Gregory Charlop: I'm glad you mentioned the 3D tours, because I agree with you. I think that consumers, at a minimum, are using the internet as a way of pre-researching the market before speaking to an agent or going to visit homes because nobody wants to waste time. I think technology like 3D tours gives consumers a great opportunity to preview houses in a more immersive experience. Do you have any thoughts about virtual or augmented reality in real estate? Do you see those having a role anytime soon?
Dave Phillips: Absolutely. In fact, we've got some pretty cool features on our Realtor.com mobile app now that use AI and AR. We just introduced a feature on our mobile app called Street Peek. It allows you to walk down the street and hold your phone up to a house to get market information, such as how many bedrooms and baths and the price. A little bubble pops up above the house on your phone, and you can see data being augmented to your reality.
You hit the nail on the head when you said it's all about saving people time. All these innovations that we're coming up with—augmented reality, virtual reality and artificial intelligence—are all converging and helping the consumer and helping the Realtor save time. Consumers can now research a neighborhood as they drive through it. They don't have to go back and do several different searches to see what the houses are worth.
I think its key, and we have to embrace it more and more. We've created a lot of big data in real estate, we now need to use that big data to augment the reality that consumers are seeing and that real estate agents are providing.
Gregory Charlop: What technologies should real estate agents be using now, that are available now, but they simply aren't using enough?
Dave Phillips: I'm betting on the 3D tours. I think that's key. I like to talk about a technology tipping point that I believe we're reaching in the industry. One example is digital photography, which was invented in 1975, but in the late nineties Kodak still had a huge business printing pictures. But a few years later, in 2001, they went bankrupt. So, that's a tipping point. Suddenly everybody had digital photography capability right on their phone. And it created that tipping point, putting Kodak out of the picture printing business.
I think there are three technologies right now that are ready to hit that tipping point and disrupt the industry. Agents need to start paying attention to them now and look for ways to embrace and understand these technologies. They are artificial intelligence, augmented reality, and virtual reality. The third one is probably a little bit further behind the other two in terms of the tipping point but will probably be prevalent in more like five years instead of three years.
The 3D tours are amazing but having to strap on one of those headsets to transport yourself to a different reality, is still a little clunky and a little costly. AI and AR are starting to pop into every application. So, when we reach the tipping point, it will come fast and hard, leaving behind those who weren’t paying attention.
Gregory Charlop: I have just two more questions for you. One of them switches gears and focuses more on real estate firms and brokers as opposed to real estate agents. We discussed how having the MLS in people's living rooms has made the process more transparent. I think one of the consequences of that is it has eliminated the larger brokerages and firms as gatekeepers for information, both in terms of helping a customer find an agent and helping a customer learn about homes. Also, it's made the agents a bit freer. How do you think that public access to the MLS and greater transparency are impacting the brokerages and these larger real estate firms?
Dave Phillips: I think, in large part, we're on the mature end of that change. It's been happening for decades, but some in the industry still think we control the data. We've had real estate listings on the internet for over 20 years. And Realtor.com is over 20 years old. So, it is not a new phenomenon. A large part of this transformation has already occurred and is now just being tweaked and refined. I've seen the transformation happen, and there are still a few who want to hold the information, when the reality is: that ship sailed a long time ago.
Each listing today is typically on hundreds of different websites, if you include all the IDX websites. Listings are on all the brokers' websites in addition to the big portals like Realtor.com. Your listing is on many different sites, so to think that you can do anything to restrain that is silly.
I do think that there are some minor issues that are still working their way through. We've seen a real reluctance over the years to display sold data to the public. But the consumer is firmly in charge today, and they want more data. They want 100 pictures, 3D tours, neighborhood information, market information and historical data. To hide anything, any data, from the consumer just makes them lose trust in the industry.
The fear is, of course, that instead of having to come to the real estate agent to get that information, consumers can now get it on the internet. That is so 1980’s thinking. Anything that wastes the consumer's time, or the agent's time, is a deal killer today.
Gregory Charlop: Last question, kind of a fun one. What is your favorite feature of Realtor.com? Or the best feature that not a lot of people know about?
Dave Phillips: I'm going to say Sign Snap, which is an artificial intelligence feature we have on our mobile app. It allows you to go through the neighborhood, take a picture of the sign in the front yard, and instantly the listing information on that particular property pops right up on your phone. You don’t need to get out of the car and go up to the little box and grab a flyer. You simply snap a picture. I think that's super cool. It's becoming popular on our mobile app now, but it's still probably relatively unknown to folks.
Interview with Ken Potashner, angel investor & CEO of Home Bay Technologies
Gregory Charlop: Thanks for joining us. You are the executive chairman of Home Bay Technologies. You have a remarkable background, and you didn't come from real estate. Can you please tell us your story?
