Join Andreas Senie and Saul Klein, the Original Real Estate Internet Evangelist, as they discuss the evolution of real estate. From hard copy listing books to the Internet's first listings, what the future holds for real estate professionals, what is the Intercontinental Exchange, Inc. (NYSE: ICE), and why it matters to Real Estate Professionals, MLS companies, and the industry.
About Saul Klein:
Saul Klein is the father of technology and Internet adoption in the Residential Real Estate Industry. He is generally recognized within the Real Estate Industry as a technology pioneer and its first Internet evangelist. He was the creator of one of the first online real estate communities, RealTalk, first developed for the National Association of REALTORS in 1995 and still an active Community. He was an original member of the first REALTOR.com Team, where he was a driving force in the migration of listings from the MLS Book to the Internet...from "Atoms to Bits." Saul is well-recognized as an industry pioneer, especially in real estate syndication and education, and one of the few luminaries that paved the way for real estate's transition to the online world.
About Andreas Senie
Andreas Senie, CRECo.ai Roundtable Host, Founder CRE Collaborative Inc. (CRECo.ai), Technology Growth Strategist, CRETech Thought Leader, Certified Commercial Real Estate Trainer & Brokerage Owner EAC Properties at The Higgins Group.
Sector Interviews are bonus episodes of CRECo.ai Real Estate Roundtable - Your comprehensive all-in-one view of what's happening across the real estate industry -- straight from some of the industry's earliest technology adopters and foremost experts.
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Andreas Senie: Welcome back to the CRECo.ai Real Estate Round table for this sector expert interview with round table co host, Saul Klein, the original real estate internet evangelists, multiple time founders, strategist, and futurists. Saul is recognized as an industry pioneer in real estate, syndication and education.
And one of the luminaries that paved the way for real estate to transition from the big book to the online world. I'm Andreas technology growth, strategist, founder, CRE collaborative brokerage owner at EAC properties and the host of the Cracko AI round table. Your all in one comprehensive view, what's happening across the industry from some of the industry's earliest technology adopters, SA foremost experts saw technology in technology, marketing, brokerage, government policy, capital construction, and cyber security.
So I could not be more excited to be having this one on one with you so much is changing so much has changed in the world of real estate. Before we get into all that, let's talk some history and context. Tell us about coming online, the industry coming online, and then let's talk about ice and everything else that's happened.
[00:01:24] Saul Klein: Well, Andrea, it's great to be here. You know, we've been planning this for a while. We just haven't taken the time to do it. So I'm happy to be here as well and be able. Uh, to, uh, talk to you and answer any questions that I, that I can, you know, this is a changing world. There's lots of things I forget. Right.
I read stuff. And then the next day I forgot it because there's all this new stuff coming in, right. There's just not enough room inside. And it just goes in one ear and it kind of comes out the other. So, but there is a lot taking place. And, and so a little history of, uh, technology in real estate, the, in 1993, the national association of realtors, uh, allocated about 13 million to help realtors go online through the creation of something called Rin, the realtors information network.
I was fortunate enough to be, uh, hired, to look at these new applications as they were being built, try to figure out how they might work in a real estate broker and agents business create the, the conversation around it and the compelling argument, and then take that argument to MLSs across the country.
So in 95, you're right prior to prior to actually 93, we had the book by the time 95 rolled around, we still had the book because you don't let go of the book on it. But that's an interesting story, how we eventually got rid of the book, but we got those listings. We got 'em up on the internet. And, uh, realtor.com was created owned by Rin the realtors information network, which is a wholly owned subsidiary of the national association of realtor.
So NAR owned realtor.com 100%. And there were rules of operation that were created to make it something that realtors wanted to participate in. And about 1996, what happened was when realtor.com, which was a piece of, it was the public side of, of the realtors information network. When it was about to be exposed to the world, uh, Microsoft decided they didn't wanted to do the same thing.
And so Microsoft had a website at that time, there were like three real estate portals, realtor.com, actually four realtor.com, home seekers Cyberhomes and Microsoft introduced home advisor. And the model, the business model for realtor.com was if you have a listing, you ought to put it up on the internet, cuz everybody's gonna start going to the internet and they're gonna get to see your listing.
And because realtor.com, this web, we had to explain what a website was. We had to explain what email was. Then we explained that people and the way I explained it was, I actually had a newspaper, um, a from a movie theater. And it, I don't remember the name of the movie, but it was a big, almost like a quarter page ad about a movie.
And then in, there was a URL was a website address. No kidding. And then I would, and without like the first one I found, right, because I'm saying what the internet I'm learning. I gotta go out and look, and I find that the movies are using it. Yeah. If it
[00:04:23] Andreas Senie: works for Hollywood, it's gonna work for
[00:04:25] Saul Klein: your real estate.
Great. Yeah, exactly. So I use that as an example, look, they're use, this is coming. They're gonna use this in H better. Put your listings up here. What's the business model. The business model for realtor.com started at $2 a listing a month and before, and the first MLS to sign up. And I was the one that went out and explained it all and got on black and white acetate overheads, right on an overhead machine and convinced the Austin, uh, MLS and the Austin association of realtors that this was the future and they elected to do it and they negotiated and we got the price down and we got the first contract was a dollar, a listing.
Wow. No three-headed monsters, no other people get your leads. This wasn't about leads. Matter of fact, that's a whole nother conversation.
[00:05:13] Andreas Senie: this was just you getting your, your, your deal out there.
[00:05:17] Saul Klein: You're getting your exposure. Right. Right. And that was the whole idea. And your phone number, was it your phone number was in there.
And then if you didn't have an email address, you could firstname.lastname@example.org an email address, and this was all brand new. But then when we launched at the committee, launched realtor.com to the public in August, in, uh, November at the national association of realtors convention in Atlanta, in, um, 1995, timeframe, 96.
