March 3rd 2015
Crain's New York
For decades, residential brokerages in the city have successfully resisted creating something long commonplace just about everywhere else—a single clearinghouse of reliable information on apartments for sale or rent, known as a multiple-listing service. Instead, information flows from a variety of different sources, and agents have kept a big chunk of listings as private as possible. The result? A landscape where information changing hands among landlords, brokers, websites and consumers is often outdated and incorrect.
Now a number of players—from techie upstarts to some big established brokerages—insist the system’s days are numbered and busy themselves maneuvering for a killer edge in a new marketplace by collecting, analyzing and using data most efficiently. It remains to be seen if any outfit can become the city’s de facto listing service, but a number of brokerages have no intention of waiting to find out.
“Data is king,” said Luis Guevara, Town Residential’s freshly minted head of technology. “And the firms that are able to produce the best data sets are going to have the better analytical tools to work on both the buyers’ and sellers’ sides.”
Many landlords, brokers and customers alike in recent years have come to the same conclusion: Change is overdue. As apartment hunters have moved their searches online and brokerages have armed their staffs with the latest smartphones, tablets and websites, glaring shortcomings have emerged in the information behind the tens of thousands of co-op, condo and rental listings up for grabs on any given day.
That’s why firms like Nestio and brokerages like Compass, formerly known as Urban Compass, have been raising tens of millions of dollars in venture-capital money with the aim of fundamentally changing the way data are stored and transferred, and ultimately helping landlords fill vacancies faster, brokers sell more apartments and buyers and renters become smarter consumers.
Investors in tech-savvy real estate companies hope to get rich by bringing modern solutions to an industry in dire need of them. Today, for instance, many landlords still keep track of their vacant apartments in a spreadsheet stored on their desktop computer and then periodically email vacancies to brokers, who then manually post them on a multitude of websites like StreetEasy or Trulia.
It’s a process that leads to significant lags and also leaves ample room for error. What’s more, less-scrupulous brokers have been known to advertise the sort of holy-grail apartments that turn out to be too good to be true, only to pull a bait-and-switch in an effort to reel in new clients.
It’s a problem StreetEasy encountered when it first began trying to harness the power of New York City’s messy data landscape back in 2006, according to Susan Daimler, general manager of the listings site, which was purchased by Zillow for $50 million in 2013.
The firm has long employed a data-integrity team to manage information, such as recent closings and new listings, coming from public and private sources, and to ensure all the material powering the site’s search tools is as current and accurate as possible. But now the goal is to move that information faster.
That’s why the firm is updating its computer programs that pull listings directly from brokerages to try to get updates in real time—eliminating the margin for error and cutting the lag time in information down to zero.
“We are working on it with several partners literally as we speak,” Ms. Daimler said. “It benefits everybody: The brokerages get their listings up more quickly, and we get consumers who are better informed.”
Others are trying to address another longtime sticking point in the sector, the technology-starved landlord. That’s where firms such as Nestio come in. That company is hoping to provide a real-time connection between brokers and building owners and managers. The idea is that landlords will use Nestio’s interface instead of a spreadsheet, and rather than waiting for an email, brokers will be able to notice any updates right away.
“There isn’t really a backbone to this industry,” said Caren Maio, chief executive of Nestio, which in the past two years has raised more than $3 million in several rounds and already counts major landlords such as Two Trees as clients. “To us, winning means becoming the system of record for landlords and brokers.”
Her firm is also helping to get more reliable information to the closest thing the city has to a centralized service—the Real Estate Board of New York’s database, which stores information on exclusive listings from 14,000 registered brokers.
The database has greatly improved with a recent software upgrade. But the overall system, of which REBNY is a part, still has a long way to go.
“It has been an incredibly inefficient and inconsistent means of communicating data, which we are attempting to slowly clean up,” said Steven Goldschmidt of Warburg Realty, who helps manage REBNY’s system.
Compass finds the path
But of all the wielders of new technology, no real estate company has generated more buzz than Compass. Since Robert Reffkin and Ori Allon created the company in 2012, more than $73 million has poured in from investors in three rounds of fundraising. While many in the property industry remained deeply skeptical as the firm kept mum on how its mousetrap marked an improvement over anybody else’s, the outward signs were there.
Compass signed pricey leases in 90 Fifth Ave. and the landmarked Lever House on Park Avenue, while touting its roster of ex-Google, Twitter and Facebook engineers. But more recently, it has begun to talk about what those engineers have been up to.
“There is so much basic info out there that can help people make decisions on which agents they should use, what prices they should ask for and where they should market their product,” said Mr. Reffkin, who has been building all his storage and search functions in-house.
According to him, the key has been not only saving every piece of information, but making sure it is all stored in a central location, rather than separate informational silos.
For example: Because Compass’ records on closed transactions are connected to the database on current valuations, agents can instantly see how much a former client’s property sold for, and how much it has increased or decreased in value since then. The connected databases also allow Compass agents to tell clients how much longer, on average, their property will sit on the market if they price it above its value and on which websites to market it.
The firm tracks individual agents as well, assigning them the sort of stats commonly associated with sports stars: percentage of sales closed, length of time their properties were listed, and the ratio of closing price versus asking price. Although the information can be used to show off the track record of certain employees, it is also a formula that Compass is using to identify top prospects in other companies.
It is beginning to be clear what the money has been going toward. A search for apartments with swimming pools on the Compass website, for example, turned up more than 600 results. On the site of a competitor, on the other hand, one result was returned.
“I think every company over the next 20 years will transform into a tech company,” Mr. Reffkin said, noting that the firm plans on more funding rounds and eventually a nationwide expansion. “The decisions that we have to make are increasingly driven by data, and we will be at the forefront of that for real estate.”