Consolidation in the US property portal market

by Alistair Helm in

This week saw the announcement by Zillow that it had entered into a definitive agreement to acquire its competitor Trulia for US$3.5 billion. The move by Zillow is an aggressive one that further cement its position as a key part of the future of the real estate industry in the US market.

Zillow has long held the mantle as the largest real estate website in the US surpassing the effective incumbent Realtor.com many years ago as it has headed for an aggregated audience of over 80 million unique users per month. Trulia has played a powerful game as the challenger as it has also surpassed Realtor.com and carved out an audience and support base within the industry.

Both companies rely on advertising revenue from agents and 3rd party companies as the US model with industry owned MLS’s (Multiple Listing Services) effectively making access to listings open and free for portals negating the opportunity to build a business model of a subscription as operated in most other countries. Agents are sold advertising packages to provide profile to secure listings as either buyers or sellers agents. With over 1.5m agents there is a large customer pool and with $12 billion of marketing spend across the industry each year these two leading portals and others have a significant cake to carve up between them, especially as the US industry effectively ceased print advertising for real estate a few years ago.

Neither company is as yet 10 years old and equally neither really makes any serious amount of money. For Zillow the 2013 year saw revenues of $197m and EBIDTA of $29m; for Trulia revenues of $143m and an EBIDTA of just $17m. Yet these two companies have a collective market capitalised value of $8.2 billion that is a staggering combined price earnings ratio of 178:1.

Trulia and Zillow are very different operations strategically, culturally and in regard to user experience and consumer brand experience and this has been part of the reason for the healthy and respectful rivalry.

Zillow has always been about data and the desire to empower consumers as home-shoppers with all the information and insight to make better decisions in the real estate process. They began originally as a site with no listings, merely a valuation estimate for every house in the US, matched to historical sale price records which was instantly a much talked about and compelling reason for almost every American to visit the site. This razor sharp focus on data off-sided them in the early days with the industry of agents and brokers as the accuracy and credibility of these valuation estimates “Zestimates” were challenged by the industry. However applying huge technology to the problem their data insight and analysis has turned them into the leaders in property tracking in the US with the largest and most valuable database on US households.

Trulia on the other hand has always been about the agents and the listings, working to empower agents through creating a community for home-shoppers to learn, ask questions and establish contact with trusted agents.  They have tried to engage their audience on a hyper-local basis so that you feel that Trulia is there at your side as a trusted friend, unlike the Zillow role as a trusted advisor.

In terms of business development Trulia has been focused on getting closer to their customers especially through the acquisition in Market Leader last year a leading SaaS CRM provider to the industry. Conversely Zillow has been more focused on the consumer engagement first by powering the leading media portals of Yahoo and MSN and then moving to acquire the New York portal Easy Street last year. They have also outspent Trulia in advertising and has lead a massive social media and PR campaign that has effectively intertwined Zillow into the vocabulary of US home-shoppers.

So Trulia and Zillow are different very different brands, different in culture, focus and user experience; however they are competitors. They both fight for the same advertising dollar of agents and brokers, as well as 3rd party advertisers eager to engage with home-shoppers. For this reason I hold no long term belief that Zillow will continue to operate both websites - Trulia as a website and a brand has a finite life. Zillow will be the gorilla in the market. A portfolio strategy as advocated by Spencer Rascoff Zillow’s CEO is a laudable strategy when the portfolio is made up of regional players or segment specific portals for rental property or holiday property or commercial property, but two national residential real estate portals - I don’t think so.

This acquisition will drive Zillow’s growth and earnings. For a start, the combined companies were due to be spending over $100m on advertising this year - no point in wasting half that money to try and out-flank your sister site! A single site will allow Zillow to begin to leverage their massive audience to drive lead generation solutions for agents and brokers, unchallenged by a competing offering from Trulia.

This consolidation is very unlikely to be challenged as anti-competitive even allowing for the shear scale of the combined audience share; as the marketing of property listings will not be impeded by the deal with the MLS structure still effectively allowing any real estate company to be a local portal with all the listings; after all real estate is far more a local business than a national business, especially across 100+ million homes and 300+ million people across the vast continent of 50 states.

Zillow have however not won the war with this acquisition, they have merely avoided a distracting skirmish with a competitor on the road to their ultimate goal of getting closer to the advertising cake of $12 billion a year. They will continue to innovate and acquire on their path as they will continue to grow in influence and power. Both companies have been highly innovative with technology across all platforms and whilst the acquisition could potentially be seen as a chance for Zillow to take a breather on such innovation, I suspect not. Zillow is all about empowering consumers and they are at their core a tech company so I see no easing up in the flow of smart user friendly innovative future tech. This is good news for the consumer and the real estate industry in the US who have nothing to fear and much to gain from this consolidation. However within the US real estate industry the general feeling is of the threat this acquisition brings to the core operation of real estate. That view is in my view more a function of the industry's inherent lack of confidence that their business model (with dual agency services and c. 6% commission fees) being ultimately sustainable.

