Real estate the "online community" way.
For several years now, Craigslist.com, the self-described "online community", has eaten the lunch of local newspapers, cutting deeply into their classified advertising revenue. Why? I've prepared an exhaustive comparison of the cost of running an ad for, say, a rental, in each medium:
Would anyone like to see this demonstration again?
Craigslist's deep discount has persuaded me and, apparently, many other small advertisers, to switch. And if free isn't good enough for you, you can post up to four property photos on Craigslist, giving you something very close to a newspaper display ad (which costs hundreds of dollars) for—yes—free. And Craigslist reaches renters as well as or better than any newspaper's classifieds. Great performance, zero cost: what's not to like, aside from moving newspapers to the top of the Endangered Species List?
So for the past year or so I've been posting not just my rentals, but also my for-sale listings, on Craigslist. Not because I expected Craigslist to sell houses. Houses sell either because agents see them on the Multiple Listing Service (MLS) and call their buyers, or because buyers see them on one of the mainstream listing Web sites such as MLSlistings.com or Realtor.com and call their agents. At least that's been my experience. But Craigslist was a no-brainer: it's free, and while it probably didn't help, it probably didn't hurt.
Right?
Then a few months ago an old client asked me to sell his home. He isn't going to buy in his new community yet, but mentioned that he'd casually browsed Craigslist just to see what was for sale there. When I asked why he hadn't checked out the mainstream listing sites he'd used back in 2000 when he bought, he said that his girlfriend had found her home on Craigslist, and added that "it just seemed easier" because he didn't have to register. But the look of disgust as he mentioned real estate sites, and the fact that most of them don't require registration, made me suspect that the appeal of "online community" went deeper than easy access.
We put his home on the market and when I held it open, I noticed that many of those going through clutched Craigslist print-outs. I'd never seen this before, even at a listing I'd held open only the previous week, and even though I'd been using Craigslist for some time. So I made a point of getting to know this new breed of buyer.
From my informal survey it appears that the typical Craigslist buyer:
In other words, the typical Craigslist buyer is "getting ready to get ready": at the very beginning of a very steep learning curve; very leery of the real estate industry; and very unprepared to buy in the near future, and perhaps in the distant future. By no means does this make the typical Craigslist buyer a bad person. But it does make him or her significantly less appealing to the typical agent, who likes getting paid in weeks or months, not years or never.
Here's an example of what I mean. After grilling one Craigslister it dawned on me that I'd met him before, in 2002, and that we'd had exactly the same conversation then that we'd just had, in 2006. In 2002 he'd told me confidently that only fools were buying at current prices. In 2006, with prices up 50 percent, he'd told me (a little less confidently) that only fools are buying at current prices. Four years later he was still seeking, not a house, but the Holy Grail, scouring the corners of the globe—Santa Cruz, the Peninsula, the East Bay—for the hot deal that didn't exist in 2002 and doesn't exist today.
So what's Craigslist's appeal? Does it offer, say, the Menlo Park buyer anything that the mainstream listing sites don't, aside from virtual community? As of June 26, 2006 Craigslist had fifteen Menlo Park listings, compared to seventy-eight listings on sites that get their data from the MLS. Not only that, three of those fifteen Craigslist so-called Menlo Park listings were located in cities that aren't Menlo Park. So now we're down to twelve real Menlo Park listings.
But of those twelve, six were "pre-MLS specials" not on the MLS. Wowzers! Is this the Craigslist advantage? Let's see what it amounts to:
So what does Craigslist offer the homebuyer that the mainstream sites don't? Better selection? No. FSBOs? Any FSBO can pay a limited-service broker a few hundred bucks to get his or her house on my local MLS. Hot deals? Doesn't look like it.
"Online community" instead of "sleazy real estate community"? Okay, now I get it.
