On a national, and even international, scale the world of real estate is undergoing a transformation, one that could fundamentally change the process of buying and selling homes. The average consumer probably doesn’t notice, but behind the scenes, there’s a power struggle taking place, as a select group of corporate giants position themselves to be the stand-out source for all your real estate needs.
To some extent, it’s a David and Goliath kind of story. Playing David would be Spencer Rascoff. At the tender young age of 24, Rascoff successfully joined the burgeoning dot-com millionaire scene when he founded Hotwire, the Internet travel company. From there, Rascoff went on to become CEO of Zillow, the popular real estate website. With Zillow, he acquired a number of other real estate related companies, most recently and most notably, Trulia. With the joining of Zillow and Trulia, Rascoff has created an Internet juggernaut for anyone looking to buy or sell a home.
There’s a lot of money to be made as the real estate industry evolves, and that has sparked the interest of two goliath investors. First up is Rupert Murdoch. Although Rascoff might be well on the way to making his first billion, Murdoch is already part of that exclusive club, with an estimated net worth of over $14 billion. Murdoch is primarily known as CEO of the global media behemoth, News Corporation. News Corp. has an extensive presence in television, newspapers and magazines with outlets such as Fox News and The Wall Street Journal.
However, Murdoch also has an interest in real estate and the Internet. His company owns a controlling share of REA Group Limited, which pretty much has a lock on Internet home sales in Murdoch’s home country of Australia. Only a few months ago, and on the heels of Rascoff’s Zillow/Trulia merger, Murdoch bought Move, Inc., which owns the popular real estate website, Realtor.com. That purchase, along with other assets owned by Move, put Murdoch in a great position to go toe to toe with Zillow and Tulia.
Although Murdoch clearly has the resources to take on Rascoff, there’s yet another big dog that’s sniffing around. That would be Warren Buffett, whose net worth, at approximately $73 billion, is an astounding five times larger than Murdoch’s.
Buffett is the chairman and CEO of Berkshire Hathaway, a company that owns some of the world’s best-known brand names. Buffet is now expanding his empire into the world of residential real estate. Through Homes Services of America, Buffett has put together some of the best regional real estate companies across the nation. Plus, he has started to leverage the Berkshire Hathaway name in a variety of ways with respect to real estate sales and services.
It’s a bold move for Buffett, who rarely associates his prized Berkshire Hathaway moniker with a specific product or service.
The subtle factors
So, what does all this maneuvering by multi-national companies have to do with the importance of local knowledge? Well, it’s a long-winded way of pointing out that, like politics, all real estate is local. Although services like Zillow and Realtor.com are useful tools to initially explore the idea of buying or selling a home, they often lack the ability to incorporate the subtleties of local market information, something only an experienced agent can provide.
The expansion of online real estate services will never supplant the unique knowledge and wisdom of someone who intimately knows the area, as well as how the many and varied components of a house and its design come together to create a specific market value.
For example, take our old stomping grounds of Eastport in Annapolis. There is a multitude of factors that can have a significant impact on what an Eastport house is worth, things that an out-of-town agent might not be aware of, and delicate details that a national, one-size-fits-all website will also be unable to understand. In Eastport, whether a house is above or below 6th Street could swing the price by $100,000 or more. And certain streets are more or less desirable, depending on the amount of traffic or availability of parking.
The type of house also is important. Traditional Eastport homes do better than newer or more contemporary designs. There’s a certain style to Eastport, and the buyers that want to move there are looking for a home that reflects that style. Eastport even has specific zoning requirements and limitations that are separate and distinct from what governs the rest of Annapolis. Recognizing these factors can be vitally important to both buyers and sellers. Some agent from Baltimore, or an agent who paid Zillow to get their face next to a listing, isn’t going to have a clue about these little-known facts.
It doesn’t mean an agent can’t ever sell a house that’s on the perimeter of where they normally do business. But it does mean that they should be on the lookout for anything that might be unique to a particular property or issues that could affect the enjoyment of a home for buyers, or the ability to get top dollar for sellers.
Going back to Annapolis, the Historic District has all sorts of rules and regulations, yet many agents might not even know where the Historic District begins and ends. When you leave the city and start looking at homes in the countryside, there’s a whole new bunch of considerations that rely on the expertise of local knowledge. Things like “right to farm” and “agricultural taxes” can become a big deal. If you aren’t willing to accommodate the scent of freshly spread manure or don’t know that converting that pastureland to a home site might generate a $20,000 tax bill, that could be a problem.
The list of local knowledge is a long one, and when it comes to real estate, it’s vitally important. As they say, you don’t know what you don’t know. So, when it comes to getting help with buying or selling, the information offered by places like Zillow or Realtor.com can be a good place to start, but if you want to finish in good form, don’t forget to seek out the agents and local firms that are experts in the area.