Living with greater transparency - the challenge for real estate
Two articles this week prompted my thoughts about the challenge that greater transparency plays in our lives and the impact it will have on the real estate market. I have commented in the past as to the use of obfuscation by some commentators from within the real estate industry when talking about the market, a behaviour that I sense will have no part in the future.
The first article that caught my eye was a tweet which came into my stream as a retweet from a person I do not know but the content certainly made me sit up!
A person using social media to reach out to as wide a community as possible to ask a question - a very relevant question as to the condition of a rental property. A question they could have asked the letting agent or the landlord, however they chose to reach out to an open audience to see if anyone could answer the question. This 'reaching-out' to people's connections whether on Twitter or on Facebook or any other medium is what the internet allows us all to do. Rather than historically relying on controlled channels we can look for trusted connections to help us evaluate products and services.
The lesson for the real estate industry from such examples is be open, be ready to engage and answer all such questions and better still, be proactive and provide as much relevant information as possible. If as the case in this example there really is a water-tightness issue with the property (and I have no idea) then take steps to discuss with the landlord to be ready to answer any such question, after all the agent is just that, the agent, not the owner.
The second article was actually a link I saw to a random listing in the US on Zillow. A house that had been on the market for a couple of months. Now; with well over 2 million homes on the market this house is not remarkable in anyway. What is remarkable, and it is not for the first time that I have seen this, but in the context of this issue of greater transparency this property caught my eye because of the richness of valuable information available on the property that we would never see on a property in NZ.
Let me highlight these insights and in so doing provide an explanation of why I think we are being short-changed in regard to valuable property information, not so much from the real estate industry but from at heart the property data industry.
1. Sale Price - this property much like most in the US and in fact most countries has an asking price. Not a sticker price, but a price which based on comparable local sales would indicate that it should be worth as judged by the listing agent, thereby providing prospective buyers with a guide. This property may sell for more than the $339,500 if there is sufficient demand just as would be the case for property in Auckland at the moment. To put a price on a property, every property for sale in NZ would not be extra work for real estate agents, it would not diminish their role or devalue the sale price, it would though I think build respect and openness!
2. Last Sale Price - this property sold for $390,000 just over 3 years ago - FACT. A fact that is true of all houses in NZ, yet we are not given open access to this information, it is locked away behind payment walls by government entities (local/ national) - it is public record and should be openly accessible to assist the property process.
3. Days on the market - valuable information, thankfully we do have this insight on both Trade Me Property and Realestate.co.nz in the form of a listed date; although somehow this data structure seems more telling.
4. Estimated valuation - in this case the proprietary Zestimate. A complex dynamic algorithm developed by Zillow to place an up- to-date estimate on every property in the US. Now in NZ you can buy such an estimate from QV for $50, but in the US the data is free, dynamic and referenced as to when it was last updated. QV is joint venture between the Government owned entity Quotable Value Ltd and the US company Core Logic. It's NZ public record data being managed through a US technology company's algorithm to be sold back to us at $50 at a time!
It is interesting to see that QV report an accuracy of 10% variance of sale price to estimate 65% of the time and 20% variance of sale price to estimate 93% of the time, Zillow goes further by reporting 5% / 10% and 20% variance by major city with accuracies of up to 73% at 10% variance and 93% for 20%. So the data model of QV is good - we just have to pay the government and the US company for the pleasure.
5. Price History - not only do property buyers in the US have an asking price and a 'last sale' price they also have an incredible insight into the historical price movements of both sale and asking price as cited by this example. Here we can see the historical transaction record (a bleak picture in this case as the US property market tumbled and continues to struggle). Two public record sale prices together with details of when the property was listed at what price and price changes as well as by which agency.
I can sense a loud cry from the real estate industry about this data, that it should not be exposed as to do so would be to diminish the appeal of the property. However if all property was laid bare with the true facts, buyer could make informed choices. Property transactions would not collapse. Quite possibly we might not have the rampant property speculation and price bubbles built off the back of sketchy information and hyped frenetic auctions. Maybe, just maybe this greater transparency like sunlight could help us all better understand and operate with greater confidence in the property market!