Top Real Estate Search Engines Explained

Using a browser to search for potential real estate investments has certainly put a wealth of information at the fingertips of investors. Maybe even too much information. Load a search term like “houses for sale Minneapolis” into Google and you get back more than 4 million hits. All of these listings are dynamic with changes constantly being made. Making it impossible for an investor to sort through all of this information and stay current.

What you want to do is become familiar with how the major real estate search engines differentiated themselves. This enables you to begin your search on the website intended to deliver results closest to your investing criteria. This article explains how five of the most used real estate search engines are unique.

1. Zillow maintains a database of approximately 100 million homes across the U.S. In 2011, Zillow averaged over 19 million unique site visitors per month. Zestimate® and Rent Zestimate are it’s two most unique features. While Zestimate is no substitution for an appraisal, it’s a good starting place for researching a property’s market value. The accuracy of the property value depends on the amount of information available. The secret formula relies on a combination of data input by the listing agent and appraiser as well as data from public records. One of the most influential factors are the number of recent transactions in the neighborhood. The more transactions, the more accurate the estimate. Examining the “value range” gives you an idea of the accuracy of the data. A wider “value range’” indicates a less accurate value estimate. Also useful is the historical price change chart that shows how the house value has changed over time. The Rent Zestimate is similar but based on local rental data. It’s no substitute for a local rent survey but is a good starting place for landlords needing to establish fair market rents.

2. However, it’s the most visited consumer real estate website with 6 million visitors each month. The site is composed exclusively of listings from the MLS. It updates once each day – Monday through Friday during the evening hours. It takes between 24 and 48 hours before updates appear online.

3. Truila has about 5.5 million unique visitors each month. It’s similar to most real estate search engines in that it provides basic sales and rental data. What makes it unique is some of the neighborhood data it provides. An example of available data are crime statistics down to the street level. Additionally, the site has applications you can use to extract the neighborhood data you want to automatically display with your own marketing materials.

4. RealtyTrac averages more than 3 million unique visitors each month. This website specializes in foreclosure related properties and is the most quoted authority on the subject. It tracks substantial information in all three stages of the foreclosure process – pre-foreclosure, foreclosure, and bank owned properties. It also provides tools and other data related to individual foreclosure houses. These include an estimated value of the property, sales data for surrounding properties, information regarding other financial encumbrances on the property, and MLS listed properties in the vicinity.

5. However, it is useful to investors seeking demographic information for specific cities. The website is widely followed with over 11 million monthly visitors. The available demographic data is extensive including income, race, school test scores, hospitals, car accidents, property tax assessments, and cell phone towers.

6. Loopnet is the leading commercial real estate website with more than 5 million registered users and 2.7 million monthly visitors. The website makes it possible to search and compare not only current commercial listings but also properties not listed for sale or lease. Along with traditional information about building and lot size, it also provides information regarding owners, tenants and historical sales, leasing, and mortgage information. The comparables tool alone contains more than 35 variables.

While this blog is not a comprehensive guide to these online investing resources, the descriptions will point you towards the site you should use when you need unique and specific information about a potential investment property.

There Can be No Economic Recovery Until Real Estate Recovers

Real estate is the corner stone of our economy. A recovery of the real estate sector has always brought us out of past recessions. This one will be no different.

We know a big surplus of vacant houses has existed on the market for years. Much of this is caused by the foreclosure catastrophe. If nothing changes, we will eventually work through the glut and return to normal in several more years. But do we really want to continue in a very slow recovery for years to come?

The government has made several unsuccessful attempts to reduce foreclosures and thereby stimulate the economic recovery. All of us are aware of the government’s Making Home Affordable Program and spinoffs like Home Affordable Modification Program. No single program or combination of programs has made a noticeable improvement in the recovery of the residential real estate sector.

Some expert’s have advocated the government intervene to force a reduction of mortgage principles so that homeowners can refinance at today’s lower mortgage rates. While this may be a viable option, it would come at another heavy expense to taxpayers.

