Greg: Welcome to this edition of the Greg Fly Podcast, my excuse for talking to people I find interesting about subjects that I'm curious about. I'm Greg Fleischaker, your host, and today I'm joined again by Jon Mand from Lenihan Sotheby's International Realty where we are both licensed real estate agents. Jon, good to see you.
Jon: Good to see you, Greg.
Greg: You mocked me last time with my opening, so I will just say that I find you mildly interesting, but I couldn't round up anyone else from the office, so here you are.
Jon: Fair enough.
Greg: Fair enough. All right. I wanted to talk about the MLS today, so in particular, the Louisville MLS, and how it compares with maybe the reason it got started however many years ago, and Zillow and Trulia, and what people actually think the MLS is. I know you have some thoughts on this and some expertise, so you okay to talk about that?
Jon: Sure, happy to.
Greg: I don't know exactly how many years ago what we call the MLS actually started. My dad was licensed in the early '70s and he can remember carrying around a phone book of listings. I guess that was the MLS, but not as we think of it.
Jon: Yes, absolutely. That all predated my involvement a little bit. Luckily, I came into the business after the phone book days.
Greg: You should have seen it, it was something else. I think it was every month, maybe it's every couple of weeks, a new phone book and that was where all the listings were and whoever had that phone book actually had the information. As we've gotten involved with computers and technology, the information's easier to distribute, I guess, and so now there are a lot of portals where you can find a lot of the information, but they're not exactly the MLS, right? There's a difference between Zillow and the MLS?
Old School MLS Systems
Jon: Yeah, there's a big difference. Going back to the phone book days, those were certainly times when the only portal to get any information on listed properties was obviously to go through a real estate broker. That access to information has been dis-intermediated considerably with all the technology that's rolled out in the real estate space over the past fifteen years or so, Zillow and Trulia being the largest disruptors there. A lot of information's available, but the quality of the information and then, importantly, the analysis of the information is where we can really fit in and help our clients out.
Greg: That's where Realtors had to change the most, right? It's not necessarily hording the information, but there's so much information. How do you figure out what is good information, it's like everything on the internet. It's all out there, how do you figure out what's good, what's relevant, what's worthless ...
Jon: Exactly. It's kind of like WebMD, you know, you still go to a doctor because all WebMD did was make everybody hypochondriacs, where everything is wrong with you as soon as you start reading ...
Greg: That's funny that you mention WebMD because I think a late-night comedian just joked about it that everything is either a cure, causes cancer, or does both. Everything you can eat, bacon cures cancer and causes cancer, you know, butter, the same thing. WebMD says everything.
Jon: Exactly. It's similar in that respect, that you can get all the information on all sorts of things on WebMD, but you still need a doctor to advise you and actually diagnose and then come up with a cure or therapy based on your situation. Same thing with real estate. You can get a lot of information, publicly available, tax records, you can go to portals like Zillow and Trulia and those types of online sites, pull in all kinds of information, rough appraisal, Zestimates and that sort of thing, but all real estate is unique. That's the interesting thing about this business. Every piece of real estate is unique. There's no two pieces alike, by definition. It takes somebody with experience and just expertise in the business to be able to look at it and pull all that data in and then say here's what's important in all of this raw data that we've collected, or that you have access to. Here are the things that you should be focusing on, and guide the customer through that process whether it's a buyer or a seller.
The Power Of An Accurate Home Evaluation
Greg: You mentioned on a previous podcast, it's not only the raw information, what did something sell for, what did your neighbor sell for, but it's also having the experience of walking through homes with buyers on a daily basis and knowing, having that pulse of the buying public and what is expected, what's an extra, what is frowned upon, which the MLS in any form can not possibly relay to a buyer who's looking on the computer.
Jon: Yeah, that's very true. I spend a good portion of my time explaining Zestimates to people, the automated estimate process through Zillow. A lot of buyers will look at it and say well, Zillow says this house is worth X, or the sellers will look at it and say Zillow says my house is worth Y. I spend a lot of time just explaining how that automated model works, the limitations of using an automated model. I'd have to pull the stats on Zillow, but I think that their model is predicated on being within twenty percent of the value eighty percent of the time, or something like that. It leaves a lot to be desired if you're a buyer and a seller and trying to actually figure out what something is worth.
We come in and go through the evaluation process representing buyers or sellers, and obviously it's not an automated process. It's a very manual process, very time consuming, but it's something that we do everyday where we pull in the most recent sales, the most comparable properties, and then we make a lot of those adjustments for homes that the automated models won't. Obviously, we're accounting for square footage differences, and acreage differences, and parking differences, two car versus three car, et cetera, but then you get to know the subjective things that you have to make adjustments. What are specific amenities worth or not worth?
