.com and others, users can get all the information they need both for the property they are trying to buy or sell as well as get neighborhood data from such sites as SpotCrime.com which merges local area crime statistics data with Google Maps to create a visual representation of neighborhoods to stay away from. There are plenty of other sites that offer similar kinds of services and we will talk about those later on.

What is the Current Market Solutions? The real estate market is currently grasping at every straw it can, it’s trying to adopt every kind of technology that it thinks will help keep it’s business afloat all the while neglecting the very core of it’s business. In many cases agents are becoming more selective when dealing with buyers and sellers but this won’t bring back the large benefits that most firms received on a per house basis in the past. In a situation like this most industries feel the need to increase their commission structures to keep up with the decrease in demand but this is also a bad ideas as you are driving more and more customers away from your business model and are essentially pushing them to go out and do the research themselves. By trying to become more and more of the middle man they are essentially eliminating themselves and forcing people to rethink their home buying or selling in the process. You don’t need a middle man to sell your car right? Then why do we feel like we need one to sell our house.

What is the Industry Core Business? I feel bad when I have to break a business down to it’s core components because in many cases the people within the industry scream out and say, “but we do so much more”. In honesty they do and we have to give them credit for that, but when someone is making a decision worth thousands of dollars to them on whether or not to hire an agent or try and research themselves, the last thing they are going to do is listen to you as you try to explain to them why they need you. Real estate agents need to break down to the core what they do that no one else can so here we go. I will explain these more as I talk about what a Real Estate company needs to do to be an open business but there are three main things that are apart of it’s core business model, 1) It has access to show off the properties 2) It can help with processing and doing all the paperwork for the client and 3) it can aggregate all of the necessary information on a single property and be basically an answer and questions service. I’ll talk more about these later but for now just know that anything an agent does outside of these three things is ultimately replaceable and utterly disposable.

What is the Industry Myths? The industry thinks that they just have to wait for the market to come back up for them to start making huge profits from commissions again. This is short sighted as it’s focus is only on the sale as it happens now and doesn’t take into account the idea of protecting it’s business for the future. When I say protecting I don’t mean doing something that will prevent others from competing with you in the future but in many cases that is what the industry thinks needs to occur. Like an animal cornered against a wall, many agents have their home owners sign long and complicated agreements in order to ensure that when they show them a home or sell their home, the agent will get a cut never really allowing the home owner to change his mind or change agents in the process. Many homeowners skip coming to an agent because of these legal contracts and firms are focusing more on the myth of keeping the status quo over disrupting it. Starting your own website or going at it on your own isn’t going to solve your problem, fundamentally changing the way that real estate agents work and make money should be the core strategy for any aspiring young seller hoping to break away from the mold of the establishment they work in. Most importantly, loose the big fancy Mercedes and drive something reasonable and or cheap, whether I am a buyer or seller, I don’t want to have this idea that I will be soon paying for your next vehicle upgrade when we close escrow, simple and not flashy is the key.

What is the Industry Cannibalization? When I say that you need to disrupt your industry, I really mean it. Be willing to do things that most in your industry would consider suicide, a real estate agent should consider reducing his commissions to almost nothing if it’s possible and instead charging for a sort of a la carte service. Many say it can’t be done, they say the amount of time they spend on a client is barely worth the commission they already get but what they are forgetting is that for many clients, the sticker shock comes at the end when they see just how much they paid in commission and this is what the agent should show people to make an a la carte system work. What you think you are loosing in sales when you reduce your commission you make up for in volume if you are efficient with what you do and how you do it. If you think distributed and you think in terms of volume, there is no reason why an agent can’t sell or help buy a few dozen houses a month. Another thing to consider is whether you want to buy houses or sell them, if you focus on just helping your customer sell houses, then you can put all your focus on that, if you help them buy then your efficiency can be geared in one direction and you don’t find yourself trying to sell your own houses to buyers that don’t want them. Double dipping is dangerous in any industry but for some reason agents think they can do it successfully and get away with it. Aside from removing commissions for a basic services business done in bulk and or specializing in only one side of the sale or the other, the most important cannibalization that an agent can do is to be honest with the customer and teach them the industry secrets. You know what I’m talking about, things you would usually take advantage of by keeping from your clients should be open and on the table. When a customer asks you why you do something differently than other agents, you should be more than willing to tell them and throw any future agent that person may have under the bus. In any industry no one wants to be the outsider everyone hates, but if you do it all successfully then when you start selling more houses at a steady pace than your competition you’ll find there are a slew of other hungry sales people wanting to learn how you do what you do.