Craigslist is a trusted brand name, particularly with those just beginning the transition from renting to the sales market. It's probably where they found their rental, and maybe even where they found their room-mates. So when they feel those first vague pangs to own, back they go to good ol' Craigslist. The homespun, non-commercial nature of the site gives it credibility with the beginner looking for a just-plain-folks alternative to the glistening high-speed machinery of the real estate industry. Because for every consumer who's titillated by a slick presentation, another is repelled. Craigslisters are so loyal that they apparently never do what once came naturally to the Web-savvy homebuyer: type "homes for sale" into a search engine and follow the links to the mainstream listing sites. That's remarkable stickiness, with remarkable long-term implications.
But Craigslist's comfortably amateurish approach to real estate is, in fact, its biggest practical drawback. I don't think anyone would be surprised to learn that free advertising attracts at least a few sellers with pie-in-the-sky prices and less-than-urgent motivation. The upside (catching a credulous, free-spending buyer) outweighs the downside (none, except a few minutes of wasted time). Then let's consider the selection: just a small fraction of MLS listings; a handful of FSBOs, something you can find anywhere on the Internet, including the industry's own Realtor.com; and a few real estate industry minions trolling for buyers. How about content? No, not even short tutorials on buying and selling. Not even a quickie hatchet job on the real estate industry ("Ten Things Your Realtor Won't Tell You.").
Speaking of which, my profile of the Craigslist buyer matches the profile of those who do most of the posting to Internet sites, including the real estate blogs that have sprung up lately like online community mushrooms. Having read a few, I'd hate to think that anyone relies on blogs for their real estate education, since they're unlikely to find much that's useful. The demographics work against it, if nothing else. The typical Internet poster's age makes it less likely that he or she has had meaningful experience with real estate, since young first-time buyers are increasingly shut out of the market by rising prices and home-equity rich boomers. So the postings are often warmed-over urban legends, lightly garnished with insights gained from brief and meaningless sparring matches at open houses.
But that's not the point: the point is that everyone has fun weighing in on the topic du jour, no knowledge or experience necessary. And you don't have to check your flame-thrower at the door. Since this is the 'net, there's a lunatic fringe that could only air its opinions in the anonymity of a blog, because if they tried it anywhere else, someone would call Security. Mix "everything I know about real estate I learned on the blogs" with an exclusive reliance on Craigslist's slim and shall-we-say eclectic offerings, and you're sailing straight into uncharted and heavily-mined waters.
What about my client's girlfriend, the one who found her home on Craigslist? In some ways, she fits the profile: young and entry-level. In other ways, she doesn't: pre-approved, and willing to work with an agent. And in one big way she's anything but typical: she heads a major union's efforts to influence a national issue that's brought hundreds of thousands into the streets and tied up Congress in knots. It's safe to say that she's exceptional.
Will this brave new world of online community real estate blindside the MLS as it did the newspapers? I don't see Craigslist offering savvy buyers anything an MLS-based site doesn't; in fact, quite the opposite. Both are free, both come with no strings attached, yet the MLS-based site offers far more data and content. That's for now; what Craigslist does down the road with its strong brand identity and eBay backing remains to be seen. In some cities, Craigslist now charges $10 for real estate postings, still one heck of a deal for landlords but $10 too much for this listing agent.
Why would Craigslist challenge the MLSs? Because Internet listings can be profitable all by themselves. Listings generate responses, which can be sold as leads to agents and lenders—especially if those listings come without the usual MLS strings attached—and they attract eyeballs, which can be sold to advertisers. But so far everyone's been content to work the MLS goldmine instead of digging their own.
One major obstacle to Craigslist cashing in on its good name is that a Web site that gets much of its credibility from shunning the money god had better have a good story if it's spotted feeding at the trough of Commerce.
Am I just ticked off because I'm afraid Craigslist might disintermediate the real estate industry? The Internet has been trying to take agents out of the loop for almost ten years, and with efforts far more compelling than today's Craigslist. The crushed and rusting hulks of next-big-thing Web sites litter the virtual canyons. So far at least, staying shiny-side up on the road to success in real estate services has meant offering real benefits to real buyers.
No, thoughts of Craigslist won't be furrowing this agent's brow anytime soon.