Nick Bailey of Zillow Joins Bruce Norris on the Real Estate Radio Show #507

Nick Bailey

On Friday, October 21, the Norris Group proudly presents its 9th annual award-winning black tie event I Survived Real Estate. An incredible lineup of industry experts will join Bruce Norris to discuss perplexing industry trends, head-scratching legislation and opportunities emerging for real estate professionals. Proceeds for the event benefit Make a Wish and St. Jude Children’s Research Hospital. This event is not possible without the generous help of the following platinum partners: HousingWire, PropertyRadar, the Apartment Owners Association, the San Diego Creative Real Estate Investors Association, InvestClub for Women, MVT Productions, the San Jose Real Estate Investors Association, Inland Empire Real Estate Investment Club, Think Realty, and White House Catering. Visit www.isurvivedrealestate.com for event information and tickets.

Bruce Norris is joined this week by Nick Bailey. Nick serves as Vice President for Zillow group, helping build the company’s strategic partners and relationships throughout the U.S. He helps drive the expansion of products and services and partnerships and the broadening of brand awareness across the real estate industry. He has over 20 years of real estate industry experience as a leader in franchising, brokerage, management, and technology, and as a licensed broker. Prior to joining Zillow group he spent nearly 12 years at RE/Max World Headquarters as Vice President since 2004. He lead the growth and development for numerous regional operations throughout the U.S., including serving as Vice President. He started his real estate career at 17 when he began purchasing commercial and residential property and was awarded Entrepreneur of the Year by the Chamber of Commerce. Nick will be featured on the panel at I Survived Real Estate in 2 weeks.

Episode Highlights

    • How did Nick Bailey first get his start in real estate?
    • What are the benefits of renting versus buying?
    • What factors are affecting homeownership for first-time buyers?
    • What two types of real estate professionals exist today?
    • What are the first things consumers do today when looking to buy a house?
    • Do realtors view Zillow as a partner or competitor?

Episode Notes

Not many 17-year olds are thinking about buying real estate, so Bruce wondered where he started. Nick said after hearing Bruce read his bio he still feels fairly youthful in this industry. He did not have family in the real estate business, but he always had an interest in it since he was a child. His brother wanted to be an architect, and for some reason he wanted to be involved in real estate starting all the way back to his single-digit years. It always fascinated him; there were a lot of buildings around him at the time and could figure out how to open the lock boxes on construction sites. He would use this to take personal tours of the property.

He had an opportunity to invest in commercial real estate as a very young person, working with two retail buildings in a small area. This was what started it all. He was licensed early on, and he decided when he started college and saw the cost of living on campus. Bruce imagined none of his friends joined him in this endevour. However, thankfully he did have a few since the house he lived in was a little more expensive than he thought. He was able to recruit a little bit, and this was his first experience with recruiting. He had roommates help pay the rent, and once he felt good about it a year later he kicked them out. He encourages anyone when looking at dollars spent to go to college if they can make a smart real estate investment as it is a great way to get your money back.

There has been a lot of discussion about how renting is a better choice, and it is hard for Bruce to accept this. He has rentals, and once a year he looks at the numbers to see if he can get a raise in rent. The person who owns the house next door with a 3% mortgage rate does not have that issue. Eventually it will be a 0 payment, and that difference is a big difference during a lifetime of spendable money, net worth, comfort, and retirement. Nick said when he looks at the average age of fist-time homeownership increasing, he thinks that there are many individuals looking at their parents or other individuals and what they went through from 2007-2012. They are therefore more cautious.

Nick thinks there are two things affecting homeownership for first-time homebuyers. One is student debt coming out of college. There is a lot more debt load on young people, and the concept of having a down payment is essential. We have gone through markets of people with 0 down payments and expecting a check at closing to cash so they can buy a flat panel tv. Nick thinks these days are behind us and there is a pride of ownership. You should have some skin in the game in purchasing property.  The other part contributing is the number of women in the workforce having children later. They are entering the workforce at a much younger age and getting married later. All these factors can relate to first-time homeownership.

Nick purchased real estate at a young age, never rented and would not recommend it. However, he also said it was up to the individual. If you are going to be temporary in an area and look at average price appreciation, then you have to ask if you can get a return short-term. Sometimes the cost associated with closing, even with interest rates as low as they are, is like free money. It still may not be worth it short term depending on where you are located.

Bruce said when he saw bad things happening to California, he wrote a report called The California Crash back in 2006. He did some exchanging and landed in Dallas and Fort Worth as a safe haven. The place never went up, and people were renting houses for $1400 when their payment would have otherwise been $600-$700. He finally asked them why they were making the decisions they were making and did not understand it. He is trying to talk his renter into becoming an owner, and they said it had never worked out nor was it profitable. We get shifts in jobs and have to move to a new location. We only stay in one spot 2-3 years, then prices never go up and it is never profitable. This is why we just rent.