And at that time, Microsoft decided, Hey, we gotta get into this. And so they jumped out with their portal home advisor and they said, we're free. We'll take your listings for free. And of course, All of the realtors said, Hey, free is better than a dollar, a listing a month, little did they know? And so Microsoft got their website populated and the realtors information network couldn't charge a dollar a listing a month because Microsoft was offering it for nothing.
And so the, the directors of NAR got cold feet. Basically. They said we can't compete with Microsoft. And if we have to go to zero and we can't charge for this, we can't make any money that collapses this whole business model. So how do we save what we invested? And the answer was that you sell it off to all the thing off, and that's what happened.
And they sold it off to a group and the group took it public. And NAR probably made 50 to a hundred million on that deal,
[00:06:44] Andreas Senie: which, which could be a whole different rabbit hole on, on AR. And what that's a whole nother
[00:06:50] Saul Klein: right now. NA AR has a program called reach. In which they do just that kind of thing, right?
They'll take a new technology company that puts up money and then they'll mentor it and they'll introduce it. And then they own an equity piece and then they own, and AR owns, I don't know, like a hundred equity pieces now
[00:07:06] Andreas Senie: at the end of the day, exposure, more exposure for more companies, for, for brokers, realtors, and so forth.
And, and why not as us as brokers, we as brokers, uh, we're putting in the data, the data comes from us. We have the newest, most relevant data working where we are. We're putting it in for free. And historically, as you're, as you're mentioning millions of dollars, really it's CR the, this data flow has created billion dollar enterprise.
[00:07:33] Saul Klein: Billion many billion dollar enterprises, billion data. So at first the concept was, so you had to, at first we had to convince realtors because realtors believed that the value that they had was the fact that they had the data and that people had to come to you. How do you get 'em to come to you? Well, they can't get the data unless they come to a realtor.
And that was the way that it was. So the idea that you would put it up in the, for the world to see it, that was kind of a really hard thing for people to swallow in the real estate industry, but they did because they could see that this was the future and this was where it was all going and that it made sense to put it up there.
And so when I, I was the person that traveled across the country to all the MLSs. After we got about 500,000 listings, we expanded that Salesforce out to about four people, but initially it was me and then Carl Demus who runs the MLS in, uh, Northern Ohio, regional MLS. And that was our job was to go out and get these MLSs to sign up.
And, and the idea was exclusivity. Don't give your listing data to anybody. Put your listing data here on this website, realtor.com because here's, what's gonna happen. It's like the super bowl. And I had a Superbowl trophy slide. It's like the super bowl. If the NFL decided to play the super bowl on a hundred channels, then they couldn't charge 10 million for 32nd ads.
Right? They'd be monetizing a different way, but they decided that the way to monetize was keep that content exclusive. It wouldn't take long before consumers would learn that if you wanna watch the super bowl, this is where you go. And our theory was, if we put all the listings in one place, it won't take the public long to learn.
If you wanna see what's for sale, this is where you go. And that keeps us under the control of the realtor community. And any, any profits that can be derived at some point could, could, could come back to the real estate community. Well, what happened? And when Microsoft went to zero, everybody gave all their data away.
That's right. And that then, then we couldn't be exclusive. Couldn't charge. They spun it off. And then, and then what had to happen is realtor.com had to create a new, uh, business model over the years. They've all kinda evolved right now. Everybody has it. And it's really a commodity. And the idea was how do we now determine what the value is?
Because we, we, the industry gave our data to these new startups, cuz there were these new startups around 2006, 2007, 2008 companies called like Zillow crazy name, huh and Trulia and all these. And they wanted to get listing data, but they didn't, they couldn't go to the MLS. Wouldn't give it to 'em. And so where would they get that data?
And the answer was they could get it from aggregators companies like list hub and 0.2. And then I became the CEO of 0.2. And so we began. Aggregating data, providing data at no charge, right? And these companies like Zillow and Trulia became billion dollar enterprises. That's your point. And how much of that money went back to the realtors?
Not very much, as a matter of fact, what happened to your listing went up and then other people got the leads off your
[00:10:42] Andreas Senie: listing and they were, and most of those platforms were charging others. And, and so on, truly a Zillow they're they, they found the model. Not only they got, they pulled the data, ag aggregated it from you and said, wait a minute, let's charge the realtors backwards.
So the entire thing shifted.
[00:11:01] Saul Klein: So for 11 years, yeah, for 11 years, realtor.com was the number one most visited real estate website in the world. That's right. 11 years number one. And I watched it Hitwise was the website. You might remember, we'd go to Hitwise and we'd look at, we'd put up the websites. We'd watch what's number one, what's number two, what's number three.
And it didn't took, took a while, but Zillow passed realtor.com. That's right. And, uh, now realtor.com was at a handicap because when it got spun off, an operating agreement got produced at the time, it was a thousand page operating agreement. And it said you can't put fisbos on there. You can't be right.
All the things that were concerned to realtors, realtor.com couldn't do well. Zillow didn't have those same restrictions. Zillow could do whatever it wants. So it really put realtor.com at an economic disadvantage. And so the rules then started to change for realtor.com. Otherwise it wouldn't be able to compete in the world with the other portals
[00:11:51] Andreas Senie: and it, and it did compete.
It took first place again, Zillow, truly overtook realtor.com. Then realtor.com came back ahead and above competitors. But now there's an even bigger competitor out there. And I say, competitor, there's ice. And, and why, why does this matter? I mean, real estate today, it's an asset class has no future markets.
You talk about this all the time, but in essence, we're a disconnected trading and settlement process, right? Absolutely MLS. May feed up to realtor.com post lift 2.0 top, all of it, but ice internet Intercontinental exchange here comes ice. The biggest thing, since I would say rent coming online based on our conversations now, and ice is heavily invested in it systems and modernizing disparate trading systems, bringing it all together.
