Then and Now
Ten years ago, a search for real estate would have started in the office of a local real estate agent or by just driving around town. At the agent's office, you would spend an afternoon flipping through pages of active property listings from the local Multiple Listing Service (MLS). After choosing properties of interest, you would spend many weeks touring each property until you found the right one. Finding the market data to enable you to evaluate the asking price would take more time and a lot more driving, and you still could not be able to find all the information you needed to get really comfortable with a fair market value.
Today , most property searches begin on the Internet. Quick keyword search on Google by location will likely get you thousands of results. If you spot a property of interest on a real estate web site, you can usually view photos online and maybe even take a virtual tour. You can check other web sites, such as the local county assessor, to get an idea of the property's value, see what the current owner paid for the property, check the real estate tax, get census data, school information, and even check
While the resources on the Internet are convenient and useful, using them properly can be a challenge because of the volume of information and the difficulty in verifying its accuracy. At the time of writing, a search for "Denver Real Estate" returned 2,670,000 Web sites. Even a neighborhood specific search for real estate can easily return thousands of Web sites. With so many online resources how does an investor effectively use them without getting bogged down or winding up with incomplete or bad information? Believe it or not, understanding how the business of real estate works offline makes it easier to understand online real estate information and strategies.
The Business of Real Estate
Real estate is typically bought and sold either through licensed real estate agent or directly by the owner. The vast majority are also bought and sold through real estate brokers. (We use "agent" and "broker" to refer to the same professional.) This is due to their real estate knowledge and experience and, at least historically, their exclusive access to a database of active properties for sale. The MLS (and CIE)
The database of residential, land, and smaller income generating properties commercial properties) is commonly referred to as a multiple listing service (MLS). In most cases, only properties listed by member real estate agents can be added to an MLS. The primary purpose of an MLS is to enable the member real estate agents to make offers of compensation to other member agents if they find a buyer for a property.
This purpose does not include the direct publishing of the MLS information to the public; times change. Today, most MLS information is directly accessible to the public over the Internet in many different forms.
Commercial property listings are also displayed online but aggregated commercial property information is more elusive. Larger MLSs often operate a commercial information exchange (CIE). A CIE is similar to a MLS but the agents adding the listings to the database are not required to offer any specific type of compensation to the other members. Compensation is negotiated outside the CIE.
In most cases, MLS and CIE are not directly linked to MLS and CIE, which are typically maintained by REALTOR associations. The lack of a managed centralized database can make these properties more difficult to locate. Traditionally, these properties are found by driving around or looking for ads in the local newspaper's real estate listings. A more efficient way to locate for-sale-by-owner properties is to search for a site-by-site seller in the geographic area.
What is REALTOR? Sometimes the terms real estate agent and REALTOR are used interchangeably; however, they are not the same. REALTOR is also a licensed real estate agent who is also a member of the NATIONAL ASSOCIATION OF REALTORS. Realtors are required to comply with a strict code of ethics and conduct.
The MLS and CIE property listing information was historically only available in hard copy, and as we mentioned, only directly available to real estate agents of an MLS or CIE. About ten years ago, this valuable property information began to trickle out to the Internet. This is a flood!
One reason is that most of the 1 million or so REALTORS have Web sites, and most of those Web sites have varying amounts of local MLS or CIE property information displayed on them. Another reason is that there are many non-real estate agent websites that also offer real estate information, including, for-sale-by-owner sites, foreclosure sites, regional and international listing sites, county assessor sites, and valuation and market information sites. The Real Estate Agent is the owner of a real estate agent who is responsible for the sale of real-estate information to the Internet. Internet, most properties are still sold directly through real estate agents listing properties in the local MLS or CIE. However, those property listings do not stay local anymore. By its nature, the Internet is a global marketplace and local MLS and CIE listings are normally disseminated for display on many different Web sites. For example, many go to the NATIONAL ASSOCIATION OF REALTORS web site, http://www.realtor.com, and to the local real estate agent's website. In addition, the listing may be displayed on the web site of a local newspaper. In essence, the Internet is just another form of marketing offered by today's real estate agent, but it has a much broader reach than the old print advertising.
In addition to Internet marketing, listing agents may also help the seller establish a price , hold open houses, keep the seller informed about interested buyers and offers, negotiate the contract and help with closing. When an agent provides all of these services, it is referred to as a full service listing arrangement. While full service listing arrangements are the most common type of listing arrangement, they are not the only option anymore.
