How To Lose 2 Million in On-Line Home Equity!

Today, I witnessed a revealing interview on CNN with Richard Barton & Lloyd Frink, the brains behind the successful Expedia.com Travel site and more recently Zillow.com.   Barton referred to Zillows entry into the real estate market with it's on-line home evalutations, Zestimates and Make me a Move Price as "turning on the lights in a dark room".  "We're here to give home owners more control, more information and better education".

When questioned by the host of CNN Newsroom about the error rate for Zestimates, Barton passed the baton to Frink who indicated that the Zestimate is a starting point. He explained that if there were no updated home facts available or if the tax assessment did not reflect recent updates, the Zestimate could be "off".  In a related article entitle What's Your Home Really Worth?  Fortune Magazine senior editor Jeffery M. O'Brien, indicates that an on-going urgent priority for Zillow.com is improving the site's accuracy.

"Overall, Zillow has Zestimated the value of 57 percent of U.S. housing stock, but only 65 percent of that could be considered "accurate" - by its definition, within 10 percent of the actual selling price. And even that accuracy isn't equally distributed. For example, 85 percent of homes in Los Angeles have Zestimates, and two-thirds have been accurate. But only 53 percent of homes in metropolitan New York have Zestimates, and only half of those are accurate. In Louisiana, where one in 50 homes is listed on Zillow, the site is just about worthless".

Barton and Frink both vigorously denied trying to eliminate the services of the "middle man" aka Realtors in the real estate transaction in a similar fashion to the end result of the Expedia.com model which decimated the travel agent industry.  They  indicated that  they are working diigently to perfect their current model.  The pair agreed that people need professional assistance in selling their home; "we are just trying to create a new kind of marketplace".

O'Brien's article suggests that Zillow.com is really after another huge asset, the real estate advertising dollar.

"It's clearly in the company's short-term interest to maintain the current power structure. Brokers, agents and developers spend upwards of $8 billion in advertising a year. By 2010 a greater percentage of that money will go to the Internet than to newspapers, according to the media consultancy Borrell Associates. So Frink spends his time convincing the professionals that their ads on Zillow will attract new clients"

And what kind of marketplace might Zillow be intent on creating?  Right now in Zillow World, anyone can access information about a home listing AND anyone can change or manipulate it.  There is no consistent or coherent way to check to see if the information being used to update a home listing is accurate or if the individual doing the updating is in actual fact the seller.  Zillow.com claims its goal is to enhance transparancy in the real estate transaction.  Blurring the lines between truth and contrivance by allowing anyone to do anything without appropriate verification is similar to the age old parable of the fox guarding the hen house and promising not to have any chickens for dinner....ever! In my opinion the lights haven't been turned on...we've just fast tracked the descent into a bottomless black hole.

As the segment prepared to wind up, the camera focused on a listing on Zillow which was listed in the Local MLS for 3+Million dollars but had a Zestimate of just over 1.5 Million.  The home was located in Seattle, headquarters of Zillow.com.  The inevitable question about accurate pricing loomed large as the camera panned over to the two men in the Hot Seat.  How do you LOSE 2 MILLION DOLLARS ON-LINE IN HOME EQUITY?  Lloyd admitted that Zillow.com has an error rate of 7.2%, but this should be qualified.  As the Fortune article points out, the error rate of 7.2% must be framed within the context  of discrepancies in value projections of within 10% of the true home value for so called "on target Zestimates". So now we are really talking about a compounding of potential error. 

 Mark Lesswing, a senior vice president at NAR is quoted in the Fortune Magazine article. "Many realtors don't fear Zillow anymore. They use it as a way to show how their services are more valuable than something you can get for free on the Web."

As the show concluded the the host summarized the intervew  to the television audience with the following salient counsel "Don't cry if you don't find your home is worth what you think it is" .  I echo the sentiment...don't cry indeed my friend; for no one will see your tears within this present darkness. Now, it is possible with  just a Click to wipe out 2 Million Dollars of Equity in this brave new world on on-line fortune telling.

*Interested in Zillow estimates for the rich & famous, for whom presumably a few Million dollars Loss of Equity may not require any tear shedding, click and hold your breath here....

*For related discussion and comments on Active Rain Network about trends in 75 metropolitan areas in the 4th Quarter of 2006view this post entitled  Zillow Releases Raw Data behind 4th QTR Housing Reports.