A better solution is establishing tax incentives for investors like you and I to buy up the glut of houses and either turn them into rental properties or sell them on the open market for market value.

There are several advantages to putting an investing incentive in place. Foremost, only after the surplus dries up will the market return to normal and housing values begin appreciating again. When that happens, homeowners and investors alike will be able to refinance or again sell properties at a profit.

This is a much less expensive alternative to taxpayers. Congress should enact an investment incentive allowing investors to immediately depreciate the value of properties instead of requiring it be done over multiple years. Although I don’t favor controls on investors, if the government enacts this incentive, it is also likely to require the property be held for a period of time that could be several years in length.

Overall, increased immediate depreciation would have the compound affect needed for a rapid real estate recovery. The tax savings for investors would make more investing funds available. These funds would be plowed back into the real estate market to further reduce the excess inventory. Reducing the inventory takes pressure off the lenders’ balance sheets when the FDIC reduces the amount of reserves lenders are required to hold in anticipation the loans will not be repaid.

Lower reserves make more money available for lenders to loan out. This in turn, makes it easier for people to buy homes. Reduced inventory means supply and demand are brought back into balance. Real estate prices will begin to rise again. When owners again have equity in their houses, they can refinance at the low interest rates, thus lowering their monthly payments. More affordable payments will lower the foreclosure rate.

There is a pent up demand for rental housing that works in the favor of investors. Young people in particular are room mating when they would rather have their own place. Young families are living with parents when they should be on their own. This pent up demand will absorb rental housing when investor incentives allow positive cash flow at a lower rent price.

Reduced inventory, increasing real estate prices, and increased demand will bring on new construction. Exactly what has occurred to stimulate the economy to end past recessions.

Short Sales and Bankruptcies Mix Like Oil and Water

The year 2007 total for U.S. bankruptcy filings came to 850,912. Of those, 822,590 were personal bankruptcies (nonbusiness). By the end of 2010, the total jumped to 1,593,081. This year is on track for another 1.5 million bankruptcies. That’s about a 94% jump from when our economy was in good shape to where we find ourselves today.

The reason I bring this to light is that as a real estate investor you never want to become involved with the short sale of a property involved in a bankruptcy. The only time you combine a bankruptcy and a short sale is before the borrower declares bankruptcy. The genuine threat of bankruptcy as part of the borrower’s short sale hardship can convince a lender to approve a short sale.

Before going further, I want to be clear that I’m not offering any legal advice. I’m not an attorney and I don’t know the facts in your situation. I’m only sharing information. You need to check with a competent attorney regarding your situation.

Once the borrower files for bankruptcy, the short sale process becomes much to complicated to justify pursuing it. The bankruptcy filing stops all collection activities. A short sale is considered a collection activity. Instead of working only with the lender and borrower on the short sale, you now have to work with a court appointed trustee of the bankruptcy and the lender and the borrower.

If you think you have the perfect short sale property and want to go through the process, this is what you should expect. First you need to obtain a court document known as an “Affidavit of Abandonment for Real Estate and Asset”.
Obtaining that document requires proving to the court that the borrower has no equity in the property. You begin this process by collecting evidence such as contractor estimates, appraisals, market reports, and other supporting documents.

The objective is having the property excluded from the bankruptcy case to allow the borrower and lender to resolve the debt outside of court proceedings. Once the property is out of the bankruptcy case, the lender is free to begin or continue the foreclosure process. Even if you have a verbal short sale agreement with the lender, they still have the option to pursue foreclosure.

Another issue to consider is the cloud the bankruptcy places on the title. The Affidavit of Abandonment for Real Estate and Asset document is sufficient for the title company to convey clear title to you but it might take some effort on your part to convince them or they might limit title insurance if you purchase it.

The reason I’m strongly against mixing bankruptcies and short sales is there are too many down sides. There’s another issue you need to be aware of. If you sign any legal documents with the lender or borrower while the property is inside bankruptcy, it’s considered “fraudulent conveyance”. I don’t know all of the legal ramifications to this. However, at the least, it makes the agreement null and void because the property is under the control of the bankruptcy court. This isn’t likely to be an issue with the lender because they have a legion of attorneys advising them. However, the borrower is not likely to be aware of the issue.