What is the Industry Competition? Though Google Maps and Craigslist alone can be seen as a major competition to providing users with valuable information and can show an individual what they’re potential home will look like from the outside and they can travel the neighborhood, there are plenty of similar Mashups that give even more great information for users. HousingMaps.com is a mix of Craigslist and Google Maps showing users listing of housing for rent and for sale in most major cities while it also allows people to filter and drill down to a specific price range. Yelp.com and FindbyClick.com allow you to find nearby restaurants and stores letting you know what’s around you when you are making the decision to purchase a property. WalkJogRun.net shows you jogging paths within a neighborhood for those users on the go. Sites like WikiMapia will provide users with pretty much any information they need about an area while Flickrvision combines both Flickr and Google Maps database information to show you the most recently uploaded photos within an area in real time on a map. Site’s like Fizber.com do much of these mashups as well pulling data from various sources into one powerful search engine. On the part of commercial realestate there are sites like Business Planet (http://rru.worldbank.org/businessplanet/) that mashup how hard or easy it is to run or do business within a certain area both in the US and Internationally. Even Forbes magazine has gotten into the competition with their Americans Living Well mashup (http://www.forbes.com/2009/05/04/towns-cities-real-estate-lifestyle-real-estate-top-towns_map.html) showing where Americans are living the best provided by ZoomProspector.com. Zoom aggregates local data such as Population, labor force, job growth rate and median age as well as what neighborhoods have people with more Bachelor’s degrees or higher, have more white collar verses blue collar workers as well as average house hold incomes and median home values. They do an insane job at calculating the average commute travel time for an area as well as proximity to the nearest interstate and many more variables automatically. Basically these companies are in essence competing with Real estate agents to give more accurate and timely information to its users than an agent could ever hope to gather.

How to make it an Open Business? So how would I start an open real estate firm, well the first thing you need is to focus on your core business model. If you are planning on reducing your commissions down to barely anything then you should consider how you will make money in the long haul through other services and fees. Explain to your customers what the benefit is of going through you verses the other guy and show them in a big way just how much they’ll save if they go through your firm. Obviously you are going to need a website, but how your site works and what it provides your clients speaks as much about you as a salesman as does your personal sales pitch. Many people think it’s hard to set up a site that’s more than a catalog but if you use open platforms like WordPress and other tools that are relatively free and or cheap to implement, then you can spend any money you had set aside for internet marketing on making tools that will both aggregate the information your clients need as well as integrate their experience with social media online.

First and most importantly real estate firms need to allow people to see the house, firms should remove the aspect of seeing each agent as a salesman because in many cases the information about the property is readily available to the home buyer and few buyers really pay that much attention to the “sales” pitch that the agent is giving. The idea of having the client drive in your car is a bit too sales oriented as well, I’ve met agents who plan out the path from a list of houses the clients have chosen and give them Google map directions to follow while they drive in front with a motorcycle for two reasons. Number one, the customer has a better idea of where the house is and can drive back by themselves later on if they want to take a second look but number two is that the customer doesn’t feel hassled by the agent.

Secondly you need to set up your business so that you are both a real estate firm and an escrow service, in some states the laws may forbid this but the core idea is to be efficient so provide the service of filling out the paperwork. If you let them know that you are not making a dime or very little from commission and thus saving them a ton of money in the process, they will be more likely to pay for your services whether they close escrow or not. Selling a home is the same way, you are the expert, what lawyers do for legal paperwork your firm can do for estate sales and save the customer a ton of money and you a ton of extra unneeded work in the process. The third part of the core business that a real estate firm should remember as part of it’s core business is that it’s an aggregates information. Yes I said all of those others sites have all of that information but instead of thinking you can compete with them you should use them and the information they provide in an automated fashion so that you can answer any and all questions your customers have without having to do much research if any at all.

