San Antonio s Current Market Conditions

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1 Why You re Probably Wrong About San Antonio s Current Market Conditions I ve been receiving several rather frantic calls from sellers in San Antonio who want me to buy their homes. They ve listed their home with a Realtor thinking their need to sell their house fast would be supported by current market conditions. After all, it s a hot HOT real estate market in San Antonio right now, isn t it? Not so fast. Now, I should tell you I m a real estate investor, and I buy houses from people who need to sell them fast. I give them a cash offer for property, and I keep my word so I depend on real estate data for a living. I make fair offers to people for their property. I m not in the business of taking advantage of others. I have been lucky enough to find some success in this crazy real estate business, and I m hoping to continue for a long time. I buy properties, and often I ll fix them up and sell them, or rent out the property. Each situation is unique, but when someone calls me up and tells me that they need to sell their home, my first step is to figure out the highest price that I can possibly pay them for their house to make them an offer. (If you want to sell your property, please call me - Kim - at (210) or visit to get a cash offer right away.) People need to sell their house fast for many reasons - like divorce, to avoid foreclosure, a sudden inheritance, or a desire to exit land lording here in Military City USA folks get transferred seemingly overnight - their houses have to sell, and fast. So they read the market conditions, sometimes talk to an enthusiastic Realtor, and next they decide to

2 list their house in hopes of getting a great offer. Then the house just sits, not getting any offers. If the market s so hot, why don t some properties sell? What s going on? Like you, I need to know the true price of real estate. There is no clear, comprehensive data provided in San Antonio, so we just don t know. Let me explain to you how it works and how it s supposed to work, and why It s different here in San Antonio. In every major city there is a Multiple Listing Service (MLS). That s a database owned and controlled by the local real estate association and driven by Realtors. Here the San Antonio Board of Realtors (SABOR) controls the MLS data and they don t share. More on that in a second. MLS is the most common way to find out if it s a good time to sell your house by comparing the sold prices of other properties nearby, sellers can make a reasonable guess as to the value of their own property. If they choose to hire a real estate agent to sell their property, sellers depend upon guidance from that agent to help correctly price the property to sell. It s tough to sell a property, even with all the right data. But here in San Antonio, we don t have the right data, partly because SABOR won t release the sale prices of property from the MLS to the public. But that s not the most troubling part there are bigger implications for the San Antonio economy, because real estate is a huge piece of what we investors call the market.

3 In May 2014, SABOR submitted a press release touting a 4% increase in average home sold- prices (an all time high in San Antonio) and a 4% increase in total home sales over May Suzanne Westrum, SABOR s Communications Director also released a press release about their recent press attention, boasting several local news distribution channels utilizing them as San Antonio s resource for real estate in San Antonio. SABOR would like you to use their Realtors to sell your house, please. That is plain to see. And hey, we re not opposed to Realtors we know that the good ones do a great job helping people out of tough situations. They re fellow real estate professionals, just like us.we just want to help our local economy grow, and right now San Antonio is being held back from its full potential and that damages everyone. Then there is Zillow. Lots of people around the country have used Zillow to get a Zestimate and even though those Zestimates are notoriously unreliable, it s a pretty neat tool. See, Zillow gets data from lots of sources including local counties, cities, public records, and deals with MLS providers (like SABOR). Beyond the Zestimate, many folks use Zillow for updates on the local real estate market because it s pretty easy to find out what other properties have sold for around you. Zillow also publishes data on local real estate markets based on the data they gather, and investors use that information to make decisions about where to put their money. In Zillow s May 2014 San Antonio Real Estate Market Overview, they reported an average home sold- price $77,000 less than SABOR s May 2014 findings, an average decrease in total home sales of - 0.5% down from May 2013, and a - 1.5% monthly change down over April

4 2014. In nearby cities like Seguin the decrease they report is as bad as - 4% total home sales down over April Another common way to measure the current market conditions is through the Market Action Index which relies on an accurate reporting of MLS data to determine the current rate of home sales versus the amount of the overall inventory. An index above 30 implies a seller's advantage. Below 30, conditions give the advantage to the buyer. While this proprietary model is currently undisclosed, its creator Altos Research will tell you this method requires a complete data set of active listings which SABOR does not provide, effectively leaving out transactions like tax lien sales, all county and city sales, and every other home sale that didn t run through their exclusively Realtor- generated listing service. Enough about the numbers. The bigger point to be illuminated is that SABOR has decided not to feed their MLS data into Zillow s database, leaving Zillow with public record data and the MLS with Realtor generated data. Both are mutually exclusive in their offering of information, leaving both somewhat incomplete and, individually, absolutely flawed. Since the two don t play well in the sandbox together, that leaves you the consumer with an unclear picture of what s really going on in the market. The obvious result is the marketplace suffers. Zillow and SABOR and its members, Realtors, have been in a Hollywood- tabloid style bickering session with each other for some time now and the opinions are strong. Other major metropolitan areas in Texas such as Houston are in bed with Zillow, cooperating with them to form an agreement that better serves their community. Corpus Christie recently followed suit by allowing their MLS data to be fed through Zillow. Unlike SABOR, both cities real estate boards realize there is definitely some public interest served