Bottom line is there are too many good investment properties on the market today for investors to become bogged down trying to buy a short sale that is involved in a bankruptcy.

Old Technology Still Counts as Much as Ever

Over the past year, I’ve written several articles about technology that focused heavily on the internet. A couple of my technology suggestions have been creating email lists, having a Facebook page, and writing a blog about your community, among other ways of staying in touch with your potential customers. And I’ve touted the importance of creating videos that market your real estate.

While that is critically important to today’s real estate investor, it’s just as important that you don’t take your eye off the old fashion telephone. If you’re running your real estate business correctly, you’ve probably invested several thousand dollars and countless hours promoting and marketing your business.

The entire purpose of it all is keeping your business in the forefront of people’s mind so that when they have a need for a rental or they are looking to buy a property, your business is the first one they contact. Even with all the technology you are using, that first person-to-person contact is likely to be a telephone call.

I want you to take a moment right now to stop and think about how your business phone is answered. Too many of us don’t give this the attention it deserves.

Do you have a hired receptionist or someone other than yourself that answers your business phone most of the time? Do you know how they answer it?

You or they should be answering every call as is there is a $50,000 check at the other end because there may well be. Besides the tone of your voice and the greeting you use, are you making sure all incoming calls are answered promptly?

My point isn’t to give you a lesson in telephone etiquette. I think anyone that can become a real estate professional can easily figure that part out. What I want to do is make sure you are doing what you already know is the right thing to do.

If your business telephone isn’t being answered within the first three rings, you need to remember, your competition is one click or one call away. Too often, I see busy entrepreneurs let a ringing telephone go to voice mail. That might be alright if you recognize the number as your janitorial service and you don’t have any pressing business with them. But if you don’t recognize the number, you need to assume it’s a customer wanting to put $50,000 into your bank account – treat the call accordingly.

Now let’s take this a step farther. Do you use any online forms or other ways such as online customer service to communicate with customers? If you do, how long does it take to get back to them when they send a note? There’s a reason that online retailers use automated response software to send a sales confirmation. It’s because that’s what customers have come to expect.

It’s not realistic for you to sit at your computer waiting to instantly reply to every inquiry that comes in. But you can use automated reply software to set an expectation with customers that you will get back to them within 24 hours or less. Without some type of confirmation that you’ll shortly be in touch, they’ll assume it might not be until the middle of next week. You should assume that they’ll be off checking in with your competition and taking that $50,000 deposit with them. If they do, all of your marketing will have been for nothing.

Multifamily Investing – With Caution

It depends very much on your geographical location but there are signs the multifamily sector may have peaked – at least temporarily and in certain locations. In primary markets like NYC and Washington D.C., big institutional investors have driven cap rates of return down below 4% in some recent deals. There are even reports some class A properties have been bought for negative cash flow amounts.

Additionally, most everything desirable has been purchased. Where land is available in the primary markets, the big guys are starting to build apartments again. Because land is limited in the major markets, other large investors are expanding into secondary markets like Seattle and Charlotte. There is even some renewed activity for third tier markets in the Mid West. However, these remain focused on class A properties.

Obviously, smaller investors are looking for class B and C properties. On that front, there was a 47% increase in multifamily loan originations in the second quarter of the year compared to the first as reported by the Mortgage Bankers Association. Just as important, up until recently, about the only lenders making loans in this sector where Fannie and Freddie. A significant number of the recent up tick in loan applications were accepted by regional and local banks.

While high-rises dominate the primary markets, garden apartments – low-rise buildings surrounding a common courtyard – saw a dramatic increase in sales volume. These are properties small investors can get into individually or with small partnerships. This sector accounted for a full two-thirds of multifamily transactions in July and May saw a 165% increase year on year.