Ken Potashner: I'm a Silicon Valley tech executive. I've been involved with building several companies that have gone public and created a north of a billion-dollar market cap. My initial executive roles were in the disk drive sector. I then became the CEO and chairman of the company that brought the first MP3 player, the Rio, to market. I've also taken a San Diego company and transitioned it from a defense focus to a commercial focus. So, I absolutely consider myself a tech guy, not a real estate guy. We've taken a technology platform focus, in terms of how we disintermediate the transactions that real estate agents do. We do it in the context that we believe the value proposition is solid. For someone to get 6 percent of your house for facilitating a transaction, we think, is outrageous. We point to the very large technology mindset and ask: how do we disintermediate everything that a traditional agent does, automate it, add efficiencies, and offer a platform solution to transact in real estate?
Gregory Charlop: Does that mean that Home Bay sells properties without the use of real estate agents? How does that work?
Ken Potashner: We use agents in a support capacity. If, at any point, one of our customers needs to talk to a person, we have people available. Very highly qualified people available to get on the phone with them. Very rarely is there a face to face interaction required. And we find that our customers aren't looking for that. They're very comfortable talking ... texting, making calls—but predominantly using the platform.
Think of it in the context of a Turbo Tax type experience. You're being guided through a step-by-step process, a lot of data is being given to you. You're totally aligned. In real estate, a traditional agent, may be trying to get a transaction done, where, in our case, we're supporting your thinking, your valuation for your home. Things of that nature.
Traditionally, it would apply 50, 55 hours of human time to a transaction. We're spending about an hour and a half of human time. And we're not compromising at all the customer experience. As a matter of fact, the ratings we've gotten back from customers are dramatically higher than you would get with a conventional agent. We set off to design something that has a str
onger customer experience, better results, measured in terms of the ultimate price you get for your house, as well as the time your house is on market. And an extreme increase in the responsiveness. And we’re doing all this at a dramatically reduced cost.
Gregory Charlop: When a customer does ask someone on your team for help, are they speaking to a real estate agent, or broker? Or are they speaking to a receptionist? Who's actually answering their calls or texts?
Ken Potashner: Agents. We've hired a fleet of agents who have done, I think the minimum is 500 transactions over their lifetime. Traditionally, an agent spends a great deal of time trying to recruit new business, identify leads. Our entire lead generation is done online. Facebook, Google, Bing. So, we've got agents who are doing nothing but supporting customers. Therefore, we're able to get a tremendous amount of bandwidth on the key issues, and we have agents who are supporting 20, 30 clients at a time.
Gregory Charlop: It sounds like you do all the work of finding the customers, using your platform and your advertising. And all the agent has to do is facilitate the transaction remotely.
Ken Potashner: That's correct. It’s done with a tremendous amount of data learning analytics with a bit of AI thrown in. We’re operating at the ZIP code level, understanding what's normal and not normal on a given transaction. And the platform's identifying an offer you got. The buyer has asked for these things that are not traditionally offered. You may want to consider this proposed counter. So, it's a blend of the system with the human intervention.
Gregory Charlop: Well, it sounds like a remarkable product. It'll save a lot of people money.
Ken Potashner: Yeah. On average, we're saving $16,000 per client. Our average price point has been about $600,000, and that price point's moving up as we begin marketing in a more aggressive fashion.
Gregory Charlop: Very impressive. You obviously have a keen eye for how technology can disrupt industry. That's what you've done during your career—not only in real estate but in other fields. What did you see in the real estate industry that made you think that it was ripe for a change?
Ken Potashner: I guess the starting point was the value proposition being offered by traditional agents today. Again, the 6 percent of your house. We realized that there's a tremendous margin with that type of a proposition, and we knew that, through technology, we can offer a much more compelling experience as well as a much more aggressive price point. So that convinced us that the value proposition was there. Then it became, can we define and execute on a platform that delivers those dynamics? So, whenever you see a disconnect between the value being provided and the cost being charged for that, it’s a green flag, right? Here's something ripe for disruption.
Gregory Charlop: In other words, it seems like the real estate industry was overcharging for the amount of service it was providing.
Ken Potashner: Absolutely correct.
Gregory Charlop: The current system for buying and selling residential real estate is essentially based on large, traditional real estate companies, broker supervisors, agents, and high commissions. And this has been around a long time. When this system first started, information was pretty scarce, and companies, frankly, held all the cards. How do you think that increased information transparency and access to the MLS in everyone's home or on their cell phone will change this long-standing model? In other words, do you think that the current system of large firms, brokers, and agents will even continue to exist? Or will they need to change radically?
Ken Potashner: You hit it right on the head. There's tremendous transparency now in terms of data flow. Zillow provides a great deal of data. People go in now with a preconception of what their house is worth. They're able to see comparables in a way that they weren't able to years ago. We're in a data information-rich environment. In the distant past, you would have had to rely on your broker and trust your broker to steer you through valuation. Therefore, given the existence of the information, the brokerage needs to define differently what value add they're providing to the equation. They need to either look for different ways to add more value or change their value proposition from a cost perspective to align with how much data is flowing freely to the consumer.