It is a very different experience if you come out from California since things do not play out this way. Sometimes you can own a house for two years and come out with a big check. It does sometimes change when you are in an area like Texas or Oklahoma where prices do not move. We have an atmosphere now in our economy since real estate has had such monumental increases in value. Granted we did go down while many markets went back up. Nick lived in Denver where they surpassed any type of high that they saw in the past. Nick said generationally his parents and grandparents purchased a home for the sense of shelter, and it just happened to increase in value due to economic stimulation, growth, population increase, and factors that generally grew. It was a nice benefit, but the primary reason was shelter.

Nick told people in the past if you will be long-term shelter and ownership is good for you, then good. If you look at it purely from an investment perspective and have to increase the risk hoping to get a return, then to Nick you are a real estate investor. The average homeowner is not involved in that level of detail, around appreciation, neighborhoods, economic growth, and indicators to play that game. However, many have received that benefit over the years somewhat by accident.

When Bruce wrote the report about the crash and talked about prices going down by half, he had a $1.3 million house in Riverside and knew prices would take a hit. He thought he could be a renter since it would save half a million dollars. He made a phone call and talked to a guy who had a really great home in Riverside. He told him he was not a typical renter and would pay him a year in advance. The guy then asked Bruce if he had any pets, and he was glad he asked this because he had just remembered why he wanted to own a home. It was worth half a million dollars to say he was going to stay where he was and make choices in that square box of his. This is why he owns.

Our industry could do a better job getting the word out, and he wishes there was a 0 down program with one caveat. 95% of the people getting into a home will pay that payment. A long time ago the FHA had what they called the “simple assumption.” This allowed a loan to move to the next owner without a formal assumption. The only criteria was to make the payment current at the end of escrow. You could literally have the mortgage walk. If it was late, it could walk to a new owner, and you could have a rise in the ownership of homes. You would not have a rise in foreclosures.

Nick said his first loan was FHA, and it was a 3% down on a $66,000 house. If it wasn’t for that type of financing, he probably would not have been able to start the way he did. If it had been required at 10-20% down, he would not have had that opportunity at the age he did. Those type of loan programs make sense for the right people. He does agree that home is about choice, and he is constantly doing projects, even in a new construction home built 13 years ago. He always has a project running. The homes are always going through constant improvement in the event that someone who wants to buy a home tomorrow can buy one that is ready and looks good. This is why this is his personal strategy, which is important.

At the same time, when you look at rent vs. buy, he does believe when you think about real estate long term, net worth, and retirement, it is something everyone should look hard at early. When he was 17 and looking for real estate, he could not just click on his computer to look for deals. Now it is easier than it used to be. How you find information today is pretty phenomenal, and this has been a big fundamental shift. When he first started selling real estate, he had and sold MLS books that he picked up from the board office every two weeks. There were no lock boxes, so even at 41 years old he sold real estate he was in a small market and could use books to get on the board to write bi-logs and get computerized MLS.

The day before he relocated to Denver to start working at RE/Max, they received the electronic lock boxes. Fast forward through the franchising years, and now sitting on the technology side of marketing it has been an interesting view. This means being an agent, opening an office as a broker, being a franchisor, and now sitting on the technology marketing side of the industry because he can look through the lens of each one of those experiences. When he looked at how he used to justify his commission, it was about his knowledge.

There are two types real estate professionals today. He liked to coin it as having an immigration problem, not like the one we are hearing about on the political stage. You have digital natives and digital immigrants. This means having the average age of an agent being 57 years old, they can be considered a digital immigrant. They did not grow up with the process, so their brain does not function with the way technology in the connectivity works in society. They are pretty good with running the technology, leveraging it, and helping them become more efficient in generating more leads and making it work for them. Being of generation X, Nick is right at the cusp of that in that he is more of a digital native. He took typing on a computer, not an old typewriter, so he was right at the forefront of how technology has evolved in our lives. It is even more so with the young people today.

When you look at how that is different today, he sees people in his generation selling real estate who realize that holding the keys to the kingdom (having the MLS book) is not about just getting the commission because they could. For Nick, it was about customer service. That is what you pay for: negotiation, customer service, follow-up, and being able to forecast the potholes and pitfalls within the transactions you can help people avoid. That is what people paid Nick for when he earned a commission. There is still the other generation of real estate professionals who are holding onto the idea that they have the knowledge and justify their income this way. This is where there is a lot of pressure.

The modern day technology and Zillows and Trulias of the world that are bringing forth the information to the people is somewhat scary to some of those folks. They have not transitioned on how to leverage the technology to make it just a customer service game and not a purely lifting marketing game.