So what just happened with ice in black Knight? That that is a big concern to us as realtors, as brokers, even as investors, developers leverage what is happening there. Yeah.
[00:12:55] Saul Klein: And not as, from my perspective, not so much concern as, as evolution. Yeah. And the fact that we need to know about it. Yes. Right.
Because there's gonna be opportunities. We have to figure out how to play as this thing change as everything changes. Right. So if you go back to like 2007, 2008, and even prior to that, back to Enron, okay. Right. And the, remember the oil, the Enron, and they were, they were like selling contracts in oil, but you didn't know what oil it was.
And so a lot of money was lost. There was a lot of big issues and, and, um, what became apparent to people is you have to be able to degrade things, to be able to invest in them. If you don't, then again, you're really taking big chances. And so in that timeframe in 2000, after that 2007, 2008, and the big financial collapse, part of the reason for that were bad love ones, right?
That's a whole nother story. And a big part of that was really not having transparency into the assets. And another part of that was how much it cost to place a loan that loans cost like seven to $10,000, which is ridiculous. And the who discovered this, who really was looking at this first word, like the big money players, like MB a.
And Citibank and chase and Wells Fargo and right. And the GSEs, right? The government service enterprises like Fanny and Fred MC Fanny and Fred, right. well, we gotta, what's gonna happen. Who's gonna kind try to fix this now, Fannie and Fred kinda looking from the outside, but what was decided by all these big financial players was they needed to create this digitized loan process, which would lead to the digitization of real estate.
And so the, the person's name, and I really hadn't followed him very much, but is worth following is Jeff Sprecher and Sprecher then was brought in to start to, to create a system that could bring in data and information from all over a high level, real capable. It says, now give you an idea of who ice is, Intercontinental exchange.
They own. Exchanges around the world. And the big one that I always use as an example is this is the entity that owns the New York stock exchange, right? The oh, and they create markets and they create futures markets. And so this is a big organization tasked with digitizing the housing finance system.
And so to do that, they had to make acquisitions because as you mentioned, part of the issue with the housing finance system is it's all separate and disparate and, and there is no one place, right? So it's difficult. And what happens when people loan it. And that's another issue. People don't even understand how the real estate finance system works.
So here comes Sprecher and Intercontinental exchange, and they they're into the exchanging and creating the technologies that give insight and allow for, you know, faster trading, better trade. So this is a big company. If you haven't followed it. Look it up Intercontinental exchange, look up the acquisitions.
I lose track of all the acquisitions. I write 'em down. Like they purchased MERS, right. Which was the, what they call the golden record. Right. Because here's the problem. You get a loan. So let's talk about the housing finance system in general. People don't know how it works. And so people say, well, I'm gonna get a loan on my house.
Well, that's great. How come you can get a loan? Well, because I can go down to the bank and I can borrow the money. And so I get a loan and then people say, and then if I don't pay it, the bank takes it back. Well, that's not really how it works at all. Right. That's right. The fact is that the banks are the front people for all of this, the banks sub mortgage companies.
And while there are portfolio lenders, the fact is that the housing finance system is government subsidized in this country, through the GSEs, right through the government government service enterprises. And so gov, when we look at this and we see that. There are these major entities that buy these loans.
So there's how come there's all this $17 trillion in the real real estate, the largest individual asset there is. And you mentioned that there's no futures market for it, but it's giant trillions of dollars in loans. Where's that money come from? Where did 17 trillion come from to finance? It didn't come from the bank.
So what happens is you've got these people that are, that can handle money like banks. And they have capital and they will place that capital, but they try to place it with criteria so that they don't have to hold onto
[00:17:43] Andreas Senie: that loan. That's right. They're gonna sell it to the next guy and the next guy, and this was a crisis, bad loans breathing on a mirror.
We all remember this. If you're in real estate and you
[00:17:51] Saul Klein: threw it plus 7,000 to $10,000 to originate with put the whole thing in play anyway. Yeah. So it starts out. So you've got, so when you go to get a loan, the reason there's money there is because the institutions put this together and then they sell it to investors and actually they'll sell it to the big loan.
Most of them are bought by the GSEs by Fannie and Freddy. And then those loans get packaged up. Mm-hmm into securities. That's right. And their mortgage back securities and those mortgage back securities are sold to pension funds. Right? So if you work for the teachers union in California, there's a good chance that there are loans in port loan portfolio, the retirement plan.
And if there's a collapse of the real estate market and the mortgage market, it's gonna affect your retirement. Absolutely. And so, so the way this works is the loans are then placed. Then they're purchased in what we call the secondary market. And the big buyer in the secondary market are the GSE, Spani, and Freddy.
And they have a requirement. They're, they're independent companies. They're not the government, right. They're, you know, they're not the government. That's what we're told. Right. They're independent entity, but they got their own interests and they make money and what's the government got to do with it.
Well, they've got, these GSEs have reserves. They have to keep in case loans go bad. And in 2008, 2009, a lot of loans went bad to say the least. Yes. And what happened was the amount that went bad, exceeded Fannie and Fred's reserves. And so they were basically in solvent. . And so what happened was the us government treasury stepped in.
So they went into receivership and then conservatorship, and they're still in conservatorship, right? So here, we've got these entities that buy loans, but if the loans go bad, they don't have any enough reserves. If the loans go bad, who covers it? Treasury, Treasury's the us government. So who real, if treasury has to keep these things in play, the money really comes from you and me.
It's the taxpayers that give the treasury, right? It's so what we've got now is got the subsidized industry. We've got the big buyers of loans that create this housing, finance right capability that are in big trouble. We've got this system, that's all fractionalized and you can't really see and you can't measure risk.