As to the implications and ramifications for other countries and specifically for NZ. This deal demonstrates the stakes that the key players are playing for in the global property portal space. Zillow is by no means the poster child of the industry, those accolades rightly belong to the likes of Rightmove in the UK and REA group in Australia who deliver significantly stronger financial results from far smaller markets. Those operations though do have very significant competitors who have gained significant ground over the past few years. The likelihood of consolidation in these markets of the #1 player acquiring the #2 are less likely. What is far more likely is regional consolidation with more acquisitions of emerging market players by these two key specialist portal players and other media companies such as Axel Springer and Schibsted.

In NZ Trade Me has no need to consider acquisition, nor would it probably be able to as the ownership of Realestate.co.nz is more a strategic asset for its shareholders than a financial investment. The key focus for them as it is for Zillow, will be cementing the relationship with the industry customers at all levels, agents and business owners. More likely on the agenda may well be the benefit of an integrated CRM system as Trulia saw with the Market Leader acquisition. In NZ and Australia new operations offering SaaS solutions for real estate CRM look to be redefining the digital backbone of the industry and this could be key for Trade Me and other property portals who all rightly recognise their core customer are agents and brokers / business owners.

The fact is that nowadays the property portal industry is far exceeding the value of the real estate industry they support and rely on for their business. This is largely a function of a continued belief that the digital transformation of the whole industry process will occur at some time and smart tech companies will be the ones to take advantage of any such trend. For real estate companies there are massive efficiency gains to be made through working with portals, however collectively the industry around the world still holds an adversarial relationship with their local portal. 

Real estate industry abandons print media!

by Alistair Helm in

OK - this headline is not quite true. But I couldn't help myself to take the opportunity to headline an article that I never foresee occurring, a least not anytime soon.

So the real headline is

Real Estate Industry Authority abandons print media

The news is that the Real Estate Agents Authority (REAA) the body that has under the mandate of the Real Estate Agents Act (2008) undertakes the licensing of the industry has after 4 years in existence decided (very smartly in my view) that there is no logic in requiring that prospective agents advertise as a Public Notice their intention to seek registration as a licensed real estate agent in local newspapers. Instead they are offering the facility on their own website. This is completely logical as their website also hosts a directory of all licensed agents in the country.

It always seemed somewhat illogical to me at the time to seek to make a public notice in a newspaper as a means to challenge people's right to oppose applications to be an agent. At the time I offered for Realestate.co.nz to host such notices given the contextual audience.

The move will also no doubt please prospective agents who in addition to the costs of the course and the license application (c.$3,000+ in total) were required to spend what in the case of Auckland was around $500 on 2 adverts which I would challenge anyone to say they had ever read.

The losers will be the print media companies who will face an estimated loss of c. $100,000 of advertising revenue per annum - so continues a steady and pervasive decline, however those media companies can still count on the more than $75,000,000 of spend the real estate industry overall will spend this year on print media. A sum that seems slow to transition to digital and thereby pushes further out my long awaited headline of "The Real Estate Industry abandons print media!"

Trade Me Property changes its pricing model - again!

by Alistair Helm in , ,

Trade Me Property today announced a new pricing structure almost a year after the implementation of the radical switch from a subscription model to a pay-per-listing business model. That model has, so it seems, proved to be a too great a stretch for the industry to accept and likely as not, too troublesome an issue for Trade Me to continue to deal with as it approaches it annual reporting just 3 weeks away.

The new pricing structure is on the face of it, a significant win for the real estate industry as it re-establishes the subscription model, whilst at the same time offering a scaled per-listing fee and a regionalisation of pricing.

The real estate industry mobilised itself into action upon the announcement of the new pricing model last November with clear messages passed within the industry from, at the extreme a  complete boycott of Trade Me Property, to merely advising clients that the website had changed its pricing and was no longer a mandatory component of marketing of a listing.

At the same time the industry circled the wagons around the ‘industry-owned’ website of Realestate.co.nz as a means to provide the home-shopping public with an alternative to Trade Me Property.

As the standoff ensued over the next 10 months there has been a clear demonstration that the impact on Trade Me’s business was being felt in both customer loyalty as demonstrated by listing numbers and in investor confidence as evidenced by the share price (although it is not accurate to entirely correlate share price to the issues with the Property sector, however it is a critical sector).

It is my belief that this new pricing scheme will in one fell swoop patch up the issues that Trade Me Property has faced, resulting in a solid re-population of the site to full strength and full loyalty (and if not loyalty then at least patronage). It will not deliver the much hoped for absolute gain to the bottom line that the original pricing model of a pure per-listing fee would have delivered but it will get the company back on track to build its business for the future.

So what are the details of the new price structure, who will benefit, who will choose which of the options and what will be the medium term outcome, as well as an assessment of the winners and losers within this tussle?