Changes in technology behind the real estate business have caused many agents to change their business. In large part, this is due to the instant access most consumers now have to property listings and other real estate information. In addition, the Internet and other technologies have automated much of the marketing and initial search process for real estate. For example, consumers can view properties online and make inquires via email. Brokers can use automated programs to send listings to consumers that match their property criteria. So, some agents now limit the services they offer and change their fees accordingly. An agent may offer to advertise the property in the MLS but only provide limited additional services.
Because of the volume of real estate information on the Internet, when people hire a real estate agent today they should look at the particular services offered by the agent and the depth of their experience and knowledge in the relevant property sector. It is not just about access to property listing information. Buyers and sellers historically found agents by referrals from friends and family. The Internet now provides ways to directly find qualified agents or to research the biography of an agent referred to you offline. One such site, AgentWorld.com, is quickly becoming the LinkedIn or Facebook for real estate agents. On this site an agent can personalize their profile, start a blog, post photos and videos and even create a link to their web site for free.
Some have argued that the Internet makes REALTORS and the MLS less relevant. We believe this will be false in the long run. It may change the role of the agent but will make knowledgeable, qualified, and professional REALTORS more relevant than ever. In fact, the number of real estate agents has risen significantly in recent years. No wonder, the Internet has made local real estate a global business. Besides, the Internet or not, the simple fact remains that the purchase of real estate is the largest single purchase for most people in their lifetime, and they want expert help. As for the MLS, it remains the most reliable source of real estate listing and sell information available and continues to enable efficient marketing of properties. So, what is the function of all online real estate information?
Online Real Estate Information is a great search tool for buyers and sellers and a marketing tool for sellers. When used correctly, buyers can save time by quickly researching properties and ultimately making better investment decisions. Sellers can efficiently research the market and make informed decisions about hiring an agent and marketing their properties online. The next step is to know where to look for some of the best resources.
In the sections that follow, we provide strategies and tips on how to use the Internet to locate property for sale and research information relevant to your decision to purchase the property. There are many real estate web sites from which to choose and although we do not mean to endorse any particular Web site, we have found those listed here to be good resources in most cases or to be so popular that they need to mention. One way to test your site's accuracy is to search for information about a property you already own.
Finding Real Estate for Sale
MLS databases continue to offer the most complete and accurate source of real estate information. Now MLSs now distribute content to other Web sites (primarily operated by real estate agents). An excellent starting point for MLS originated content is the national NAR Web site, realtor.com, which is also the most popular web site for searching real estate listings. Virtually all local and regional MLSs have an agreement with realtor.com to display much of their active inventory.
Some local and regional MLS systems also have a publicly accessible Web site. However, to get complete information you will most likely still need to find a qualified local REALTOR. Many local real estate agents will also provide their customers (via email) new listings that are input into the MLS that match their predefined criteria.
There are also many web sites that display both real estate agent listed and for-sale-by-owner properties. Some of the more popular Web sites include zillow.com and trulia.com. These sites offer other services too. For example, zillow.com is best known for its instantaneous property valuation function and trulia.com for providing historical information. Another source of properties for sale is the state, regional, and local Web sites associated with brokerage companies; for example, remax.com or prudential.com. Search engines like yahoo.com and classified advertising sites like craigslist.com also have a large number of active real estate listings.
One key difference between these sites is how much information you can access anonymously. For example, at trulia.com you can shop anonymously up to a point but then you will need to click through to the agent's website for more information. Many new real estate search engines allow you to sift through listings without having to fill out a form. The best strategy is to browse some of the sites listed above to find geographic areas or price ranges that are interesting. Once you get serious about a property, then that's the time to find a qualified REALTOR of your choice to conduct a complete search in the local MLS.