© Audu Real Estate 2007 All rights reserved

How to Avoid Being Tipped Over...Coping with Crisis during a Challenging Housing Market.

To read part 1 of The Tipping Point...When Poverty Moves to the Burbs...

In 2002, Malcolm Gladwell published a bestselling book, The Tipping Point: How Little Things Can Make a Big Difference. Gladwell's book popularized this term into a oft repeated cliche. 

However, the original term was coined in the 1960's by a sociologist Morton Grodzins who was studying integration trends  and white flight in suburban neighborhoods.  Grodzin defined the"tipping point" as the dramatic point at which something unique becomes common.

Today, another type of tipping point is upsetting the balance in many suburban communities.  Poverty has come knocking and for the first time in history, there is more poverty in the suburbs than in the cities.  A related Newsweek article indicates "currently, 38 million Americans live below the poverty line, which the federal government defines as an annual income of $20,000 or less for a family of four. But for the first time in history, more of America's poor are living in the suburbs than the cities—1.2 million more, according to a 2005 survey."

The situation in the Midwest is exacerbated by the economic crisis spawned from massive job losses in the manufacturing sector and automobile industy.  The effect has been widespread.  It's never possible to prevent all possible adverse situations, but there are some things we can do to minimize or avoid substantial loss.  These practical suggestions can be implemented at any time.

1.  Live within your means.  This is difficult but necessary.  If you don't have the cash to buy it, maybe it doesn't need to be bought.  Carrying cash in your wallet rather than plastic is a good way to get a handle on what you are actually spending.  You also won't have the additional drag of paying for your meal for the next 6 months!

2. If you're in a adjustable mortgage loan which is set to adjust soon, re-finance NOW.  Get into a loan program which will have a set payment amount.  Worrying about whether your payment will be increasing or decreasing is more excitement than is necessary in stressful times. 

3. Begin  a Savings Account or increase your contribution to the one you have.  America's Saving Rate has dropped to below Zero.  Coupled with money being taken out through home equity loans, there is very little cushion for the unexpected.  You may wonder how to save.  There are a number of creative ways to save money, sometimes by doing things differently. This wiki article on Saving Money is an excellent place to start.

4.  Talk!  Yes, talk to your family and significant others.  A common reaction to pain is to shy away from what we perceive to be the source.  Your family and those whom you love are also caught in the same trap.  Choose to involve them as on-going part of the solution.  Talking about what is going on, even with children in an appropriate way gives an opportunity for everyone to be involved in creating solutions.  When everyone is on the same page, it''s easier to go in the same direction and reach a mutually beneficial destination.

5.  Set Goals.  This may seem counter-intuitive, but it is even more vitally necessary in the midst of a crisis.  If you set goals and never looked at them, this is the time to look at them and perhaps revise them.  Developing a Budget plan is very important. Getting out of a mess is easier if you have a plan.  It doesn't have to be a complicated plan.  It can begin with simple steps to save an amount to be put aside for savings or to pay off a balance on a credit card.  Goal setting should also include regular reviews to check your progress.  Goal setting helps you to step out of the blame cycle and start taking deliberate steps to resolve the crisis.

These little suggestions are small, but significant ways that each of us can tip things in our favor as opposed to being tipped over.

© Audu Real Estate 2007  All rights reserved

The Tipping Point...When Poverty Moves to the "Burbs"

This past week, I was talking to a real estate broker about the Open House he had scheduled.  After comparing notes about local market conditions, our discussion  focused on an article that had been recently published in the Grand Rapids Press about sellers in Grand Rapids, Michigan renting their homes because they were having difficulty selling them.  He said, " Lola, this crisis is everywhere.  I am doing an Open House today in a home that is in foreclosure and there are a total of 3 in MY neighborhood."

I understood.  Not so long ago, forclosures were confined to areas where there was less economic growth.  The suburbs seemed insulated from this scourge.  Not long ago, brokers debated whether it was appropriate to disclose if there was a financial crisis as that might prejudice the sale against the seller...even if the home was in the 6 month redemption period during which a seller might reclaim some equity if a sale could be generated.  Those days now seem to be a long, long, time ago.  Now, agents of our local board routinely see notifications in red alterting them to the fact that a particular listing is in foreclosure or will require a short sale to close.