 

Return of the subscription 

The new subscription service with unlimited listings will be open to all offices with a regional split with metro offices in Auckland / Wellington / Christchurch paying $1,399 per month, an increase from the previous monthly subscription from last year when fee was $999. For those offices outside of these 3 metro areas the monthly fee will be $999 - no change.

This subscription model based on location is a smart move in that it moves the company away from a single flat fee structure, to regional pricing. This will go down well with provincial customers who have long fought to be recognised as having a wholly different cost base than the metro real estate operators. Once established, Trade Me Property may well apply this regional structure to their premium property advertising and also potentially further segment by geography as I am sure Southlanders will likely argue that Hamilton and Tauranga should pay more than them or rather that they should pay less. Regional pricing makes sense and it will be interesting to see if Realestate.co.nz follow suit.

 

Listing fees based on rateable value price

Trade Me Property will continue with the per listing fees in what they describe as the "Flexi option" however to mirror the differential pricing that was introduced for private sellers a year or so ago, single listings will be $159 for a property with a rateable value over $450,000 and $99 for those under $450,000. This will also go down well especially with the smaller offices. On top of this they are making a very public statement that the scale of a customers business affords discounts in the form of Gold / Silver / Bronze.

The average office in NZ is actually quite small handling around 100 listings a year / 8 listings a month, with many of these offices in provincial areas of the country where the median listing is more likely $300,000 this change will be welcome news. A year ago these offices would have been paying $999 a month for unlimited listings. The per listing fees bumped this up to $1,272 whilst this new structure will cost them $800 - a win!

The retention of the listing fee based model is in Trade Me’s words a method whereby offices can seek to remove the sunk cost of Trade Me Property and appropriately pass the cost on to the consumer, in effect saving them thousands of dollars a year. Time will tell if this is how the industry see it.

So overall the industry will feel I think, vindicated in leveraging their collective muscle against Trade Me and maybe Simon Tremain of Tremain Real Estate in the Hawkes Bay and Tim Mordaunt of Property Brokers in the Manawatu and Hawkes Bay will be hailed as heroes for staunchly refusing to capitulate and effectively completely boycotting Trade Me Property for all this time across all their offices.

I think it is likely that the vast majority of offices will switch back to a subscription model, the metro offices absorbing the higher monthly fee and relinquishing the charging of the fees to vendors. Many small offices will choose the per listing fee not to pass the cost on, simply as a means of saving money.

So the question has to be asked - so who’s the winner and who’s the looser in this change?

For my money the short term winner is the real estate industry. They will be happy and as I say feel vindicated. In the medium and longer term Trade Me Property is the winner. They will once again re-affirm their dominance of the lead generation business for agents from the largest and most comprehensive portal of listings covering licensed agent listings and private sellers. They will now, once they have regained patronage (if not as yet loyalty) build a growing business in premium services sold more aggressively through a growing field-based sales team. They will naturally hike fees regularly and in time seek to move to a pure per listing fee, probably as a more bundled offerings as other leading portals do. This will deliver the bottom line that the company and the investors want.

As for Realestate.co.nz I fear that they will be the loser in the short and long term. They have emerged from this period a lot stronger in audience terms and with a greater industry appreciation, however with Trade Me Property back with a full listings complement the delivery of leads through Trade Me will return and Realestate.co.nz will be back to being judged by the industry as a championing industry site, yet hardly a comparable adversary. Compounding their problems will be a more aggressive and significantly larger resource base across the Trade Me Property sales team out in the field who will seek to develop a stronger relationship with agents and offices matched to a significant ramping up in their technology team. 

Disclosure: I was CEO of Realestate.co.nz from 2006 to 2012. I provide consultancy services to Trade Me Property from time to time, but I note those services do not extend to advice on pricing and offers.  All insight and opinion expressed here are without any reference to any knowledge or insight I have gained through my work at Trade Me Property. 

Real Estate, the generational challenge

by Alistair Helm in ,

Image courtesy of Flickr

Image courtesy of Flickr

I read this short but interesting article from Inman News over the weekend titled "Appealing to millennial homebuyers often requires out of the box thinking"

It got me thinking about the way real estate is and has (or has not) adapted to the changes in the demographics and attitudes of the new generations and the cultural changes of the past 20 years.

Here are my thoughts:

Not exclusively the domain of millennials but for most of us these days buying any product or service involves at some stage an online search. Whether for price comparison, product details, customer feedback or just simply opening hours. For real estate this is a telling fact. Real estate is a business providing a service to homeowners wishing to sell property. These home sellers don't want to be prospected by real estate agents. They want to do their own prospecting to find an agent that suits their needs. As the article says (and here again I don't think this is the exclusive domain of millennials) people tend to be resistant to strong sales technique. We have been empowered through the resources and capability of the internet and more than ever shun hard selling technique. Hard as it may be to hear this, real estate agents need to change their approach to securing new business and stop prospecting using hard sell techniques - they need to nurture relationships - not sales leads.

