Redfin is launching tonight The Real Estate Scientist, an initiative to use empirical techniques to improve the way our agents and clients buy and sell homes. We’re releasing our first report, which provides seven recommendations for home-sellers, and training our agents on the findings, which should allow us to have more informed conversations with our clients.
We developed this research because the housing downturn has made it harder to sell our clients’ homes. This in turn has made us more introspective about how we can use our special powers – our computer science background and our consumer commitment – to be the best brokerage, not just the best real estate website.
This has been a contentious process. At lunch we argue over the practical questions we have to address for our clients, like the best day to debut a listing or whether it’s really worthwhile to post an MLS property on craigslist. But why argue when you can experiment?
There are plenty of excellent academic studies of local real estate markets. And Redfin has data that most academics don’t: access to 17 MLSs with more than 250,000 listings, and a website used by hundreds of thousands of buyers every month.
We’ve tried to put this information to good use. We know that listings that debuted on Friday rather than Thursday drew 7.7% more visitors; that a vacant home increased the odds of a price reduction by 9.5%; that, because of how real estate websites filter on price, a listing priced at $351,001 got as much as 7.1% less traffic than one priced a dollar lower. A team of agents, engineers, statisticians and writers worked together to produce the report. Some of their findings are surprising, while others confirm conventional wisdom, which has value too.
We only worry that the name we’ve given this initiative, “The Real Estate Scientist,” will open us to being mocked. And too, we hesitated to give consumers simple answers due to the complexity of the underlying data. But in the end we chose the name because it was the one we had used all along, it was fun, and it was the simplest way to explain how our approach was different. We strove for conclusive answers because we have houses to sell every week, and customers who need straightforward guidance.
Consumers who have read early drafts of the report overwhelmingly found our recommendations useful and effective. The industry reaction will likely be different. Some will argue that the report substantiates already well-understood tactics, while others will take the exact opposite position, refuting our points one by one.
But the truth is that a discussion of how real estate brokerages can deliver better results, based on data rather than just opinion, is in everyone’s best interests. And the findings aren’t simply a prescription for how we’ll serve our customers, but the starting point for an informed conversation about pricing and marketing our listings. Hopefully you can contribute to this conversation too, suggesting future avenues for research.
And now we are going to be talking about the findings on “Today,” probably around 7:40 Friday morning. What fun! To get ready for the interview I got my first $50-haircut, by a young Albanian in midtown Manhattan who compared my current style to 1989 Depeche Mode, and suggested I try a different color. “Like blonde?” I said, intrigued. “Just not so gray,” she mumbled. Because I had 30 minutes before running for a train, she cut quickly, putting off a very stylish socialite who was demanding that her hair be wrapped for the ice storm.
And then it was exhilarating to run – really run – through the streets as the year’s first flakes fell and pedestrians looked up gratefully into the sky. On the sidewalks at nearly every corner, there was one guy pushing a salt spreader and, this being New York, another to stand there and tell him what to do.
I had a meeting in the coffee shop of a remote, pretty Connecticut town, covered in silence and snow. Now on the train back, a teenager next to me is reading an article entitled “Sex Snafus That Can Send You to the ER”; a culinary school student who cried after being short on the fare has asked if we could stay together through the connection; and a bald salesman has been eavesdropping on my cell phone conversations.
“You can’t live in fear,” he says, repeating what I just said when I hung up on my last call. Then he adds: “Guys like us, we’re not afraid.” I nod, thinking about the next day’s show. If only that were true!
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- The Real Estate Scientist Strikes Again: Pricing Your Home
This month’s issue of The Atlantic reports on research by Cornell University’s Manoj Thomas and his colleagues which found that consumers perceive round prices, such as $390,000, as being higher than prices such as $391,534. Round prices were in turn found to be correlated with a lower final sales price. Professor Thomas’s research, posted to the Web last week, validated findings first reported by Redfin in March 2007, based on an analysis of more than 30,000 2006 homes sales in Seattle, Washington. We would have included our March 2007 findings in our original Real Estate Scientist report, but worried that our data lacked a plausible rationale.
The Cornell study, which evaluated empirical data for 27,000 home sales in Florida and Long Island but also included a controlled trial, took the next step to understand the consumer behavior behind the numbers: when researchers presented 90 college undergraduates with a hypothetical home for sale at different prices and asked if the home were overpriced, the subjects were more likely to say that a home was overpriced if the asking price was a round number. Professor Thomas and his colleagues posited that consumers associate round prices with high-priced items such as a car, and precise prices with low-priced items such as a pair of jeans.