Greg: Like when someone says I finished my basement. What does finished mean in that sentence, right? Some basements are palaces, and others are not.
Jon: Yeah, so you want to look at that. Do the comps have really elaborate basement finish with engineered hardwood floors, and wet bars, and granite counter tops, or is it just dry wall and carpet in a big empty family room. We want to make sure we're assigning the correct value when we're making those adjustments and square footage differences, and then just all of the other things that go along. Does it have a pool, a pool house, does it have secondary structures on the property, is it a first floor master versus a second floor master. Obviously, we try to use comps that are as similar as possible in the process, but sometimes you run into situations where you've got an outlier in the neighborhood and you're trying to make these adjustments.
What's a three and a half car garage versus a two car garage? It depends on the neighborhood and what's standard for that area. We see a lot of properties where the sellers particularly want to get value out of all the things they put in, the imported marble, and the just over-the-top finishes, and those are super adequacies is the term, where they've over improved the property relative to the neighborhood. Again, it's stuff that an automated model really can't take into account. We spend a lot of time helping people through this process.
Greg: Do you know where some of the automated systems get their information? Just to be clear, the Louisville MLS as I'm describing it, that's the actual database where agents go in, or offices and enter the raw data. When you list a new home, the office is going to put the data in and that's the MLS that all the agents here who belong have access to. Then, some way Realtor.com gets that info, Trulia gets that info, Zillow gets that info, but sometimes they get different pieces of it, right?
Jon: Yeah, Realtor.com pulls directly from the MLS systems across the country.
Greg: That's part of us being Realtors, correct?
Jon: Correct, so that is probably a very clean data source, but there's a lot of difference between the fields, data fields that are provided in each individual local MLS across the country and what Realtor.com displays on the national website. That's one difference there. The other sites, Zillow and Trulia and those things, they will pull information from a variety of sources. They'll pull from publicly available tax records, from other websites, they'll pull them from direct brokerage feeds, all of the listings at our company are directly fed into Zillow and Trulia so we want to make sure that ...
Greg: That means that's an individual basis for each brokerage to decide to opt in or out with Zillow and Trulia.
Jon: Correct, and so a lot of times what we'll see on these other sites when people go venture outside of our local MLS, the data can get a little stale. It depends on the refresh rates on the different sources, if they're scraping the county tax record information, believe me that can lag considerably depending on what's going on at the county clerk's office. The MLS information provided through your agent is going to be the most timely and accurate information by far of any that are available. That timeliness can be a huge factor. If you're a buyer looking to buy in a very desirable neighborhood, when homes go on the market immediately with multiple offers, if you're waiting for a data refresh that takes twenty-four hours, forty-eight hours to cycle ...
Greg: That's too long.
Jon: You can see the problem.
The Power Of Your Brokerage Network
Greg: Right. In my mind, it helps to look at Realtor.com and I put Trulia and Zillow in the same box, but they're kind of competitors and they have a different model on how to get that information, but I still come back to an agent's access to the MLS here locally is the best access. But I think we've created a situation where there's so much information available to sellers and buyers in that there's, the MLS becomes such a beast in some ways, that I find that some people now are asking, I'm interested in selling my house but I don't want to mess with the MLS, and I don't want to be on Zillow, and I don't want to be on a thousand different websites. What are my options? You've done a lot of work in this field. Have we gotten ourselves to a place where maybe our brokerage network is as valuable, more valuable, a different value than the MLS?
Jon: It definitely has a tremendous value, the reach of our client base of buyers and sellers. It doesn't matter which side of the transaction you're on, that's a huge competitive advantage. We're the number one selling brokerage firm and have been for over four years now in the high end space in Louisville, so $500,000 homes and above. We have just an out-sized proportion of that market, so for sellers that are listing their properties with us, a big part of the reason, or one of the competitive advantages we bring is we have the buyers for that product. If you're a buyer looking for a house, guess what, we've got the listings.
Not only the listings that are going to be on the MLS or on Zillow and Trulia and that sort of thing, but we represent a lot of clients that have a home for sale, or they're interested in selling potentially but they're not actively putting it out there on the market. It's one of those where hey, if you guys happen to have a client looking in my neighborhood and price range, we'd be interested in thinking about selling. It's not something that we're actively listing but we'd file it away and keep it in our back pocket. At the point that we have a buyer-client looking in the neighborhood, they've seen everything on the market, nothing fits, we start going though the Rolodex and say wait a second.
Greg: Right. All right, great. I think we have thoroughly confused the Louisville MLS conversation, if anyone needs to ...
Jon: I'm happy to help.
Greg: Give us a call if you want us to straighten it back out and we'll unsay whatever we said!