Be part of the community really resonates with me. However I think most real estate companies and agents think this means a flash new office on the high street. I have noticed over the past 5 years the look and feel of real estate offices have changed markedly. Gone are the windows plastered with pictures of properties for sale, replaced by inviting open spaces with comfy chairs and coffee machines that look very inviting. However when was the last time you saw anyone sitting in one of these goldfish bowls?

To be a part of the community means so much more. Banks have learnt so much more about this in their local business centres - places where people can use offices and Wi-Fi to sit down between meetings or host meetings. How about real estate offices taking this idea from banks for business people and doing the same for non-business people? I am not exclusively thinking of young mothers, but imagine a place to have a sit down - the role libraries used to provide (and still do) where you could grab a coffee or a water, use Wi-Fi have a chat with a friend, hold a community meeting or whatever. A place in the community - a part of the community.

Giving back to the community. Real estate is well respected as a large donor to charitable organisations - think Ray White and Ronald McDonald House, Bayleys Guide Dogs and Barfoot & Thompson Starship. Very laudable and public spirited. However real estate is essentially a hyper local business. People engage local agents and the colour of their jacket, tie or the brand logo on their business card is largely a supportive component of the decision. 

Real estate agents do foster and hold deep relationships into the community and they do sponsor local school events and rotary clubs. However the Inman article about supporting local artists somehow struck me as more mutually beneficial than simply giving money to a cause. How could real estate agents work more with local businesses to see more mutual benefit? I don't have the solution, I just wanted to trigger some thinking - any ideas?

The fact is we are not the same people we were in the 80's or 90's - the home buyers and sellers in the next 10 years have no idea what a cassette is. To them the stock market crash happened in 2008, not 1987; they cannot imagine interest rates of 10% let alone 20% and can't conceive of a house not connected to ultra high speed broadband. However the large majority of real estate agents were in school or had started work when man took its first tentative steps on the moon and most probably know the words to or can hum along to American Pie!

Property musings on Facebook - 1st August

by Alistair Helm

Here are the articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.

Smart Marketing

Post by Properazzi.
Post by Properazzi.
Post by Properazzi.




Agents breaking with convention to demonstrate their success

by Alistair Helm in

A few weeks ago I posed the question in an article as to “Just how competitive is real estate in NZ” - citing the factual comparative advertising shown in the UK. At the time I suggested that factual comparative advertising was not regarded as appropriate in NZ within the industry.

Well I was wrong. What is more, I have found it alive and well right on my doorstep in my local community newspaper in Devonport, the suburb in which I live.

The local comment newspaper “The Flagstaff” is a great collection of news, letters, profiles and historical insights, very conspicuously supported by the real estate industry in the community - 1 in 5 of the pages is a real estate advert for an agent or a listing. Not unusual, as I am sure such local community papers exist around the country and are widely patronised by agents to reach out to the community.

This week's paper had two full page adverts from individual agents both of which typify the traditional approach taken by agents to promote themselves.

One approached the advert in a traditional manner - full photo and a biography of past achievements and involvement in the community, talking of "bringing energy and confidence to the real estate process", of "real estate expertise and real world experience and success through hard work" - all laudable attributes of an agent.

The other chose to let her clients speak for her with a glowing testimonial, extolling her capabilities and commitment to go the extra mile and her passion and positivity. Oddly given the industry’s love for profile pictures I was surprised that this advert does not have the ubiquitous agent photo and personal contact number - merely the office details.

Both of these adverts are what I am sure we are all accustomed to and would be likely replicated around the country by many hundreds of agents each week. There is no implied criticism in these adverts, they serve a purpose in raising the respective agents profile.

However turn the page in this community magazine and I was surprised by this advert.

This advert is direct, factual, compelling and has an arresting capability to attract attention and get people talking.

This agent makes a statement of performance that leaves the other agents struggling to catch their breath. 

In past 2 years in the suburb of Devonport this agent is responsible for selling 46% - virtually half of all the properties sold in the suburb for over $2 million. That is 23 sales out of 49 in the past 2 years and this is by one agent. There are, as she states 42 agents in Devonport - she is one of them and she alone accounts for close to half of all sales above $2m. The suburb has a median price of around $1m - Wow!

You have to say, if you owned a $2m house in Devonport you would have to think twice about why you would not use her or at least get her to pitch for the business.

This is without doubt smart advertising. Its factual. It is absolutely relevant and clearly it is true and it blows out of the water the subjective differentiation other agents seek to establish around ‘pillars of the community’ and working ‘that bit harder’ - after all what counts is results.

Maybe what the real estate industry needs is to expose more of the facts and let people choose agents based on their performance and let their performance track-record speak for itself.