And so another thing that happens is you have, uh, misplaced risk or you have misassigned risk to assets that people invest. And so part of all of what ice is trying to do is bring this together. Yeah. They wanna be the kingpin and be able to digitize the loan process. Basically this will eliminate probably a lot of small lenders and a lot of people who are mortgage loan officers, and it could even play into the real estate space.
But what we're thinking is maybe realtors can kind of pick up the ball here on the loan side is all this thing starts to become visible. And so that's why we, and so ice, you know, continental, continental exchange to accomplish what it wanted to accomplish, had to buy entities and it bought, and we've got a list we can make how much money they paid for, for Ellie and how much money they paid for Meers and how much money they paid for the big one recently is black.
Which had included with it, um, optimal blue, right? So loan origination. And so the purchase of black Knight really was a big deal for ice as it tries to build the pieces. So it can have the digitized mortgage process
[00:21:39] Andreas Senie: start to finish bill. And so that can build that interoperable platform start
[00:21:45] Saul Klein: exactly, start
[00:21:46] Andreas Senie: to finish, gives them the ability to, to have quality loans in near real time.
And as you pointed out minimal risk because there's transparency into those, into everything side by side, I know what the left hand is doing. I know what the right hand is doing. So at the end of the day, we can get to a point where we can rebalance that federal housing system get everything. Uh, walking and talking the same.
Cause even candidly today, the MLSs and, uh, Rezo real estate standards, we don't, we don't walk and talk the same commercial. We don't walk and talk the same anywhere in the country. We don't walk and talk the same county to county. And once we get there, what's, what's really exciting. And we've touched on it.
You and I watch twice at futures markets, right? Real time transactions. It's funny. Uh, I talk about this stuff and a lot of times realtors, eyes will glad is over or investors or brokers less. So developers, securities experts. But I mean, if you're in residential real estate, commercial real estate, and I loved being, helping build residential teams prior to working strictly commercial because they were, they were ahead with technology consumers, demanded technology.
They wanted to see it on the internet. So I got, I got to sit there and watch. The same thing happened in commercial, but by understanding what is taking place, that's really today, what's gonna differentiate, differentiate you from competition, that expertise, that confidence has to be there because if or when this happens and it's happening now, your consumers and clients and customers are gonna see it.
They're gonna have confidence in their answers. They can find it on the internet. The internet may be a big and broken place. And I say that because how massive it is. But as ice consolidates, the system, black Knight, CoreLogic more and more of our clients are finding ways to access that data, that knowledge that it used to be institutional only we knew it.
Nobody could call us out on it except our peers. And that is where we are today. So what about the economics of it all the next steps? I mean, are we are in the midst of web 3.0, we're on our way. So 1.0 2.03 point. Oh, how do you say it? I like the way you usually say it. What's the big differences web 1.0 was
[00:24:02] Saul Klein: well, so, so that's, we're this kind of a side conversation.
We can have it now, right? The technology, the underlying technology. And so people talk about web three. You hear it a lot. Well, that doesn't mean anything to most people cuz they don't know what web two was or web one was. Right. So to talk web three, that's kinda like talking over most people's heads,
[00:24:21] Andreas Senie: but it's all about that data.
And the realtors gave the data away into realtor doc, what became realtor.com, which then got turned into a model that made money on its own, which is now becoming part of a broader model billion dollar industry with these other companies. So I would say yes, it is over most people's HEADSS cuz it's web 3.0 what it was.
All I know is it's web. But it's about data. It's about, so let's
[00:24:43] Saul Klein: talk about web just real, real briefly. So what was web here's real? What was the first phase of the internet? Well, it was, first of all, it was email and websites. That was the use. Yes. What was the technology that was used? It was DNS HTML, right?
So, and what did we use it for? Email and website. So when we talk about you'd call it web one, but really was the internet because the browser and worldwide web didn't come along to like 92, 93. Right? Right. And the internet came around about 1968 was created 1968. Why by DARPANET. So, so you had the internet.
And so this is like, I call it web one internet one, right. It was the internet. Then we got the browser and the worldwide web. So the software was email and a browser. The technology stack was technology was DNS and HTML and HTTP. Yeah. And it was said that was, that was web one. And then, but it was read only.
That's what we call there.
[00:25:44] Andreas Senie: We go read only one of 1.0, read only,
[00:25:48] Saul Klein: right? Yeah. You all you could do unless you are a program. Right. So if you're, you couldn't like go up and, and make comments and you couldn't do that. Right. You needed a programmer to do that. And so people bought websites, but programmers had to build them for right.
And then Microsoft actually came out with a product called front page where you could start to build your own. But that, that web point, that web one, or if you're looking at, when people talk today, you know, web three, know that one was emailing websites. Yep. Two then became the interactive web became read, write.
And so what happened was a new technology stack was created for what we then call web two. And that technology stack, like you're probably familiar where they call it the lamp stack. Right. Linux, Apache, my Linux, my sequel. Python, Pearl, right? Lamp, the lamp stack and they, and so what that created this new technology then allowed for engagement.
So you couldn't get real engagement on in the first phase, in the second phase, which came about 2005, 2006 web called, we call it web two. And it really was the birth of the big social platforms because you could engage. So now you had rewrite the underlying technology changed and the underlying technology was the lamp stack.
And then the uses change. Really what happened was we now had this engagement through giant social media platforms. Web two is really giant social media platforms. And so now remember when the web, the internet was created, it wasn't created for commerce, right? It wasn't built for commerce for communication in the event of a nuclear Holocaust.