In a recent article by Newsweek magazine, entitled "Poor Among Plenty," authors Peg Tyre & Mathew Philips discuss an increasingly disturbing trend; 

 "Once prized as a leafy haven from the social ills of urban life, the suburbs are now grappling with a new outbreak of an old problem: poverty. Currently, 38 million Americans live below the poverty line, which the federal government defines as an annual income of $20,000 or less for a family of four. But for the first time in history, more of America's poor are living in the suburbs than the cities—1.2 million more, according to a 2005 survey."

The concerns of the middle class caught in this vice grip are aggravated by a number of factors, not the least being that the "new poor' don't fit the stereoptype of what we have come to expect of the impoverished.  They live in nice neighborhoods, have cars and appear to be living normal suburban lives. The suburbs are not places where you find soup kitchens or pawn shops.  The new poor are often living right alongside their affluent neighbors.

Increasingly, folks with good manufacturing jobs in West Michigan are finding that it no longer takes 2 jobs to make it, you might be required to have three or four to keep your head above water.  It is no longer uncommon to meet with someone and have them share that they are in deep financial crisis.  One of my clients recently asked me a rhetorical question, she said " Lola, how can 2 people working 2 jobs not be able to keep their house?"  It's a question that doesn't have any simple answers. 

Read Part 2 of The Tipping Point...Coping with Crisis....

© Audu Real Estate 2007  All rights reserved

Approximately 12 years ago, I began my real estate career.  In short order, I became the owner of a computer, bought a separate Compaq notebook, purchased a cell phone which took up 25% of my purse space, carried a beeper which was perpetually on, and uploaded my first website. 

The website project was a computer/business project created by my cousin who was studying business and IT in university.  He needed a project for a grade and I wanted to explore the world of computing as inexpensively as possible. This short lived partnership in which my FTP uploads didn't work properly and the website was down more than it was up, gave me a new found respect for having some expertise and support in the world of electronic media.

My disaffection with the world of computing had started a decade earlier when in highschool; we had a brief encounter with mainframes.  The sterile white room and noisy electronic hum were enough to persuade me that I wanted to avoid this world of zeros and ones for as long as possible. 

 Becoming a Realtor changed that.  I now found myself dependent on dialing into a computer to access MLS listings.  Although me first website quickly proved to be inadequate as a business tool, my cousin had succeeded in one important thing...It was now was quite clear to me...I need to check my e-mail more than once a month.  I'll never forget the look  of disbelief from my cousin at my lacksidasical attitude towards e-mail, he simply stated; "whenever you wake up, it's morning for you".

Well, in some ways, I feel as though the process of "waking up" has been in perpetual motion for most of the last decade.  My experiments with websites led me initially to Homes.com and then to Advanced Access where I was introduced to an electronic library of tools which helped me understand the medium of the internet and how to market my web site. My interactions with Advanced Access were pivotal.  This company took the unusual step of training agents who were their clients.  I was assigned an Account Executive who seemed to take a genuine interest in making sure I progressed and my website prospered.  Internet searches for real estate agents in our area in those early days consistently ranked Advanced Access Sites at the top of list.

More recently, my experience with Blogging seems like Deja Vu all over again.  There is so much noise on the Blogosphere, my instinctive reaction is to turn away from this medium of personal gibberish. It wasn't until search engine requests for information kept bringing up personal blogs as "expert" opinion that I decided I needed to re-examine my earlier assumptions.  It has become increasingly clear to me we are re-defining the nature and essential elements of on-line presence.

As I've read the posts and articles about the early days of several prominent players on the Blogosphere, I have been bemused by the re-definition of ancient.   In the historic annals of cyberspace, a few short years now represent an eternity and authority  has been minimized to being defined by clicks and links.  In this faster than the speed of lightning world, we run the risk of loosing our moorings.  When things change so quickly, our altered perspective of what matters and what is meaningful may not serve us well in the long run. 

Our heightened awarness and quest for personal significance may inadvertently result in our omiting the sign posts and guides which help those coming behind us to find their way.  It is not surprising that some blogging experts indicate that most new bloggers will not be blogging in three months. Can we remember who we lost...do we care?  Do our platforms merely frame success or do they provide tools to expand and embrace it?   Perhaps it is wise from time to time to pause between furious key strokes determined to release another brilliant comment or blog to ponder careful questions such as these.  It is easy to surmise that this kind of assistance, this human part of life, is a luxury which is no longer expedient to maintain. But, I think that perspective is short in clarity of vision.