A radical change for real estate websites?

by Alistair Helm in ,

Last week was the bi-annual conference of Inman Connect.  Held in San Francisco in July and New York in January, the event is billed as the place where real estate meets technology. I have attended many of these conferences over the past 8 years, however this year I attended virtually by following the goings-on on Twitter and through the Inman site.

For me the most interesting component of this conference was the tech challenge undertaken by 1000Watt Consultancy to revamp a website in 24hrs! In the hands of the team at 1000Watt this was always going to be worth watching as they are the leaders in their field, always at the cutting edge of the innovation capabilities of technology as it applies to the real estate industry at franchise, broker or agent level.

The team took a San Diego real estate company website of Willis Allen and revamped it in the allotted time and created a radical change - contemporary, engaging and very different. When you examine the current site against the new design and explore the new design - you will see the difference.

The current Willis Allen website

The current Willis Allen website

The revamped site as designed by 1000Watt Consulting

The revamped site as designed by 1000Watt Consulting

The Inman News team covered the session and for me what I found most interesting and I really wish I could have been there to witness the moment when the new site was unveiled to Bud Clark the Managing Broker of Willis Allen who had at the outset said that he was looking for "a modern fresh site but wasn’t sure what direction to go". 

Apparently Clark seemed a little shocked at the extensiveness of the changes. “It’s different,” he said. Clark said "the firm will look at the design and consider what it wants to implement as it works to figure out how it wants to evolve its website".

He will "look at the design and consider" - this design was created by the smartest minds in the digital space in the real estate industry, profiled at the leading event in the industry and communicated through the media and all the manager can say - we'll consider it!

To me it says so much about the real estate industry's approach to digital marketing and this applies here in NZ as much as it does internationally. The heart of the problem as I see it is that every real estate company wants to have a website that first and foremost is about trying to be a property portal - placing searching for property front and centre. Why?

Home buyers don't use real estate company websites to search for property - that is the reason that portal aggregate the total pool of listings so one site offers the access to all the listings - or in the case of NZ, both Realestate.co.nz and Trade Me Property having pretty much all the listings, with private sale listings the added richness on the later's site.

Sure real estate companies want to showcase the listings they have and there is good reason to have the individual property listings on their sites - just not blasting out of the home page - see what I mean!

My advice to real estate companies would be, have current listings within the content of your real estate company website, not just current but also have old listings - all of the listings as components of the site. In that way any Google search for a property address will be more likely to bring up the real estate company site that listed the property.

But don't have a search function on your home page and clutter the home page with current listings to mimic your office window! 

The purpose of a real estate company website is as a marketing platform for the real estate company. Just as it is for any business looking to attract new customers and provide a profile platform for prospective clients to make value judgements as to the services and uniqueness of what the company offers.

For real estate that uniqueness is not to be found in the current listings. It is in the expertise, experience, knowledge, professionalism and performance of the company and its agents. It's all about local knowledge and insight. Real estate companies should look to engage visitors to their site quickly and share with them the reason why "you should choose this real estate company over all the other options when it comes to selling your home"

For Willis Allen the distilled essence of the company as exposed by the 1000Watt team was:

 

Independent, family-owned business with a leadership position earned through integrity - Willis Allen, 100 years of Real Estate

 

Too many real estate websites uses generalities "Results through Excellence", "You'll be glad you chose..", "People and Property",  "your place for everything real estate".

I have over recent years talked to many real estate companies and owners on this subject - about focussing their websites to address the needs of their future clients and prospects rather than their current clients - few, if any have taken the radical step of embracing this change. Too many seem to echo the comments of Bud Clark at Willis Allen - "we'll consider it" - but they never do!

 

Properazzi musings on Facebook - 25 July

by Alistair Helm in

Here are the articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.


Why are house prices so high?

Post by Properazzi.

 

Property Marketing - the tease and then the benefits!?

The headline of this listing teased the searcher however the opening paragraph foretold great benefits for the property which then seem to have been forgotten in the rush for gushing generalities - my opinions 

Post by Properazzi.

 

Around the world on $400,000

A review of a NZ Herald article on what the price of an Auckland apartment buys you around the world - or not!

Post by Properazzi.

 

REINZ - Excellence Awards

A chance for the Institute to celebrate excellence as a statement of public trust - not really; more an 'inside-baseball' celebration

Post by Properazzi.




Properazzi musings on Facebook - 18 July

by Alistair Helm in

Here are the articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.

REINZ - Meet the CEO, but what about the future?

Post by Properazzi.
Post by Properazzi.
Post by Properazzi.
Post by Properazzi.


Private sale or agent sale?

by Alistair Helm in

I have often been asked a to whether it is better to sell your house privately or to use an agent. As ever with anything to do with property there is no single answer - certainly no right or wrong answer. It very much depends on the person, the property and the circumstances. 

I recall a number of years ago a real estate research report found that whilst around 12% of people said that they were planning to sell privately as compared to 40% who said they would definitely sell with an agent; a large proportion, close to 1 in 3 of the people surveyed said that they would probably sell through an agent but they may well try and sell privately first. 