It seems like his findings could help plenty of people: despite the conclusion that a round price is associated with an unfavorable result, Professor Thomas found that more than 63% of homes sold in Long Island and Florida had an asking price ending in three zeros. Of course, since real estate is a competitive marketplace, if everybody took this advice, it wouldn’t help anybody.
It is interesting to compare the Redfin study with the Cornell research:
- Redfin organized home sales into different buckets according to the last three digits of the asking price, and found that homes with an asking price ending in -500, such as $391,500, had the highest sales price-to-asking-price ratio. By contrast, Professor Thomas found that every zero in the final three digits was correlated with a lower final price.
- In Redfin’s study, the size of the effect for the last three digits of a house price was never greater than a .58%, whereas in the Cornell study, the effect was as great as .72%. In either case, the effect is significant: .58% of a $500,000 home is $2,900
Unlike Redfin, Professor Thomas excluded transactions from his consideration with an asking price ending in $-999, as this price invites a specific, already well-studied consumer reaction. Professor Thomas also studied houses and condos together, whereas Redfin published separate numbers for each. Neither Redfin nor Professor Thomas evaluated Kevin Boer’s excellent suggestion for Pacific Rim sellers, of ending a price in 8s to appeal to superstitious Chinese buyers.
We’ll add Professor Thomas’s research — and perhaps our own, too — to our summary of practical, data-driven advice for home-sellers. Thanks to a Friend of Redfin for bringing this new research to our attention, and also for submitting our bonus link for today.
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The Real Estate Scientist Strikes Again: Pricing Your Home - More Real Estate Science! Finding the Sweetest Deals
Redfin’s real estate scientists published a big, glorious new report today on when homes will sell for a big discount and when they won’t, based on thousands of home sales across the country.
We spent two months grinding through the data because every day, we see buyers with born-to-lose tattoos on their foreheads making lowball offers doomed to instant failure. And then sometimes they win.
Nuts! Figuring out fast when a deal will fly and when it won’t is the key to making our margins work.
We’ve tried to sort out when a seller will give ground, a posting that immediately set off a discussion at Newsweek and U.S. News & World Report and across the blogs. We’ve talked about it on TV.
Meanwhile, pricing discussions have been all the rage in our discussion forums, with visitors asking how negotiable new construction is, or even what to offer on an individual property.
Enter the real estate scientist, who shreds MLS data, website logs, academic research and tax records to provide reliable answers to practical questions: what really works when marketing a listing, what type of listings sell in less than seven days, whether high commissions lead to faster sales (they don’t).
Today’s report is about how to find the sweetest deals. Redfin’s Rob McGarty and M
ose Andre crunched the numbers for all 9,053 sales of single-family homes in Fairfax (Virginia ‘burbs), King (Seattle area) and Los Angeles counties, between April 15 and June 15 this year, to look at homes that sold for a lot less than the asking price.What surprised us right off the bat was how small the average discount was: after all the bad news about the housing market, it was still less than 2.5%. We were also surprised to see that a small fraction of listings got a huge discount, of more than 10% off list price.
This means that 90% of the time, lowballers are wasting their time. But that 10% of the time, they’re saving $50,000. The trick is finding the listings ripe for a discount.
So for each market we split the sales into two buckets: those that got the biggest discount (top ten percentile, an average of 11.4% off the final asking price), and all the rest (the 90th percentile and below, which got an average discount of 1.5%).
Then we compared the two groups to see what the sales involving a big discount had in common:
1. 83% more likely to have been on the market for 90+ days.
2. 73% more likely to be marketed as fixer-uppers.
3. 20% less likely to feature a noteworthy remodel.
4. 28% more likely to have already been price-reduced (though there were some confounding factors).
5. 52% more likely to have been seller-owned for 20 years or more.
6. 9% more likely to have been seller-owned for less than five years, a slight but surprising correlation.
7. Only 9% more likely to be a short sale or bank-owned. Most consumers expect this correlation to be much stronger.The portrait that emerged is of a bimodal market (much like the VC market right now) — a few homes in the most sought-after neighborhoods sell for well above asking price, most sell near the asking price and anything distressed or run-down (more homes are run-down now than before so the drop in prices is in part a reflection of the drop in the quality of the homes being sold) just keeps dropping and dropping.