5 when real estate organizations participate in transparency so that the public has access to good information. According to marketing specialist Jeff Geoghan, Zillow brings nothing but a hyper- local enhancement to data relating to local real estate market conditions: The big- traffic sites such as Trulia, Zillow and Realtor.com continue to retool their neighborhood statistic and property history functions to outmaneuver each other and respond to consumer feedback. The majority of agents and super- majority of customers welcome it as an even better way for consumers to make decisions. For agents, these sites data help avoid difficult conversations with clients over schools and crime, topics close to the edge of violating Fair Housing regulations ( hyper- local- real- estate- data/#sthash.cgcxkmlm.dpuf). Top 20 real estate websites, April 2014 Website Total visits Share of visits March rank 1. Zillow 62.6 million 17.39% 1 2. Trulia.com 32.8 million 9.10% 2 3. Realtor.com 28.5 million 7.91% 3 Source: Experian Marketing Services Real estate network Zillow (Yahoo) network Trulia (RentPath) network Sites zillow.com, homes.yahoo.com, hotpads.com trulia.com, apartmentguide.com, rent.com April 2014 desktop Web market share 23.2% 11.9%

6 realtor.com network realtor.com, MSN Real Estate Source: Inmann News 10.0% With Zillow currently ruling real estate search, it s a force to be reckoned with. The search data shows that Zillow and sites like it aren t going anywhere. So while SABOR may be protecting it agents by choosing not to complete Zillow s data to make it as accurate as possible, the public is the one who loses. And while MLS data is conclusive within its given market, Zillow may be where people want to remain safely insulated in research mode until they are ready to sell. The client base is the same for both entities. What would be helpful to the public is if they could come together to better serve San Antonio, the community Realtor s find their clients in to begin with. Until then, We Buy Houses folks are ready to be a valuable alternative resource to help you sell your house fast. We reached out to the local real estate community for more insight, and we got this response: My name is Jeff Lambert and I am a real estate attorney in West Texas. While I certainly understand the concern that services like Zillow may impact the influence of SABOR or local realtors, my personal belief is that this restriction negatively impacts the real estate market- especially for sellers. It is a fundamental theory of economics that prices should include all information about the item being bought or sold. This is the reason that aggregators of information, such as Zillow, exist in the first place. Restricting the access of information to such aggregators introduces information asymmetries into the market, where such asymmetries would not otherwise exist. As a result, the price does not accurately reflect all available information, and are, therefore, imperfect markers of value. This necessarily

7 introduces either dead- weight loss into the market, wherein the efficient market- clearing price is not met or introduces perverse incentives. What I mean by perverse incentives is that there is an incentive for a broker needing to close a sale to pressure a buyer to accept a price lower than they would in the presence of perfect information, in hopes of closing a sale faster. This is probably not happening in general, as I believe most people are scrupulous, but the incentive is there in the absence of perfect information. In my own market, Zillow is widely available and used... and if one has heard about the real estate market in Midland- Odessa, then one would know that it certainly has not hurt sellers or realtors out here. I would imagine that you would see similar effects in San Antonio. I do not think that SABOR should fear the influence of Zillow. It has certainly not created a market here where people do not hire realtors. I think that the impact felt to sellers, primarily real estate investors, is that they see marginally lower returns on their investment. Without a service like Zillow, the investor is forced to make a decision. Either she advertises and sells property herself or hires a broker. That seems like a Hobson s choice, especially when Zillow could put investors together without the intervention of third parties. In this case, I would expect to see some border effect - driving some investment into outlying communities that have Zillow access. That investment would drive the marginal price of real estate up, meaning that sellers in those communities would receive a higher ROI. In turn, people attempting to sell real estate in San Antonio would therefore necessarily see lower prices/returns, coupled with the commissions they pay the broker. In turn, the brokers themselves are hurt by receiving lower commissions.

8 It s not that I think that this deters all, or even a large proportion, of investment into San Antonio; however, to the extent that it negatively impacts any investment into local real estate, it is inefficient. Again, I understand realtors concern over Zillow. I simply believe those fears are overblown. The median real estate purchaser would still like to rely on a local expert. Yet, by forcing themselves into transactions with investors, brokers only hurt themselves as well as the aggregate market. I point again to my current market (Midland- Odessa). Zillow is alive and well here, and the market is booming. I would say that brokers have only been helped by having another channel through which they may advertise properties. Certainly it s possible that they occasionally lose a commission. This shortfall, however, is made up by the fact that more transactions in the community mean higher real estate valuations and, thus, higher commissions. I hope this helps with your report. Jeffrey A. Lambert Attorney & Counselor at Law Todd, Barron, Thomason, Hudman & Baxter, P.C. (432) Phone (If you want to sell your property, please call Kim at (210) or visit to get a cash offer right away.) Kim Joppie is a local Real Estate Investor in San Antonio, Texas.