I sensed at the time and still feel nowadays that this group - a third of all prospective sellers reflect a very commonly held view - give it a go to sell privately and if you don’t have success, fall back on the agent as they will likely sell it. It is interesting psychology really. You know that if you list with an agent you will sell your house, whilst to do it yourself has less certainty, but no real downside except for the time factor. Not an approach you would take with a legal matter or to fix your car, but far more likely reflective of home DIY work - give it a go and if you can’t do it, call in the professionals.

Certainly the cost of an agent sale is in itself a motivation to try a private sale, added to which is the full knowledge that as  agents rely on Trade Me for the bulk of their listings the site offers private sellers the same ‘level-playing-field’ on which to attract prospective buyers.

It is very interesting therefore to compare the approach private sellers take to the task of advertising a property as compared to agents on Trade Me in particular and online generally.

I recall a few years ago now noting how often private sale listings had far more photos and richer content description than those of agent listings. I believe on-the-whole this differential has almost disappeared as agents have ever more accepted the role of online as the pre-eminent form of advertising.

Just the other day however a perfect opportunity presented itself to make such an assessment - comparing the approach taken by a private seller and an agent. Unusually though this is for a property that is being marketed as a private sale after failing to be sold by an agent!

I became aware of the property when viewing the NBR site - the advert caught my eye as the image looked very much like an advert for a holiday home, but it was clearly a property for sale. An unusual placement for an advert - that is the kind of thing that caught my eye. The advert leads through to an excellent website - a wonderful presentation of the property built off a simple WordPress themed platform. The photos are excellent, mostly taken at night, they are emotionally engaging and of a very high quality.

The website is a consumate example of a professional and comprehensive presentation of the property, including 42 photos, a video, the LIM report and rateable value, details of school in the area and an insight into a recent registered valuation of the property. A building inspection is due to be added shortly. What more could a prospective buyer want in order to make an informed decision on this property before an inspection?

Doing a bit of research on this property brought insight into its marketing history - it was marketed by a real estate company with an auction date of 27th April, providing a unique opportunity to see how a private seller approaches the marketing of their property as compared to a real estate agent.

The presentation for the property in April is equally professional with 20 professionally taken photos and 2 very detailed floor plans (interestingly there is no floor plan on the new private sale site). The key difference is all the agent professional photos are taken in daylight whilst the private sale images are very moody night time photos which do add to the 'sub-tropical private paradise' sense of the property - which is a great positioning statement for the property marketing.

Aside from the comparison of the photo gallery for each presentation, I was fascinated by the difference in the way the same property was presented in the description between an agent and a private seller.

Below is the text of each starting with the private listing taken from the current listing on Trade Me:

Down a long private driveway opening up to a beautiful subtropical private paradise.The 2 steps and entrance way lead to 10mm industrial glass front doors. 

Bottom floor has 2 bedrooms.The master bedroom has ensuite, walk in wardrobe, extensive wardrobe & storage space, glass sliding doors leading to deck with spa, stepping down to one of the 3 outdoor living/dining spaces & pool area. 

Wooden floored hallway from entrance leads to open plan kitchen, dining area & step down carpeted lounge, with bifold glass doors on both sides leading directly to the solar heated pool. The heat pump is UNDER the flooring , with 6 vents distributing consistent warmth throughout winter, & air conditioning in summer. 

Just past the stairs (that lead up to 3 more bedrooms & bathroom, all with glass fronted sliding doors for wardrobe & storage) & you step into a very spacious sunny office/granny flat with bath/shower/toilet/kitchenette fully carpeted with underfloor heating in the main room. 

Sliding glass doors open out onto another patio, the other end has glass doors which bifold out making it entirely open. This office/granny flat has dual access, either through the house ( which has a 2nd door inbetween for added privacy) or through the glass doors accessed from the parking area.

The property is fully fenced so pet friendly for the smallest up to the largest of animals to roam/run freely due to the size of the land.

Garden lighting is activated by movement sensors, as does the many security lights throughout the property. House is fully alarmed with activation pads in the house and the office/granny flat.

This is a beautiful SUNNY PRIVATE OASIS right in the heart of Mt Albert.

If you love this property, it would be a pleasure show it to you. Please contact us for appointment to view. We have available upon request a Website showing a Video, Picture Gallery, LIM Report, Rateable Valuation, Registered Valuation, Schools in area, & a Building Inspection Report next week. AUCTION IS ON SITE 2PM THURSDAY 31 JULY. Many Thanks 

Here is the full text from the agents description from the agents website (Google cache) from April

Enter the private inviting driveway that leads to the rear impressive landscaped entrance, this property exceeds the WOW factor.

The glassed front entrance foyer of this impressive contemporary home beckons you to enter, giving you a glimpse of something special.

To the left a spacious light filled master bedroom with ensuite and walk in wardrobe. Flowing out onto a private enclosed spa pool area adjacent to outdoor pool and entertaining area.To the right a generous sized office.