The bottom-line is that the condition of the home and its length of time on the market — surprise, surprise — are the main drivers for discounting — but how long the seller has owned the home is a big factor too. And foreclosures aren’t as negotiable as people think.
The report has already gotten picked up by the LA Times and now the Seattle Times too (FRONT PAGE!!!).
Get the full paper (PDF), which breaks out all the data by county, and goes into the methodology too.
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More Real Estate Science! Finding the Sweetest Deals - Boston Real Estate: Not Clinically Depressed, Just a Split Personality
Redfin’s Chris Glew — Redfin Advantage essayist, Boston hockey fan and student of ancient Mexican turds — stopped another fur-flying meeting in its tracks last week with an arresting observation. He said that even in this slow real estate market, he could tell just by looking when a new listing was going to sell in a couple of days. “I see it all the time,” he said, to a now-quiet room.
Whereupon further fur flew. Someone said that the only common characteristic would be a fire-sale price. Others talked about school districts, sex offenders, safe neighborhoods. And then someone quoted the founder of modern surgery, a corpse-stealing pragmatist who challenged the French mania for grand medical theories: “why think when you can experiment?”
Why indeed!
So the Real Estate Scientist leapt into his white lab coat and began sorting through 9,212 real estate records: single-family listings in Suffolk County, Massachusetts that were sold between October 1, 2007 and March 31, 2008.
Why the Boston real estate market? Because our ex-hippie, oils-painting, die-for-the-customer, hired-all-his-cousins market manager — Alex Coon — laid it on the line, betting that such listings exist, even in the dead of the miserable Boston winter, and that most of them would be in Newton. He was right!
Here’s a rundown of the towns with the most listings that sold within seven days on the market; the numbers in parentheses calculate the hot properties as a percentage of the total houses that sold in those areas:
- Arlington: 18 (23%)
- Boston: 21 (7%)
- Brockton: 16 (8%)
- Haverhill: 11 (12%)
- Needham: 14 (20%)
- Newton: 27 (16%)
- Wellesley: 12 (14%)
But it’s not just the location of the listings. Even in these markets, the average days on market was 85 days. The average for the entire Boston area was 105. This suggests that at least one reason hot properties were hot was the property itself.
So for the areas where there were a significant number of hot properties, we compared the listings that sold in less than seven days with everything else in those areas. Our goal was to develop a clear portrait of the hot property, so our buyers would know when they really had to hop to it. And here’s what we found:
- Beds and baths were the same for both types: there was no pattern in terms of bedrooms and bathrooms. Hot properties and pariguayos (party-watchers, aka slow-to-sell properties) both had 3 bedrooms and 2 bathrooms.
- Hot properties are bigger: The median square footage for hot properties was 7% larger than the pariguayos. The median lot size was more than 13% larger. Maybe that seems obvious to you — bigger is often better — but when we began the analysis, we had imagined hot properties as cute little cottages.
- Hot properties are older: the median year built (1949) for hot properties was 29% earlier than for the pariguayos.
- Hot properties are expensive: it turns out that hot properties weren’t exactly priced to move. In fact, the median list price of hot properties ($459,000) was 78% higher than the pariguayos. And the high price isn’t just because the houses are bigger: the median dollars per square foot was nearly 40% higher for hot properties ($275) as compared to pariguayos.
The bottom line is that hot properties are bigger, older, and more expensive. That there are distinct areas and house types where properties still sell fast supports Chris’s notion that the real estate market isn’t really clinically depressed; it’s more of a split personality, with the good stuff selling fast, and the rest languishing.
You could take that theory a step further, and say one reason the market is bad is because the inventory is low-quality, first because some of the least appealing properties are being forced onto the market by foreclosure and second because lots of unappealing inventory is hanging out from the year before when the rate of new listings was higher. We’ll have to test that theory out on another day.
Bostonians, what do you think of these findings? Real estate watchers, what other markets would you like to see us analyze? Many thanks to Redfin’s Rick West for doing all the hard analytical work.
Bonus Link, from the Original Friend of Redfin: Washington Redskins cheerleaders stun massive Indian cricket crowd.
Also, since cycling season is about to begin, we are releasing some new footage of the Redfin cycling team on a training ride:
Photo: Shutterscript on Flickr.