It also does not go wrong to search the old-fashioned way by driving through the neighborhoods that interest you. There is no substitute for physically, not virtually, walking the block when you are making a serious investment decision. In this sense, real estate is still a very local business and standing in front of the property can lead to a much different decision than viewing a web page printout
Valuing Real Estate
As we mentioned, one of the most popular real estate tools is zillow.com's instant property valuation. Just type in an address and in and you get a property value. It even charts the price ups and downs, and shows the last date sold (including price) and the property tax. There are other sites that provide similar tools such as housevalues.com and homegain.com. Unfortunately, many people use these estimated values to justify sales prices, offers and counteroffers. However, these are only rough estimates based on a formula that incorporates the local county sales information. These estimates can swing wildly over a short period of time and do not seem to always track actual market changes, which are normally more gradual. In addition, these estimates do not automatically take into account property remodels or renovations or other property specific or local changes. This is not to say these sites are not useful. In fact, they are great starting points and can provide a good ball-park value in many cases.
When it comes to getting a more accurate value for a particular property, there are other strategies that are more trustworthy. One is to go directly to your county's Web site. More often than not the county's assessor's area of the site provides sales and tax information for all properties in the county. If you want to research a particular property or compare sales prices of comparable properties, the local assessor's sites are really helpful. When you visit a county's Web site you are getting information straight from the source. Most counties today publish property information on their Web sites. Many times you can not see the price paid by a previous owner, but the estimated value, property taxes, and maps.
Given the importance of valuation to investing, we are also going to remind you of the two most important (non-Internet) valuation methods: real estate agents and appraisers . Working with a local REALTOR is an accurate and efficient way to get value information for a property. While one of the primary purposes of the MLS is to market the active property listings of its members, the system also collects sales information for those listings. REALTOR members can pull this sales information and produce comparable market analyzes (sometimes called CMAs) that provide an excellent snapshot of a particular property's value for the market in a particular area.
Finally, the most accurate way to value a property is by having a certified appraiser produce an appraisal. An appraiser will typically review both the sold information in the MLS system as well as county information and then analyze the information to produce a valuation for the property based on one or more approved methods of valuation. These methods of valuation may include a comparison of similar properties adjusted for differences between properties, determining the cost of replacing the property or determining a value based on the income generated by the property.
There are many ways in which the Internet can help you get the scoop on a particular neighborhood. For example, census data can be found at census.gov. You can also check out the neighborhood scoop at sites like outside.in or review local blogs. The blog is a Web site where people discuss topics by posting and responding to messages. Start by looking at placeblogger.com and kcnn.org/citymediasites.com for a directory of blogs.
When it comes to selling residential, Trulia.com has a "Heat Map" that shows how hot or cold every neighborhood is based on prices, sales or popularity among the sites users. property or rental properties that cater to families, the quality of the area's school district makes a huge difference. There are many Web sites devoted to school information. Check out greatschools.net or schoolmatters.com. Most local school districts also have their own web site. These sites contain a variety of information about the public schools and the school district, including its district demographics, test scores and parent reviews.
Finding the Right Real Estate Agent
A recent addition to the Internet boom in real estate information is Web sites that let real estate agents market their expertise and local knowledge by displaying their professional profiles and socially networking with blogs. You can search for an agent with a specific expertise, geographic area of specialization, or an agent offering specific services. The web site AgentWorld.com allows users to quickly and easily find an agent with the right expertise using keyword search and clean and simple agent profiles. AgentWorld.com also enables agents to post personalized blogs, photos and videos to help consumers find the best agent for their needs. Plus, many agent profiles include a direct link to the agent's web site where you will likely find the local MLS listings.
Maps and Other Tools
The Internet has made mapping and locating properties much easier . To get an aerial view or satellite image of a property or neighborhood, go to maps.live.com or maps.google.com or visit walkscore.com to see how walk-able a particular property is. These sites can give you an idea of the neighborhood features and the types of entertainment, restaurants and other facilities that are within walking distance of the property. Maps.Live.com provides a view at an angle so you can see the sides of houses and Maps.Google even gives you a 360 degree street-level view for certain neighborhoods.
Final Thoughts on Internet Strategies
The Internet is a very effective research and marketing tool for real estate investors but not a replacement for a knowledgeable experienced real estate professional. The Internet can save you time and money by enabling quick and easy property research and marketing options. Sites like AgentWorld.com also help you effectively find a REALTOR who fits your buying or selling needs.
Always remember when it comes to Internet Strategies for Real Estate: More knowledge is better. You need to use the Internet to build your knowledge base on a target property or to find a real estate agent with expertise you need. However, the big caution here is that the Internet should not replace human judgment and perspective, expert advice or physical due diligence keys to successful investing.