Just past the office climb the stairs to three sunny light double bedrooms and a bathroom.

Return downstairs, down a small staircase and discover two huge areas of work from home office space, set up for business, or a granny flat complete with own bathroom and entrances.

Up to the main level, past the laundry and w.c. to the kitchen/dining which has a subtropical outlook encompassing the lush backyard with mature trees yukkas palms and plants.

Entirely private this flows onto a further entertaining area. The kitchen has integrated whiteware central granite work island and granite bench.

Adjacent is the step down lounge seamlessly opening on two sides to a fabulous swimming pool/entertainment area. The lounge has a woodfire.

The solar heated pool complex with tropical feel exemplifies indoor/outdoor living at its best.

There are so many more features in this extraordinary property we invite you to view this paradise in the heart of Mount Albert.

Open Homes Saturday & Sunday 1.30-2.30pm or view by Appointment

Auction - On site 27th April 2014 at 2.30pm

The first thing that struck me was how the agent description is effectively a commentary of a walk-through of the property - useful. However when comparing side by-by-side with the private listing the most striking difference is the use of features and benefits in the descriptions. I have highlighted what I see as contextual and relevant features and benefits in italics in each of the listings' description.

The agent's description totals 6 features and benefits, the private sale description totals 16.

I have often heard the comment made in the real estate industry that the best person to showcase a property is the owner. They know the house, they know the features and benefits and maybe this is a clear example that maybe of benefit to agents, to ask owners to write down a description of how they would communicate their own house in terms of features and benefits as part of the marketing!!

Property signboards - a vital part of real estate marketing

by Alistair Helm in

Whilst the days of newspaper advertising for property may be numbered, I believe that the traditional property signboard is here to stay and very likely to be immune to technology advances.

The signboard strategically placed on the boundary of a property which sometimes regarded as visual pollution are in my view an integral part of marketing a property. They are akin to the promotional sticker on the supermarket aisle that draws attention to the special product when doing your weekly shop. Whilst not every property on a street is for sale the ones that are, are suitably highlighted for those on-the-look-out for a property to buy.

I was drawn to this subject by an article on an Australian real estate site - Property Observer which posed the question as to whether this form of marketing has a future. One of the contributors argued that, rather in the same vein as open homes - signboards are purely for the benefit of the agent, another put forward the view that electronic signs will replace current printed sign boards.

I hold the view that neither of these predictions will come to pass. Signboards serve a valuable purpose.

They highlight to the local neighbourhood the availability of property for sale which can be vital for those serendipitous opportunities targeting people who might not feel they are ready to move house but for whom the attraction of a specific house in a particular area can prompt the call-to-action. For these people email alerts serve no purpose as they are not actively searching. This is an important aspect of the property market, as not all buyers follow a logic path of making a conscious decision to start looking which results in a purchase and a house move. Property buying is not a linear process.

The other value in house signboards is actually as a visual indicator of the property market. A lack of signboards means a quieter market, lacking demand. A lot of signboards indicates a tricky market without much activity and a nervous set of sellers looking to move. A healthy number of signboards many with the classic 'Sold' sticker signifies a dynamic market.

Innovative digital signboard - CodyLive

Innovative digital signboard - CodyLive

As to the form and size of a signboard, as stated earlier I do not see the evolution of electronic signboards. An Australian company CodyLive produce these high end LCD signs - I sense that local authorities would judge these as a step too far and ban them as their night time display would be intrusive and potentially distracting to drivers. The purpose of the signboard is just that a sign, not a substitute to an online listing which has all the images and facts regarding the property. I can imagine some real estate agents salivating at the branding opportunity of such technology beaming out at night the smiling face of the local agent, but I can't see that eventuating!

As to size, I think in the main in NZ we have a good balance. The traditional sign is around 1.2 m2 which provides ample space for a single main image, a couple of smaller images and the contact details and open home times as well as the agent brand. A suitable mix of content. Signboards that fail to show a image are clearly nothing more than advertising for the agent and the property owner should charge the agent a rental for such space.

In Australia size of some signs appears to be getting out of hand as I found on a recent trip over the Tasman.

Property signboards that totally obscure the front of the property would seem to defeat the very principle of what they are there to do!

Properazzi musings on Facebook - 11 July

by Alistair Helm in

Here are articles posted on Facebook over the past week - short, spontaneous insights and observations which I felt needed immediate discussion and didn't warrant long-form articles written.

A Compelling Headline

Post by Properazzi.
Post by Properazzi.


Property price searching online needs to be more accurate

by Alistair Helm in ,

A recent appeal against the findings of the Complaints Assessment Committee before the Real Estate Agents Authority on the subject of online search pricing for property highlights a major issue which in my opinion should have been addressed long ago, as it continues to frustrate buyers as to price expectation of property on the market.