And so, um, um, it had to evolve and when not allowed to conduct commerce on the first internet, went on the internet first. And as, as when commerce got introduced, like, I don't remember the year 98, 99, and you could start taking credit cards online. Remember it wasn't built for any of that. Consequently, we've got all of this, you need a password, you need another password, you need a new email address.
You need something to identify. Right. And it, we don't, we don't recognize who you are. You gotta, right. So it became it's burdensome. And so then now people are talking about web three, right? So what do they mean? Well, they don't mean web two. So web two was, was read, write web one was read only web three is what people are telling me is read, write own because the new technology for the new web is Buting.
And that's complicated. We don't need to talk about that. Just understand it's a technology and ownership and it allows tracking, and it allows for things you couldn't do with the old software, with the old internet, right. The one we're using now. And so you're gonna see with this with web three, lots of different changes, cuz you can track things.
You can, things that, um, you write can be tracked. Attribution can be given back to you. I always used to liken this idea before we even talked about web three to BMI and scap. If you're familiar with the music world, somebody else especially record gets played. Whoever always gets paid, gets paid. Right.
And so yeah, he wrote this. Alright. And so people have got different. Well what about the producer? What about the director? And all these people got a piece when that music gets played or utilized somewhere. All those people get paid, but. Listing information about property is put up on the web. Yeah.
There's public information, but what if I went by and took pictures of it because I'm a realtor in my neighborhood. I'm, I'm an expert in my neighborhood. I think people are interested in the neighborhood. So when I see the, the, the city out there working on the street, I take pictures and post it on my website.
So all the neighbors can see it. Absolutely. And, um, right, so there
[00:29:48] Andreas Senie: are, or you claim claim your own home and you update it or commercially, I mean, these are platforms built on this. Uh,
[00:29:54] Saul Klein: well, what is somebody's picture and uses it on their platform? Mm-hmm well, before it was kind of hard to track it down, but with these newer technologies and oh, we wanna do, here's gonna give people an idea.
Why are we even talking about this? Right? It is because there's gonna be this tracking. It's all about all this data, content. Believe it or not listing is content for the big portals. That's what it is. It draws eyeballs because people are interested in it that they got people looking at the site. They can sell advertising, they can monetize around it.
They'll make big money and realtors won't make anything. Even though
[00:30:27] Andreas Senie: we're the ones putting in the frontline data. We're, we're putting in the most data with the exception of assessors, we're the ones. And, and that's an important point that I was, I was working towards MLSs. Association's brokers are fueling billion dollar companies, but for the first time there's now regulation.
There's policy changes about data, about ownership. There's a, there's a, there are vehicles coming online or coming into place where you can, uh, advocate to own that data and get those royalties. I don't know how, I don't know which way it's gonna go. I don't have that crystal wall, uh, realtor.com. Wasn't what you expected us to be when you helped found it as the in network, is that no,
[00:31:10] Saul Klein: but I had the right idea.
the way that I had laid it out. There'd be a different ballgame today. Completely
[00:31:18] Andreas Senie: different. How would you lay it out today?
[00:31:21] Saul Klein: It was, it was exclusive. And realtors didn't give their data away to anybody else and we would keep it exclusive on the website and then figure out ways to monetize around it. Once people learn what station, the super Bowl's on.
Yep. They go there automatically. So,
[00:31:37] Andreas Senie: and then, so let's so stop distribution stops indication and hold it all to your, hold it all in house.
[00:31:43] Saul Klein: Indeed. Well, back in other things, there was no syndication or distribution. We didn't have to hold anything. Yes. All we had to do was get it right. yeah, I did. We went out and got it.
And so now, and then when we also started giving it away to everybody, I said, well, if you're gonna give it away to everybody, then I'll go out and get it. Cuz I had already done it once I got it for realtor.com. The first time I'll go out and get it and I'll put it in a language. Everybody can understand, not me.
I have a company that does this and then we'll give it to Zillow and we'll give it to Troy. Now I wanna charge him for it, but I don't know how much to charge. I don't know what it's worth yet. And so before we try to charge for it, let's get your listings exposure. And once we figure out what it's worth, then we'll go back and start charging for
[00:32:28] Andreas Senie: it.
Okay. And that was the plan. And that was the plan that was, and now they have all the exposure in the world and, uh, it's, uh, the train is left the station, the, the channels,
[00:32:38] Saul Klein: then what happens. But we figured out, you know, so I, I was working at 0.2. Then I was CEO of 0.2 technologies up in Canada. And we went out and aggregated all this content, all of these listings, we normalized it.
We provided it to the syndicators in, within our mind someday we'd monetize it for the industry. We'd figure this out. We'd figure out what, cuz I would go up. I was on for many, many years. I was on all the, you know, the big panels in Inman and in AR. And I got the time and I would get on these panels with other people whose names you might know.
And they would all say, no, you're never, this data's not, it's valuable, but it's never gonna be worth anything. And I would. Cause like the data advocate, right? I would say, no, it's gonna be worth a lot of money and you just don't. We just don't know yet. Oh no, you'll never be expected. It's worth a lot of money.
We've proven that because all these billion dollar companies that have been created around that data and they'll make all kinds of excuses around why that, so, but the fact is the data was the content that made it happen. And so at personal story, I was at 0.2 and we didn't have enough money to go. The next step.
It takes capital to make things happen. Oh yeah. And it doesn't matter if you have the best idea in the world, if you don't have capital, you aren't gonna make it happen. And my. C actually didn't served in a number of positions, but at the time he was the COO, he was the previous CTO and, um, was a top programmer at 0.2, Zach Scott and, uh, Zach and I were having these conversations about, well, let the data go and then we'll bring it back.
And this is gonna be worth, this is huge. This is gonna be worth so much money. And Zach says, yeah, you know, all we need is money. We're like, we're like, we know where the end of the rainbow is, but we, we just need bus far to get there. And so we had all this data, we had the distribution channels. We knew that these companies were built and they need it.