Bruce asked what the consumer’s first move is now. Today you have the idea of knowing what home you will buy when before you would call a realtor. Most people go online, most people in the industry know this. There is a process in which you look at consumer behavior. You look at Zillow, for example, or the other sites you could have 177 million visitors to the site in a month. The volume coming in is incredible because what it is doing is consumers are demanding they want information not only about their home but their neighborhoods as well. People love to look at real estate. From there, once people get more serious down the tunnel triggers start to happen. Maybe they apply for a mortgage or submit information on a property to contact an agent. They could do this by linking off to the local broker’s website or local agent’s site.

You see how Nick’s company is relevant at the very high national level. From there, you watch the process go down to the very hyper local level where they make the decision to invest or buy. Bruce asked if Zillow has always had the national scope from its inception. Zillow was launched in February 2006, and the concept from the co-founders Rich Barton and Lloyd Frank. They were successful Microsoft executives who co-founded Expedia, and their entire mission was “power to the people.” They felt like consumers who wanted to look at travel options could not find out a lot of information unless they went to a certain source to find them. They experienced this same type of thing after selling Expedia, and a couple years after this they were both looking at real estate.

They realized if they drove through a neighborhood and decided you wanted to live there someday, they would need the relevant information. This did not just include active properties or sold properties. They would need to know the tax rates and what has increased in value. Essentially what he used to do as a CMA, or market analyst for potential sellers, was he brought that type of data forward and made it accessible at the fingertips to consumers. They took that power to the people play exactly to this world of real estate. In doing so, it has allowed consumers to make more informed decisions about having access to data that could influence where they want to live.

Bruce asked if realtors view Zillow as a partner or a competitor and if it really comes back down to the brand of realtor. Nick said you will find both. He said it is so interesting sitting on this side because if you look throughout the spectrum of people there are some who absolutely love it as a marketing platform. They generate a tremendous amount of leads and business, are good at follow-ups and conversions, and get commission checks. You have others who, for various reasons like noise, may not be quite as supportive.

Nick said when he gets asked the question about the level of support, it can be summed up in a story. He and his wife were at an outdoor function when it started to rain. Everyone huddled under the tents and were pretty tight with each other. People were introducing themselves and getting to know other people, and when Nick visited with two of the individuals they asked him what he did. He told them he worked for Zillow, and both of them raved about it and told him so many success stories through it. He literally turned around, had two other people ask him the same question, and they both happened to be real estate agents. They, however, had a completely different reaction and were concerned. This went to show that the priorities for a real estate agent or broker are not always the same for a consumer in terms with their online real estate experience. That is where you get some level of support or lack thereof.

Bruce said it does not seem like Zillow’s mission is to ultimately end up with the consumers dealing with each other. That does not seem like we are headed this direction. Nick said since NAR has been tracking at for sale by owners since 1981, they noticed it is at the lowest level ever. Consumers have always had the ability to go person to person, and statistically when you look at them about 35% of them end of selling because they already knew the buyer. A large percentage of them do not ever come to fruition for very long for reasons that could include pricing, emotions, negotiating directly between parties. There are a lot of factors that influence why for-sale by owners are not successful. The question is if this will always exist in the market, which Nick believes it will.

The platform is to create the world’s largest and most trusted market place. You can think of it as a farmer’s market where you have consumers and producers who come together and connect. If they go out and build the largest audience they can, for those interested in taking the next step instead of just dreaming they can be connected through Zillow and as quickly as possible. It seems with this first contact the realtor would be experiencing a consumer much more knowledgeable and ready to do something than prior. They are ready, willing, and able. However, it also takes a skill set to understand a savvy internet buyer. It is a very different experience coming into being an agent, regarding how to handle them, ask the right questions, and how to determine the next steps. This is very different from how he used to sit on floor duty when someone would walk into the office and say they wanted to see a house. You have to be skilled at how to convert those folks, and those that do are wildly successful. Those who have not yet learned those skills will likely say they are terrible leads and cannot figure them out.

Thank you for joining us this week for the real estate radio show with Nick Bailey. The Norris Group would like to thanks its gold sponsors for supporting I Survived Real Estate: Auction.com, Coachella Valley Real Estate Investors Association, Coldwell Banker Town and Country, Elite Auctions, In a Day Development, Inland Valley Association of Realtors, Jennifer Buys Houses, Keller Williams Corona, Keystone CPA, Las Brisas Escrow, L.A. Green Designs, LA South REIA, New Western, North San Diego Real Estate Investors, Northern California Real Estate Investors Association, Orange County Investment Club, Orange County Building Industry Association, Pacific Premiere Bank, Pasadena FIBI, Pilot Limousine, Real Wealth Network, Realty411 Magazine, Realty Executives Inland Empire, Rick and Leanne Rossiter, Sonoca Corporation, South Orange County Real Estate Club, Spinnaker Loans, uDirect IRA Services, Westin South Coast Plaza, Wholesale Capital Corporation, and Wilson Investment Properties Inc. See www.isurvivedrealestate.com for sponsor links and event information

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