If you’ve decided to focus on only helping home buyers buy a home then your site should take advantage of all those services I’ve listed above and bring them all together on one page, you should also allow buyers to select their homes in an almost shopping cart style on your site and in the end provide the drive by drive directions from Google Maps and others while letting them visit the properties themselves if they’d like or have you meet them at each house for a small fee. This way they don’t have to feel pressured to go through you and you are still making money whether you make a sale or not. You don’t even have to be the one to show them around either, have an intern or other worker do the drive around and you can use your more valuable agents on closing the deal on the home for the home owner. By removing the commission on the home’s value you are essentially asking your agents to sell your services and it creates a virtuous circle where the agent isn’t worried about how small his commission will actually be and can focus on getting the lowest possible price for the customer. This way the home buyer may be more likely to recommend your services to others they know if you continue to reiterate how much they saved by going through you verses other firms. This how Geico and others make a killing the insurance industry and it’s how the real estate market should work. By providing a service you also avoid the pit fall that many agents get where they spend a ton of time showing people houses and in the end the buyer decides not to buy or they could never afford it in the first place. There is a huge market out there for home buyers that simply want to look at a house without the pressure of an agent, charge hourly or per house with no strings attached, either way that can be a whole other side of your business.

If you’re going to focus on selling homes then your website has to be somewhat different, you can actually have one site for selling and one for buying but don’t mix the two together. If you are selling the home then you need to make your site more internal than external, your site should be the home page that you refer people to in order to get as much information about the property as possible and have a set of questions that your client can answer for people but you also need an internal system to really push this information out to other sites. Zillow and others have built in API’s not only to garner information but for home owners to post info on their properties. Part of your “services” could be coming in and taking gorgeous pictures of the house with a professional DSLR camera, it can take less than 30 minutes and the right angle to post as many pictures to your customer’s page as possible. You can also post a YouTube video on your site with a short overview of the house.

Too many in the industry think that they need to do something fancy like put a 360 degree camera but the truth is that if you post as many gorgeous pictures as possible or as much relative video as possible you will do more for your client than they can ever imagine. Then your system should allow sites like Zillow and others to point to your site for more information on the property for sale. Have at a minimum 30 pictures of both the inside and outside of the property, also have a quick walk through video so that people get to see the home and if you do a good enough job you can even sell your services to other agents who may find it worth partnering with you for their clients. The secret is to not be afraid of competition but to out do them in such a way where they know they cannot compete with you at your level and come to you for help. What we need is a social network for houses where people can view everything possible about a house from one central location and follow the house on twitter and other platforms. Again automation is the key to making sure that you aren’t putting more work into this then you have to.

If you don’t plan on focusing on just one part of the business that’s fine, though I always advise people to do one thing and do it really well, your area may not be suited for this sort of approach and many home sellers also want their agents to help them buy their next house so you have to consider your market. Yet you have to keep both businesses separate almost as religiously as newspapers keep their ad business and their writers separated. Yes that may seem like twice the work on building two separate sites for two separate businesses but these are all selling points you can present to your customer. You can let your customers know that your business only does one side or the other, yet in the cases where you need both in one package you can tell them that your sister company can help them out with the other side of the business deal all the while keeping it under the same umbrella. The important thing here is to let your customers know that you won’t be trying to sell them a house that is yours more than any other and that you are solely focused on getting the best deal possible for them or vice versa in selling and getting the highest price possible. Again you are cannibalizing your industry by giving them the inside secrets and thus you are seen as a more trusted source for your clients.

Either way whether you are helping to buy the homes or you are setting people up to sell them, have a menu of services that clients can check out in your office and on your website. Putting the prices right out there in the open brings transparency to the industry and it may not make you as much per customer as you are use to making but it will help you move more houses and or provide more services in the long haul. The days of agents putting a ton of time and effort into getting a massive payout at the end are relatively over and you need to think of your business in the long term and not just your next sale in the short term. Also on your sites and or services you should offer something that’s unique to your location, there is a ton of information that is out there for you to aggregate for your clients, but there are some things that are unique to you and where you live that these services simply cannot ascertain.

Since I always tell businesses to have blogs and social media platforms that go along with their sites in order to drive traffic, have a section on your site where you maybe explain the local real estate industry of say San Diego to home buyers. This is where you would give all the juicy secrets that you would eventually also tell people in person but it helps you create a database of information that you can refer your clients to down the road if they want to know more about something. Keep this info categorized so that clients can learn everything from why it’s great to live downtown, to why it sucks to live downtown or give them things to think about that most would never even consider like a calculator of local living expenses so that they can see if they can afford not just the house but the area in the long run, there are plenty of sites you can pull information from for that as well. Most importantly make your site automatic, too many people think that they have to enter in all the information they need for their sites but the less work you have to put into your site and information is being pulled from other sources the more time you can focus on making money and less on keeping your site up to date. In the end remember to innovate, be willing to take a blow at how you make money and be open to gutting your cash cow so that you can make more of it down the road. Let me know if you are in the real estate industry and like or plan to implement any of these ideas or if you are against them, either way we want to hear back from you.