We just needed to build out the technology the rest of the way. So we took the company to market and, um, and the company was purchased, but the, and this was like the biggest, uh, business lesson I ever learned. And that was that when you allow your company to be acquired, if you want to continue with the vision of the company, you gotta make sure the acquirer has the same vision you do.
That's right. Because if the acquirer doesn't have your vision, your vision goes down to drain. Acquirer, buys it, they own it. They can do whatever they want with. And that's what happened to 0.2. And so when 0.2 was sold and it was sold to a company, had a different vision, where did it become at that point?
Well, so here's what happened. There were two syndicators in the marketplace, two companies that got all the MLS data list, hub and 0.2 realtor.com bought list took away about, and the capability now to turn off the valve to Zillow. Now, remember we went back and said that realtor do com was number one, Zillow came up.
So now what is how's realtor.com gonna compete? They'll just buy the source. If they can buy the source, they can turn the valves off and they can, they can, uh, starve Zillow. And so they bought list hub, which was the biggest player. Point two is the second. There are only two players in this marketplace and, but it just coincidentally list hub and 0.2, we both sold, we didn't know, but we both sold our companies at the same time, pretty close list hub sold.
First we sold seconds. We were in a silent period at 0.2 when the list up sale got announced. And so at that point, when the writing was on the wall, Zillow was gonna lose its listing data from list of right. It really needed to come after 0.2. And so I got a call from Spencer the day after they announced the list of deal and, and we had, but we'd already sold 0.2.
And from, for about two years after that, Spencer made the attempts to buy 0.2 from the acquirer because the acquirer was not in the didn't have the same vision. I had the acquirer, the vision of the acquirer was where could I buy a company that has lots of programmers that I can use in my worldwide business.
where can I buy a company that has a revenue stream that I can add to my revenue stream? Wh where is there a company that's bought technologies that I can bring into my technologies for? I'm not looking to buy a company to execute some other person's dream right. I mean, that was the acquirer. And so 0.2 was acquired.
I didn't even know when we were quite the biggest lesson I ever learned. I didn't even know. At the time I thought that the company that was buying us was gonna pursue our dream because we had created like a hundred page. We called 'em a confidential information memorandum. We hired a banker to take us to market, to sell the company or to bring capital into the company.
And there are different types of capital that can come into a company. I learned a lot during this process cost me a lot, but I learned a lot and, uh, we were acquired by company, had a different vision. And then what happened eventually within a couple years, Our acquirer sold the real estate syndication piece to list hub.
And at that point list hub, which was owned by realtor.com had all of the oxygen that Zillow needed to stay alive. Mm-hmm and they started to turn it off. And as they started to turn it off, Zillow needed to find new source of content. So Zillow went out, went to MLSs to get direct feeds, which they had, they had to do because realtor.com.
Turning off the closing, the valve, you know, on changing the data, contracts, changing, what you could do with the data contracts restricting Zillow's business. And so Zillow had to do something. And so it did, it started to get broker contracts, but I will tell you, cuz I've done this twice to get all of the contracts in the country, the data contracts from MLSs, it's no easy chore.
And it takes a concerted effort. Part of it's just a governance structure of an MLS and an Association's got volunteers. They change every year, right? So they've got committee structures. You gotta know how to get into and participate. You know, through this process, it takes time. So Zillow actually tried to do that and they had some degree of success, but then they figured out, you know, the easiest way to get all the data easiest way you just become a broker.
And then if you're a broker you're entitled to an IDX feed, that's internet data exchange. If you're a broker, you can get the data feed. If you're a broker in every state and you join every MLS, you can get the data feed from every MLS. And so people wanna know why did. Why did Zillow become a broker?
That's not because they wanted to compete with the brokerage industry, how it might have evolved and where it is now is another story. But what happened when they made that decision is they were being strangled by realtor.com. Absolutely. And I'm, I'm not making a judgment. I'm telling
[00:39:29] Andreas Senie: you what was happen.
It was a business it's simply what happened. They take away the fuel for the fire. You take away the, what they can sell they're goods and services effectively. Um, realtor.com being the wholesaler in this, in this, uh, parallel. And they have to go get it direct from the manufacturer. So, and they did. Yeah, yeah.
For changing, uh, the rules for the MLS and, and all of it. Right. Truly and others. And then, uh, residential realtors, I know back in 20, let's say 20 12, 13, 14 paying 40,000, 50,000, $60,000 a year for leads that could have been
[00:40:09] Saul Klein: that's really, really the internet did change to. The real estate industry, all for me was all.
And you know, I'm a broker, I've been a broker since 1977. I'm still a broker. I got my sales license in 1975. Right. And so to me, the real estate business has always been about relationships. Yep. Perfect. I went to work with a company where they had a sales room and the sales room. They all had leads and I couldn't believe it.
They would pay him. They, all they knew was a name and a phone number, these people on the phone. Right. And it was all about leads and working leads and generating leads. And to me, that wasn't what real estate was about at all. Real estate was about relationships took come for me. Real estate was about owning, right?
I got into real estate business. I didn't get into real estate business cause I wanted to sell real estate to other
[00:40:53] Andreas Senie: people you wanted, you wanna push out at the real estate
[00:40:56] Saul Klein: yourself. I wanted to get the real estate just what happened to selling it to other people allows you to. While you're acquiring the real estate that you wanna acquire.
And so it never was about going out and stuff. So when the whole model changed, really when all this emphasis on leads as a result of the internet, now people are, that's all they think about. Yeah. And it's all about where do I get my leads? it's where, so that's not the real estate. And I know that's the way it works.
