Transparency and Pricing

The internet has transformed industries and squeezed margins, including, now, residential real estate.  Sold to sellers as a marketing tool to reach more potential buyers, the internet platforms for residential real estate sales make some sellers cringe when the increased sales transparency drives down pricing.  That said, it’s the tool of choice for young buyers, you can’t beat the marketing reach and it’s here to stay.  For now, the revolutionary disruption is uncomfortable in supply-rich markets where sellers feel the short term pain more than the long term gains.

Transparency and Buyers

By all means, buyers do not mistake the transparency of the volume of marketing information for transparency as it relates toquality and sufficiency of information to make a real estate investment decision.  Buyers beware and use an agent to represent youas a buyer agent.  No matter how nice and informative, the listing agent works for the seller – not you.  Keep in mind, land use restrictions, building codes, environmental hazards, income qualifications, easements, remaining useful life, permits, sewer hook-ups, prevailing mortgage rates and other meaningful information (including demand) is not included in those pretty online photos.    Don’t judge a book by its cover or a property by its online photos.  Hire experts, including an inspector, attorney and financial advisor to guard your interests. 

Transparency and Sellers

Sellers feel they have less transparency than they did before.  Wait, what?  Why?  Sellers advertise.  Buyers don’t.  Sellers seek the light.  Buyers generally don’t.  At first.  On purpose, that is.  Whereas potential purchasers used to have show up in person to get a sense of inventory, now they can research online, and potential demand remains hidden.      

Still, sellers want data, insight.  And yet, sellers and agents do not have transparency as it relates to shoppers, their preferences or their qualifications.  So if not who, then how many?  Clicks can be quantified.  It’s true.  But the result does not translate into reliable data for the seller.   There is no meaningful or measurable difference between a single click from a serious qualified purchaser and five clicks from someone surfing for design ideas.  Six clicks. That’s what we know.

To be sure, there are industries dedicated to discovering buyers – who don’t want to be discovered.  Even if we know its an open information highway, it feels like an invasion of privacy.  While sellers can certainly entice buyers will photos, boost, ads and more, be be patient. They will emerge when they are ready.

What’s Next?

This year the size of the millennial generation will outgrow the baby boom generation.  They are also outgrowing their apartments, condos and homes.  So what happens when there are more home buyers?  And when inventory becomes more scarce?   In a world of transparency both buyers and sellers will see falling inventory and rising prices.  Sellers will continue to market to a wide audience and generate demand.  The difference?  Real estate  is a supply-constrained market.  It is difficult to scale new supply.  So as the market turns, sellers holding desirable, viable and affordable inventory will benefit from the increased transparency and hold firm to their pricing.  Buyers should take advantage of this generational opportunity to buy during an information pricing disruption, a buyer’s market and low interest rate environment.   It will change.

Personal Note

Not all good deals are transparent to the public. You probably missed it.  This quarter I sold a property with over 10 acres in Greenwich.  There is no record on Zillow.  Nor on the multiple listing service, nor on a website, nor the attached report of MLS sales.  It was an arms length private sale.  There’s a record of it at town hall. Who knew.  Who benefited?  Both buyer and seller.