Wednesday, July 25, 2007

A Real Estate 2.0 Vision

Brad Inman asked for thoughts on the real estate 2.0 vistion. I wrote some of my response on Sunday but could bring myself to finish. It's simply not an easy thing to speal out. Anyway, here are my initial thoughts.

Change that will help define a vision will center around online listings, the way organized real estate cooperates and how that affects business models and compensation. With web 2.0 and the evolution of online advertising, the consumer is more empowered. Consumers have more access to information and the ability to generate exposure themselves. A savvier consumer with the ability to advertise will increasingly bring a REALTORS value into question.

Apart from all of the professional services a real estate professional brings to the table for marketing and transaction management, the ability to maximize market exposure through a network of cooperating real estate professionals is the single biggest value proposition. To maintain that value proposition, the real estate industry needs to evolve to ensure cooperative real estate maintains its edge. The changes that need to occur will help map out a vision for real estate.

Thus far, web 2.0 represents a couple of things to me. Software platforms have become more interoperable and passive viewers have become contributors transforming content from static to dynamic and conversational. These technologies and their paradigms have created a foundation for change that can help a real estate 2.0 come to fruition. I agree with Brad Inman that a real vision for the real estate in 2.0 style has yet to be articulated. Where we have the foundation, we can begin to make sense of more things and its the new knowledge that we gain that will shape a new vision.

There are a few things I see in the real estate 2.0 vision:

Identity Will Evolve

Identity is going to play a big role. There are more and more software solutions that enter the real estate space and that creates account management issues. Currently, there is an enormous amount of duplication of effort. Real estate professionals have to have membership in multiple MLSs and enter data into multiple MLS systems to cover all of their selling areas. MLS consolidation only solves part of the problems. Identity needs to evolve. This is a brilliant presentation that explains the problem and possible solutions that arise from interoperable software. Also consider how convergent social networking plays a role here.

So what exactly comes out of identity? Accounts become recognized cross platform to so that user updates are updated in many places at one time. Trust evolves so that legal responsibilities that brokers carry are more easily managed. Misrepresentation becomes more difficult. When trust is better established, brokers can provide more control to agents especially when it comes to online advertising. This can and probably will affect brokerage models.

Data Control will Evolve

Data control will evolve in real estate thanks to web 2.0 and will have wide ranging impacts. In a recent article in Canada’s Globe and Mail newspaper, it was suggested that Facebook’s future would hinge on how it handles privacy. Chris Kelly, Facebook’s Chief Privacy Officer commented “Privacy, as anonymity, is declining, but privacy, as control, is on the rise.” Where control of privacy is key to Facebook and other social networks, control of data is key in real estate.

The current way listing data is managed and controlled throughout the industry is problematic in many ways.

The DOJ Threat - The current way that listing data is managed and distributed online by MLS organizations creates and anti-competitive environment according to the US Department of Justice. This is the premise of the lawsuit the DOJ has brought against the NAR. The way the industry needs to eliminate this threat is to put the online control of listing data in the hands of the brokers and their agents, rather than have that data managed and policies created by MLS organizations.

The Discount Dilemma - MLS were originally formed to facilitate cooperation and compensation. While the MLSs control data through existing broker reciprocity, brokers are either forced to cooperate with any members or are unable to cooperatively advertise with anyone. This means that many full service brokers are forced to provide their listings (which many regard as marketing assets) with limited service brokerages that could be undermining their business model.

There are many different business models in the real estate industry and the only way to accommodate all of them and maintain cooperation in organized real estate is to provide control and choice.

Advertising ROI – Real estate professionals will need more control over their listing data to maximize their ROI from online advertising. Too often MLS data is the data used to distribute online listings. As marketing assets, they not only serve the seller but they provide exposure for the real estate agent or broker.

It is clear that better data generated better response. When listings are distributed to other websites, the agent or broker must have control to provide whatever data that needs to be published to maximize the response.

Analytics – The way that a real estate professional obtains the maximum price for seller is by exposing the home to the largest audience possible. Real estate professionals deal with more savvy consumers today that question the value propositions justifying commissions. Any consumer can advertise their own home on classified sites like Craigslist, but the one thing they can not do is advertising on hundreds or thousands of local real estate websites. Today, few real estate professionals can track all of the exposure that they generate on consumer search sites and cooperatively on other real estate agent and brokerage sites.

Through open platforms and interoperability, real estate agents and brokers will be able to track online exposure generated through advertising and organized real estate cooperation.

IDX represents cooperative advertising and that needs to happen on a peer to peer basis to address the problems above. The DOJ threat is best addressed by allowing brokers to make individual business decisions on who can advertise their listings. Similarly, the discount dilemma is addressed by providing the peer to peer choice. ROI is maximized when brokers and their agents have control of all of the data that is used in online advertising, whether that is on consumer search sites or on cooperating agency sites. Lastly and ultimately, when real estate professionals have control of their listings, and advertising platforms are more interoperable, we can see how exposure is can better be tracked across many different domains and platforms.

Geo Location Information Will Evolve

Interoperable systems and communities will allow real estate professionals and consumers better define local geographic areas for local home buyers and sellers and relocating home owners. Neighborhoods and communities are constantly developing and amalgamating. Only a larger user base and an open technology framework can help manage and market real estate described in local areas that all professionals and consumers relate to. Further, it’s the only way that we can provide relevant complimentary information to better understand listings and the areas they are in.