The reason why I will always love books and maintain a personal library is because I learn from the experiences of others.  The wisdom nestled with the pages of good book has often nourished my soul.  The reason why I will always strive to give of myself and expertise to others is because I flourish most when I extend myself in service.  A decade ago when the personal website and personal marketing were the epic of progressive marketing, many turned their focus away from people and hid behind their technology.  Somehow, this didn't feel right to me.  Although, I utilize technology extensively on my clients’ behalf, it never impinges on our time together.  For me real estate remains a personal business supported by technology.

In this Journey Through the Web, I am determining that blogging must find its rightful place in my life and practice.  May I never become so full of myself that I am unwilling to assist another who is struggling to find their voice.  May I avoid the pomposity and cowardice of cruel cuts or opinions which belittle another person; particularly one whom I may never meet.  May I be judicious about asserting my opinions, rights, wants and needs, remembering they are only where I happen to be at the moment.  And, lastly, may I always remember that behind this screen, there are real people, with real needs and to whom I can offer real assistance....just in slightly modified cyber packaging.

© Audu Real Estate 2007

If your home could talk...

Yes, I've been wanting to do this for awhile.  Don't act so surprised to discover my voice, you 're talking all the time, now it's time for you to listen to what I have to say.  I'm aware that you have decided to leave me and move on.  Hey, I'm taking it a little hard right now, but that's OK.  There's a time for everything. 

I hold no hard feelings and heaven knows we have shared many special  moments and memories.  I've been there when you were up and I've hung in there with you when you've been down. We've celebrated  victories and shared some tought stuff in defeat.  I've been around the block a few times; this isn't my first time on the market, but that fact doesn't make it any easier to say goodbye. 

Now, let's get down to business.  Like I said, I know you've decided to move and having done this before, I thought you might benefit from some tips.  First, please  don't make this any harder than it has to be.  After all, I'm the one who will have strange people trampling through me, critiquing my figure,... I mean structure and personality.  These strangers don't know I hear them when they make disparaging comments or pry into areas which are well, should I say kinda private.  I'm going to be the one jabbed and poked by inspectors and who knows who else.  Sooooo....let's be smart about how we go about this.

Please do me a favor and do your homework.  There's no reason to be uninformed about how much I'm worth.  Yes, I know I'm priceless...but honey it's almost over and we must both move on.  There are many FREE services from real estate professionals which you can take advantage of, but remember you get what you pay for.  Don't bore me with interminable interviews, decide on your top selections, get your recommendations and then do the job right with someone who knows what they're doing and can provide evidence to support their results.

Next, clean me up!  You & I hang out all the time, and we're comfortable together.  But, this is company and I like to look good.  I'm still pretty vain, that hasn't changed much since you first saw me and fell in love at first sight.  I'd prefer YOU be critical with me than have strangers pick me apart.  Please get up close and very personal.  Where am I showing signs of wear and tear?  I'm a great lady, but a nip, tuck, or pick me up coat of paint will do wonders for my ah...personality.  Don't forget to clear all the clutter  and junk which has stuffed up my airspace big time over our years together.  Give me room to breathe, after all even houses have their moments if you know what I mean.

Fix the stuff we both know needs attending to.  And for goodness sakes, be honest about my history.  Don't make me an unwilling partner to any lying shinanigans!  Don't forget to spruce me up outside as well.  After all, I can only make one great first impression.  Yes, this is important to me...need I say it again...the vanity thing, surely you understand.

I'd also appreciate if you'd take some time to talk with me.  I love hearing about the good times that were shared within my walls.  I may not understand why you feel it necessary to leave, but I accept your decision.  Remembering our times together helps me prepare to meet the new homeowners.  I want them to feel my welcome when they enter the door.  I want to fill their lives with love and laughter in the way I did yours.  You can help make this transition easier by taking down mementos of our special times together for you know that I will always be in your heart.  However, my new owners will need to create their own special moments within my space, so give them a clean slate to work with.

Lastly, know that I will always love you.  I hold your presence warm, tight and safe within my inner sanctum.  Even as I open my arms to once again welcome others who I hope will treat me well, your echos will still meander through the memories of my mind.  I'll find ways to share them; sometimes in unexpected fashion, but be assured most of your secrets will ALWAYS remain safe with me.

With  regards,

Your Home

© Audu Real Estate 2007