Here is the heart of the issue. Well over 1 in 4 of all properties on the market today are advertised without a price, in Auckland that figure is closer to 1 in 2. That means in Auckland there are 3,485 properties for sale with no detail in the listing as to any guidance of price expectation. Buyers often comment that such properties are deliberately avoided as they hate the uncertainty and risk associated with discovering properties only to find it is way outside their budget due to the price search bracket on the website.

The decision not to display a price on a property is in the view of real estate agents due to the fact that in their words “the market will decide the price”. That is entirely true, as the sale price has no bearing on any displayed price or indicative price. The selling price is the agreed price based on the willing seller deciding to accept the offer of a capable buyer prepared to offer such a price. However the market decides the selling price for all properties, not just those with no price indication.

This problem confounds buyers and is at the heart of this appeal to the REAA Complaints Assessment Committee. A property should only be displayed in search results on a website within the range which includes the assessed price. That is the price which the REAA requires every agent to complete and submit to the vendor when listing the house. So if the agent assesses the house at $625,000 then the property should feature in a search range of $600,000 to $650,000. Not in a search range of $550,000 to $600,000 nor in a range of $650,000 to $700,000.

In my opinion one of the issues that results in properties appearing online within too wide a search price range is that real estate websites whether aggregator property portals or real estate company websites provide too wide a price range in the search filters and should refine their search process to reflect the needs of buyers, not play to the marketing tactics of the agents.

It should be required of suchwebsites that increments of price ranges be more narrowly defined so that buyers can input their budget and expect to see properties displayed which based on an agents appraisal would likely sell within that range

Let's look at this case in point and through that see exactly how this situation arises within the industry’s approach to property marketing. This particular appeal received publicity in the NZ Herald recently and concerned a Harcourts agent who listed a property in August 2012. The property was appraised with a price range of between $880,000 and $980,000 with the vendor expressing a clear opinion that they wished to achieve a sale price of $980,000.

Now this is the first issue I have. The Real Estate Agents Act enforced through the REAA requirements of Agency Agreements for selling a property requires the following:

“A written market appraisal: This is the agent’s best estimate of the price they expect your property could be sold for, based on sales and prices for similar properties in your area or a similar area.”

The best estimate of the price - not a rough guide with a range of $100,000 amounting to more than a 10% variance. Reading the particulars of this case clearly the agent chose to provide a range that happened to stretch from the agents best estimate of $880,000 to the vendors expectation of $980,000 - a clear disconnect which would be bound to lead to issues between agent and vendor.

The property was listed with an auction method of sale with no price displayed on the web. The listing had a search range of $750,000 to $950,000. 

Here is the second major issue - the agent provided a market appraisal of $880,000 to $980,000. Why then did the agent list the property on the web with a search price of $130,000 below their appraisal and $230,000 below the vendors expectation?!

The reason is to be found in the evidence to the REAA enquiry provided by the licensee who stated in the submission that:

“It is industry practice to load a property within a certain price bracket. Generally, this price bracket is quite wide, in the vicinity of $200,000, as this allows person searching for a property within that region to view properties that are above their price search criteria and associated properties below their price search criteria. This is useful to the vendor as it allows a wider range of parties to view their home and can often generate interest in different price brackets from parties who originally had a lower or higher price that they wished to spend.”

The licensee went on  to state:

“Price search criteria are not the price of the property and they have no bearing on the final value - their use is purely to assist prospective purchasers who might use price search criteria to assist in narrowing their search results. I also make the point that only a small sample of buyers indeed search for property using price search criteria. Rather my experience would suggest they are more intent on searching for property based on key criteria of suburb and amenities such as bedrooms.”

This assertion by a real estate professional is frankly staggering and I would have thought that the REAA would challenge this view that a $200,000 range is acceptable, and to state that the intent is to generate interest fromm parties where the property is outside their intended spend. To then go on to state that buyers don’t use the filter criteria on websites is hardly credible.

All the main real estate portals and leading real estate company website have price ranges of $100,000 between $500,000 and $1m, below $500,000 some operate with increments of $50,000 and over $1m the increment rises to 200,000. 

In my view it would be of great benefit to all buyers to have the listing price search in increments of $50,000 right up to $1m. Leaving the user to refine tightly their budget criteria to within $50,000 or to widen it to $100,000 or more. Additionally properties should be loaded on such sites with a single price which whilst not displayed, should accurately reflect the market appraisal presented by the agent. In this way the buyer would get to see properties that meet their budget as opposed to being shown properties that the agent judges that they should be enticed into viewing and end up being sold  for far more than their budget or the price search criteria.

As in this case where this property would have been seen by prospective purchasers who may have been searching for property between $700,000 and $800,000 due to the search range of $750,000 to $950,000 when in fact the vendor was not prepared to entertain any offer less than their view of the value at $980,000 shown by the fact that the property passed in at auction at $880,000 and a subsequent offer of close to $900,00 failed to secure a sale.