Originally posted here:
Boston Real Estate: Not Clinically Depressed, Just a Split Personality - marketing for real estate agents
A lot of professionals consider that marketing for real estate agents is just about looking for clients, advertising, sites, brochures or newsletters.There are lots of “marketing” activities that result simply inefficient, time wasting and really demoralizing. Competent marketing for real estate agents is an ongoing activity defined by a number of steps. It is necessary that you see what true marketing for real estate agents is about; you will be amazed to witness how in 6 simple steps you create a winning strategy for your agency, one that will enhance your commercial image and propel your success. 1. Establish Aims Effective marketing for real estate agents is achieved by recognizing where you are and where you wish your agency to go. Detailed objectives present what you desire and how to get it. These should be founded on what you visualize yourself doing, possessing and being. Question yourself regarding what you want in terms of job, lifestyle and income. Your goals have to be SMART: Specific, Measurable, Achievable, Realistic and Timely. 2. Specify Your Main Clients You have to define, plan and target a specific group of individuals showing similar characteristics. You have to exhaustively know who your possible buyers are in order to understand why they would accept your service. True marketing for real estate agents is about holding sincere conversations with buyers about who you are and what you offer and building mutual faith and deference. To achieve this, you have to know every detail about the individuals behind a potential sale. Just then, you are able to deliver the accurate offering to possible buyers. 3. Create a Selling Message You have to distinguish yourself from the competitors within your arena by means of pluses, abilities and life experiences that are meaningful for your customers.4. Train your customers Good marketing for real estate agents lets you see that it is an ongoing training process. You have to deserve the buyer’s confidence and educate him on the facts in order to make him lastly acquire a property from you. Buyers first realize they can buy a property, then, they proceed to get facts, next they asses the different options they possess and lastly, they take action. You must recognize in which phase your buyer is in order to either begin from zero, clarify wrong ideas and get over objections or go for the sale.5. Establish a Recommendation Scheme Recommendations are essential in marketing for real estate agents, because these are the simplest way to get steady buyers. Tell your buyers that you expect recommendations and what sort you want. The more you remain fresh in your buyers’ minds, the more chances you possess of them talking to others about you. 6. Define a Monthly Selling Plan Based on the five preceding points, enforce genuine marketing for real estate agents with a detailed plan. Write your monthly objective in terms of potential clients, income or any other meaningful condition. Establish a weekly action program with events you will go to, individuals you will contact, meet or send information to, call on former buyers and writing articles.
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WP Robot Wordpress Autoposter - What Do Wealthy Home Buyers Want From Their Real Estate Agent?
Wealthy home buyers who buy multi-million dollar homes are typically self-made millionaires with new money, according to a recent online survey of 683 Coldwell Banker Previews International property specialists. The study revealed the top professions of these affluent customers. According to the respondents, 88 % of their customers are business or corporate executives, 37 % are physicians, 31 % are lawyers, 30 % are financial professional and 14 % are entertainers, entertainment executives or professional athletes.
Wealthy home buyers require their real estate agents to be equipped with special skills, according to the Coldwell Banker’s survey. Given the magnitude of the financial transactions involved in luxury home purchases, 78 % of sales associates said that the top most need their clients require from their real estate agents is privacy and confidentiality. The luxury customers also want their real estate agents to exercise discretion while dealing with their multi-million dollar transactions. Almost 70 % of respondents polled that their wealthy clients want their real estate professionals to offer customized services while 44 % said that the luxury home buyers want their agents to have good network and work relationship with executive assistants, CPAs and attorneys.
Wealthy home buyers also want their agents to know the inside scoop on the real estate market, according to 36 % of the respondents in the Coldwell Banker’s survey. Seventeen percent of the sales associates surveyed indicated that one of the necessary skills for real estate professionals working with affluent customers was the ability to provide emotional support to their clients. And according to 11 % of respondents, luxury customers want their real estate agents to establish personal rapport with their clients.
The study also included queries on the “must have” amenities that the affluent clientele want in their luxury homes. Wealthy home buyers want media rooms in their homes, according to 60 % of respondents and another 60 % polled that their affluent customers want “wired” homes. However, there are a few home design elements that are out among luxury home buyers. Gourmet kitchens, granite countertops and wet bars are no longer counted as luxuries by wealthy home buyers, according to the survey respondents.
The survey also found that the multi-million dollar home buyer pays a typical down payment of 20 % to 30 %, while a quarter of clients put down 30 % to 50 % of the sale price.
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