Here’s where the short-term risk is in multifamily housing. Until development begins with some vigor in this sector, competition among buyers will remains strong – driving higher prices. Forecasts for more development remains very low in primary markets but is increasing in others. The other variable is the shadow market for residential houses. In markets with high foreclosure rates, the shadow inventory has the potential to affect apartment rent rates. Lenders have demonstrated they intend bringing REO onto the market gradually so as not to force prices down further.

However, they need to generate income from these properties. More are beginning to rent REO houses while they wait to bring them on the market. There is even speculation Fannie Mae may begin renting out REO. Places where rental houses compete with apartments could see apartment rents stagnate or even retreat. Almost universally, renters prefer the privacy of a yard and garage over the crowding of apartments.

Because multifamily has been the hottest market during the economic down turn, there is interest in beginning new development. Only 30,000 new units are expected to be added in the 54 major U.S. markets during all of 2011.

However, in the first quarter of the year, start permits for multifamily buildings jumped to 70,000 units. Most of these will come on line over the next couple of years. The industry has a long history of over building and then waiting for demand to catch up. This is the other potential to begin applying downward pressure on rents that have steadily gone up all year.

What is going on with multifamily is vey specific to location. The primary markets have clearly driven purchase prices above what most investors are willing to pay based in revenues returned. However, the rental market will remain strong for years to come. How it works out in your town or city will likely be driven by new development and REO being converted into rental houses.

More Big Government for Big Business

The FHFA says more than 4,000 responses were received. Still, the one comment that stands out in the FHFA news release is that several respondents “demonstrated their technical and financial capability to engage in large-scale transactions” with Fannie, Freddie and FHFA.

The basic plan emerging involves:

• Requiring investors to rent the properties for a still to be determined period of time that is expected to be multi year.
• For Fannie and Freddie to either provide direct financing to investors or guarantee loans from banks and financial institutions.
• Required rehabbing of the properties to government specifications.
• Encourage big banks with large foreclosure holdings to aggressively enter the rental market as landlords.
• Provide on going government oversight of each house even after the rental period ends and it is sold to an end buyer.

The news release also states, “Only a few market participants have developed the necessary infrastructure and capabilities to manage dispersed single-family rental properties. With assurance of a continued flow of new REOs, respondents suggested additional firms will make the necessary investment and develop that capability.”

What is clearly missing is any support for small businesses to participate in the program. Fannie and Freddie currently have approximately 200,000 foreclosures on their books. When the banks are included, the number jumps to about 500,000. Additionally, another 3.4 million houses are expected to be foreclosed in the next couple of years. How this FHFA program plays out will have ripple affects on big and small real estate investors everywhere and a Tsunami affect in the hardest hit regions.

Small Businesses That Could Potentially Prosper

Locking out smaller investors will not be good. Big banks and big businesses will own large rental holdings and could potentially set the rental rates for some regions of the country. Right now, it’s difficult to tell if rental rates are likely to go up or down. The last two years have seen rent rates gradually increasing as more and more people are forced to rent rather than buy.

With hundreds of thousands of rental properties entering the market, the supply side might over power the demand side of the equation. Forcing rental rates down. On the other hand, having a few big businesses set rental rates may push prices higher so the big businesses can make profit targets.

Local remodeling and construction businesses can expect to see more work as these houses reenter the markets. Because the construction industry is the hardest hit by unemployment, it might not exactly prosper but it will improve over what it has been for the last several years. Businesses that used to only do new construction are likely to enter the rehab sector as it grows to accommodate the hundreds of thousands of badly damaged foreclosures.

One bright spot is the property management sector. One reason banks haven’t been renting out foreclosures in big numbers is because they are not positioned to be landlords. Being a landlord comes with unique liabilities and risks that banks are not structured to take on. They will have little choice other than relying on established local property management companies to deal with tenants, clogged toilets, and 2 a.m. telephone calls.

The silver lining in this big government – big business plan is that at least something will be done to take the excessive inventory of houses off the market. Once all of the details are known and if they successfully implement a plan, house prices should stabilize. If large numbers of foreclosures are relegated to the rental market for several years, sale prices should go up when buyers aren’t afraid values will drop from more and more foreclosures going up for sale.