Within the ever swirling controversy that is the real estate industry, new seismic activity is happening. A real estate earthquake is approaching. Agent Match.
What is Agent Match? Just like it sounds. A way to match an agent with a consumer. This isn’t a new concept. Realtor.com is one of the top four consumer visited websites for real estate. Zillow and Trulia are #1 and #2 respectively. There are several agent ranking or matching websites out there right now. Most of them are horrible. Seriously, as a consumer, they are useless to you because the source of their data is bad. Realtor.com which gets its data directly from an MLS has an incredible advantage. None of these other sites can compete with the access to data that Realtor.com has.
What kind of data are we talking about?
Redfin tried putting agent sales on their website for consumers a couple of years ago, but quickly pulled it due to MLS data issues. Trulia entered this space earlier this year by allowing agents to manually enter transactions under their profile. They could track your listings based on homes you advertised on their site, but homes sold as a buyer agent had to be manually entered. Zillow has entered this space recently as well. You will start to see an agents sold homes appear if they are a listing and/or buyer agent on these two sites. Consumers take note that agents have to manually enter this data so you will likely not see lifetime sales, but the past years data is still helpful I think.
Consumers have been asking for this data so Zillow and Trulia have obliged. Zillow has taken a commanding lead in the real estate net world, so it wasn’t surprising that Realtor.com was going to jump into the fray with Agent Match.
Realtor.com has been doing some trials with a consumer-to-REALTOR® matching system based on neighborhood home sales, list to close ratios, days on the market, and probably some other stats. These trials have caused a real estate ruckus because essentially it takes a whole being of a real person, and turns them into an algorithm. Not a pleasant thought. Hence the outrage by REALTORS®.
Real Estate Data Interpreted
List to sales price has always had issues. The reason is that many MLS’s run their list to sales price information based on the list price at the time the offer came in which may or may not be the original list price. You can calculate the original list price to sales price, but most data isn’t crunched that way. With Realtor.com’s access to the direct MLS feeds, they could crunch this information. This seems like it would be a good number for potential home sellers to have as it would indicate how good of a job an agent does on their pricing. While this might be true, it is also an indication of agents that are willing to overprice at their seller’s request. So sellers that want to test the market with an agent that agrees to do so, will impact the stats of that agent. So, a potential consequence of putting this statistic online for all consumers to see is for agents to walk away from these kinds of listings. Once these statistics go online, they will impact an agent’s ability to generate business for better or for worse. So sellers, if you want to have agents that willingly allow you to test the market, take note that this statistic being online or part of an equation, may remove that as an option for you.
Another issue with this data is the basic math. Some agents price on the lower side to drive up multiple offers. Some price higher and come down, but all that matters is the net to the seller. So under the currently used algorithms, an agent that prices a home at $200,000, gets three offers, and ends at $215,000 gets to have the stat of 107.5% of the list. Who wouldn’t want an agent that can do that? It looks like they are great negotiators, and get their clients more money, right? BUT the agent that prices at $235,000 for the same house, gets one offer, and gets $230,000 looks worse on paper. Why? Unfortunately, the math equation doesn’t work in their favor as they get 97.9% of list in their ranking profile, yet they got their client $15,000 more. So who is the better agent?
Days on the market. This is another common statistic for how long a listing sits on the market. Again, agents will be reluctant to let sellers test the market knowing that it will negatively impact this statistic, and make them look less than adequate in the algorithm. Transparency of this statistic will also impact those of you with unique properties. I have a unique listing that should close soon, but spent 1200+ days on the market. You can see where I am going with this, right? That stat will kill my days on the market statistic because it is so grossly disproportionate to a typical property. I knew taking the listing that it would sell in one week or five years. I just had to wait, patiently, for the buyer to enter the market. So, sellers of unique properties beware. In putting this stat online, you may find it hard to find a listing agent. Without the ability to cull outliers from the data, it presents agents with a conundrum. Protect your algorithm or take the listing and watch your rankings drop.
Home sales. This seems like it should be straightforward, but this statistic creates complications. Some agents work in teams where just the team leader gets the credit for the home sale. The #1 agent in Salem (my city) has a team of 8-10 people. So it isn’t that the one agents closes that many transactions. Their team does. This issue is what caused problems for Redfin in their earlier attempt. This statistic will create problems for people that work in teams. There are people in teams all over the U.S. that do a lot of transactions, but you would never know it as a consumer because their name isn’t associated with the sale of the property on the MLS. So, what does it mean for those agents? Agents that have been around for 10 years with no transactions look bad in the algorithm, but the algorithm doesn’t know they closed 400 during that time. These stats may kill off the real estate team concept.
So here is the deal consumers. You want the data. You will get it whether agents want you to have it or not. It will happen because you want it, but there may be some unintended consequences for sellers. I just encourage you to think about how that data is generated so you can interpret it to make a good decision for yourself. I trust you enough to know that data is only one factor in your decision to hire an agent or not. I know you know I’m not an equation.
My concern for you is simple. You will have data that you think is transparent and helpful, but is fraught with issues. As such, you won’t be making the informed decision you were hoping to make. The seismic shift you were hoping to get in the real estate industry may be what you want, or you may end up with unintended consequences. Like all changes, there will be winners and there will be losers. Who ends up on what end remains to be seen.