I think you'll see everything on the spectrum. I think you'll see some guys dig a moat and build a wall higher, trying to entrench themselves in how they do it today. And I think you'll see other guys move pretty aggressively to take advantage of technology. Those who ultimately disrupt themselves are going to be viable downstream. But those who simply connect the way they've done it in the past won't be here in the future.
Gregory Charlop: In a similar vein, if the board of directors of a leading real estate company asked you for specific suggestions about how to deal with technology and with the changes in the industry, what would you say?
Ken Potashner: My advice would clearly be, you want to be the ones that disrupt yourself. You don't want to be in a reactive state when dealing with technology disruptors that are going to put you in a catch-up mode—a mode by which you're encumbered by the agents that you have in place. You need to always have internal efforts that span the breadth of technology progress, information progress. You can't sit there hoping that somebody doesn't come along and deploy the new technology in such a way that can compromise you.
In some cases, there are multiple channels. At the very high end of your market, you may want to continue the way you've done it. But with more and more people having their sleeves rolled up in their transactions, or looking for discount services and such, if you want to participate in that part of the segment, you’d better have that technology within your portfolio.
Gregory Charlop: If you met a young person, maybe someone just out of college or out of school, who's considering a career in real estate, what advice would you give that person?
Ken Potashner: Clearly, I would steer people away from getting a real estate license if they're going to work with a traditional entity. If you get a real estate license, go with a company that's heavily leveraging technology to facilitate transactions, like we're doing.
Gregory Charlop: Why? Because you just don't think there would be enough work for them in the future?
Ken Potashner: Think of the efficiency that we get. Our agent can support 30 times the transaction volume of a traditional agent in a traditional company. Maybe 50 times, even. So the inverse of that suggests I can replace 50 agents with one of mine, using my technology. There should be a pretty significant excess, or available workforce already of agents out there that will need to be redeployed. So, I would not be recommending that somebody begin training to add to what will be an overinflated workforce for that kind of work.
Gregory Charlop: You're an expert in both business and now in real estate, with quite a track record. You went from technology and business to real estate. If you met someone who wanted to do the opposite—a broker or an agent who wanted to go into business, either as an investor or as an entrepreneur starting their own real estate-related company—what advice would you give that person? In other words, how could they go about finding a career in business?
Ken Potashner: Let me correct your earlier statement. I don't consider myself having gone from business and tech to real estate. I still consider myself 100 percent a tech guy—a business guy who, by the way, now is operating in real estate surrounded by folks who know real estate. So, I'm probably the weak link on the team in terms of really understanding real estate. In the same way, I doubt that the leadership team on Uber were really guys who were fluent in the taxi industry. So, they built a software platform and pointed it at the challenge: how do I get people from point A to point B, give them a great experience, and save them a lot of money. In the same way, this is a tech company, not a real estate company. If you looked at the resumes of my team, I'd say 90 percent of them are tech guys, and then we've surrounded ourselves with the agents I discussed.
To your question, though, I think what's really key is core skills—business or tech—that can
be flexible enough that they can be pointed at any industry. I don't think that whole degree of specialization is necessary. I think that actually would be limiting. The secret would be acquiring core skills that can move back and forth across different sectors.
Interview with Nick Bailey, former president & CEO of Century 21 Real Estate
Greg Charlop: Nick, you have a very impressive background. Can you tell us a bit about your journey and how you became interested in real estate?
Nick Bailey: My interest in real estate dates back 21 years when I first started to list and sell as an agent, coincidentally with CENTURY 21® and shortly thereafter as an unaffiliated broker-owner. In the process, I realized the value of franchise and affiliation. Giving people an entrepreneurial opportunity to own their own business, provide for their family and be proud of what they’ve done for a living has been at my core over the last 21 years in the real estate industry.
Greg Charlop: Virtual and augmented reality are attracting a lot of attention in real estate. What are your thoughts about the importance of virtual and augmented reality? Do you see it as something that is ready for prime time now, or do you think it will be a while before customers expect that as part of their homebuying experience?
Nick Bailey: There are any number of technologies, new and old, that help market properties for clients to sell their homes. Consumers will ultimately decide when, or if, VR or AI are ready for prime time. As president and CEO of Century 21 Real Estate, I see technology and innovation from two buckets: One is serving consumers—buyers and sellers—and the other is serving real estate professionals. We must figure out, from a technology perspective, how to satisfy both of these constituents. My job is to help C21® agents be productive, close more deals and simplify the transaction for their clients. Right now, mobile is where everyone is. Our organization is always fine-tuning our comprehensive C21® mobile-first platform to help connect buyers and sellers with our real estate professionals and help them take their buyers and sellers from search to close. If we can make that process easier for our affiliated agents, which in turn makes it easier and transparent for consumers, that to me is a winning formula. This is where VR or AI can make a difference, and we are discussing ways in which these applications can make that happen in the real world.
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