And that's where people think it's been going. But to me still the most important piece. And I think it's gonna get, come back to this is trust and confidence. And it's about becoming, treating every buyer and seller as an investor because that's what they are. And we talked about this back in the 1990s, and it didn't happen, but it's gonna start happening now.
And that is the role of the realtor's gonna change. Well, it did change, but it changed into a lead generation. Right? It's gonna change into a cons more of a consultative business. Again. because people are gonna want to know more about the properties, more of that. Information's gonna be transparent and who's gonna be the expert to talk about it, the realtor.
So really, if you want to carve out your position, practicing real estate in the future, you need to start paying attention to the information you can accumulate about properties, and then how you can articulate that to interested parties. And if you can do that better than your competition, forget this idea of buying and chasing leads that doesn't do anybody any good.
That's a disservice, I think to people who are real estate licensees to think, now you, we really are putting them in a salesperson box. As opposed to a consultants box
[00:42:40] Andreas Senie: as an advisor. Uh, I want this to be advising an expert in an area in a market technology. I, as a broker, I would, I would always say, you know, I'm in the, I I'm working in the, the best time in this industry because the technology is available for me to go get and grow as much business as I want, because I can learn about a person about an entity.
I can start to build that network, that relationship over time, not buy leads. cause lead buying is a trap it's it's uh, it's the same as saying marketing is gonna sell this property as opposed to saying no, I'm gonna sell, sell this property. It's not just putting it up there. Things don't sell themselves except marketing.
Uh, that's the only thing that can sell itself. It's the greatest marketing design of its kind. And the a great example, uh, friend of mine quoted the other day goes, you don't see Salesforce marketing. They go out and they sell. but to your point, here we are. We've gotta go back to this consulting foundation.
Uh, you know, the settings that my, my grandmother used to go get in a plane, fly the plane. She had a pilot's license, string properties together, looking down at them, find the right ones, build out continuous properties, develop it as a broker. Why? Cause like you, she wanted to first shot at those properties then to sell other properties and so on.
[00:44:02] Saul Klein: I get, well, I saw, I buy every property at least 3%. Right. really, I buy every property at least 3%. Right. Well, cuz you're taking your
[00:44:11] Andreas Senie: commit well, right, right. Depending what you charge
[00:44:16] Saul Klein: right, right. That this was the, I don't sell real estate for other people anymore. It's been a long time. Right. but when I was accumulating properties for myself, that was my whole concept.
I got into real estate to acquire properties. That was another thing. I didn't have a lot of money. I was a Naval officer. I got 10. I got outta the Navy. I got kidney stones. I was in for 10 years. I get out, I get lump sum payment. I get 10 grand, which is nothing today. Right. It wasn't enough to buy my future wife a car and right.
But it wasn't a whole lot of money. And so when I got into real estate was like, and then you get into real estate and there's no salary . And so it's like, okay, now what are we gonna do? Let's let's find investors let's make, if we can't find 'em let's make 'em. And so I, I found a property. I thought it was a great property.
And I had a real estate business partner. I said, it's a great property. Let's figure out how we can buy it. And I went and said, dad, I found a great property. You have a couple thousand bucks, you know? And he talked to his, his family, you know, you got a couple thousand bucks. I talked to people I, that I knew, Hey, I got found this great property.
You got a couple thousand bucks. And first before you knew it, I had enough money to buy this property. And so I was able to put this together and bought this for as a condo. In a new track and bought this pro this is when you, when you could sell one phase to the next, it would go up, right? Yeah. Yeah. And so bought that one property.
And then we had this small group of people. So I earned a commission, buying the property and then needed to be managed. So I started a little property management company. So we managed, we got a management fee. And then when we turned it, somebody had to list it. I got the list, it for sale. The a couple years later, I got a little bit more sophisticated and I learned more about reg about securities and how you could actually put these things together and how you could charge fees beyond the commissions.
Right. We called them syndication fees. And so we could charge management fees. And so I actually did that for a while. So we would make our own customers. And today I still think that's a valid strategy. So go back to, why do people get in real estate? I wanna get into real estate cuz I wanna buy and chase leads.
I don't think that's anybody's dreams. Right. Buying chief leads.
[00:46:26] Andreas Senie: Yeah. Glen, uh, Glen, Glen, Glen Ross. Nobody wants to be sitting there buying, uh, making phone calls on a list of leads. Yeah. And really what you did manually friends and family, right? You went to your friends and family, got the money together.
Bunch of first property. Technology's here to help us accelerate the weight to those people, but not to if, if you're buying a lead list, so is somebody else. And that is never gonna work. Cuz now you're bombarding that person in the wrong way. If you're creating value and, and, and you have that confidence, that market knowledge, and you're presenting that, that property, like you did that condo.
This is why, this is what this is how, and they had confidence in you. They bought it. If you'd called up a list of people who bought condos, they may not buy that first one from you. They may not even talk to you. But if you, as you started to do that, these people became available. I'm assuming, because they started to know who you are.
Uh, as Reagan says, our show producer, you can't get to a hundred. If you don't get to one, you get your license, you start buying and selling for yourself. Uh, which is funny. I think I remember my real in 20 2006, I remember a real estate trainer saying that to me, most of you are never gonna sell a thing or buy you're only gonna buy your first home.
That's what you're here. Getting licensed for. Did anybody in the class know that getting a license has nothing to do with actually transacting real? Estate's just the framework of it. All you had to learn and become an expert, which hats off to NA for all of its different programs and certifications, cuz that's the difference.
Getting a license is just
[00:48:02] Saul Klein: getting a license. Well, so then you touch on a really important point. It's and it's all relationship tied and that is trust and confidence. Yep. Trust and confidence. Why did my dad give me money? Because he trusted me. right. That's the easiest level of trust, right? And so there are different levels of trust that you need to build with people before they're gonna open up their checkbook to you.
And so you build those levels of trust. I went, I actually, at one point in my career was working for a group of real estate syndicators. So I met this group of real estate syndicators that needed a real estate broker. They weren't real estate, they didn't have real estate. Like they needed a real estate broker.
They owned property in multiple states and they needed to have a real estate broker who understood real estate. So they became a client of mine. And I, so I could talk to them about why, why is there value in this what's gonna happen? And then I found out that they were buying specific areas. So really what was valuable to them was local information, local information about the opportunity, because if they had local information about the opportunity, they could then convince people to give 'em money, to buy real estate.
And I wanted them to be able to convince people to buy real estate, cuz I was a broker. You raised,
[00:49:16] Andreas Senie: you've got 3% or more. I was the guy
[00:49:18] Saul Klein: that was gonna go out and buy, help them find the properties for these people that were raising them. So now I wasn't raising money anymore. I found people who raised money that did this.
And so in this particular group, what I did this was right before the convention center was built in San Diego. And it's all about trust and confidence and knowledge and knowledge is power. I did a tour. I called it the San Diego tour. These people that I knew, these syndicators would invite their clients to go on a tour with.
and I had a van and I would put these people in a van and I had a route and I would drive down. And if you know San Diego, I'd go down to where the convention center is. And I would say, there's gonna be a convention center. It's gonna do this. It's gonna increase revenue. It's got all the, you know, all the stuff I got from the chamber of commerce, then I would go up for avenue and I'd go see thing that we build the convention center's gonna have for hotels.
We're gonna need more apartment buildings. And by the time I got 'em back to the office, they were sold. They knew that San Diego was a growing city, rents were gonna increase. And then they went back into the office and they write their checks to these guys. And then I would get to go out and buy the properties for them.
And then I had a management company and I would manage 'em so different ways to build your customers. So in that case, I helped people build their customers by knowing the market, knowing the product, the real estate. So I could help them be confident in it, not
[00:50:33] Andreas Senie: just knowing it, the nuances, the B, C and you know, eventually gets to a, B, C, and what eventually becomes Z, which I've said it before.
That's something that AI can't do today. It won't be able to do until everything gets, speaks, walks and talks, the same language. And even then, who knows, right? The nuances of what's happening, uh, there are, there are so many things that will re remain opaque. Um, you look at commercial now I've got a platform we aggregate commercially.
I check, I still check many sources for many things, but the most informative thing I do every month is I attend a local broker's luncheon. That's been happening for 30 years. And what people will say to each other because they know trust and have confidence in each other, in that room exceeds anything I can aggregate even at a hyper local local level, because of that network.
Your network is your network network
[00:51:33] Saul Klein: key networks that takes a network to beat a network, right? So it's network. So we used to have, you know, pre-internet I sold real estate pre-internet. And so we had, we called them exchangers meetings and exchangers title companies would give their offices. You could.
And so we had two or three of 'em around town, and then they would bring donuts and bagels and stuff. And there were pitch sessions. Now this was apartment buildings and commercial property. So it wasn't stuff in the MLS. mm-hmm . And so what happened the way it worked, at least when I sold was you'd have real estate brokers who had their own portfolio of clients.
And there are certain properties in San Diego that never, never come up for sale. Right. And the only had they get passed down from, in the family, or they would get sold from broker to broker. And the only way you could ever own one of these properties as if you knew the broker that knew the family that owned it.
And where did you run into these brokers at the exchangers meetings, and you would go to the exchangers meeting and you knew these people and you, and then you would do pitch sessions. And sometimes I can't remember what we called it, you know, haves and wants for pitches, but then you'd do a thing where you'd just deal making you'd do, I can't remember what we called, but you do a, uh, a deal sheet term sheet, you'd say, okay.
Cuz I, I had some clients that owned properties in Austin, Las Vegas and Arizona, and they were trying to sell 'em. It was in the eighties and they were trying to get rid of these things. So I would go to these. For these exchangers meetings at the time, I'd say I've got 10 houses in Las Vegas and $200,000, then the guy say, and, and I need to get rid of it.
And the guy say, I got 30 units on Broadway, they're all studios. Right. And right up a deal. Well, right up a deal. And then look, yeah. And then we'd take 'em back to the principles. We'd say here, we're kind of thinking about this. What do you think? And we'd come back and we put a deal together. And so you're right.
That luncheon, you go to those exchangers meetings. That was the name of the game. And it was about trust and confidence. It was about knowing people. Um, it's a relationship
[00:53:35] Andreas Senie: business. Absolutely. And, and did, and you talk about the deal making, right? So that is the name of the game. ICSC now the innovat innovating commerce service serving communities.
Uh, they do, they do large gatherings conferences every year. And. Two days deal making that is, that is what it's called. That is the sessions because the, the principles, the brokers all get together, they all meet. They sit there with those term sheets and they talk Turkey, so to speak and put deals together.
And some of these deals, uh, take a year, take two years, they show up at one meeting in may show up the next, the next year to close that same deal. But you know, we're talking large scale deals. The majority of real estate professionals, realtors, uh, you know, smaller, the deal, the quicker transact, I think is a fair statement for anyone, uh, less complexity.
There's still that network and growing it and, and belonging to it now being the biggest in the country as one of them, uh, primarily residential. Uh, they do house and house may not be the best word. I'll let you correct me here. So C C I M they, one of the oldest, most trusted educator in commercial S I O R office, uh, office brokers, office leasing and industrial.
I mean, there, there are these groups. We can join these networks and in time and time again, it proves out that being that network, knowing those people is what you need. This technology will just help us in the, uh, in between deal making. Let's let's say it that
[00:55:05] Saul Klein: way. Yeah. Well, and you mentioned AR you know, I'm an advocate of organized real estate, right?
So I'm an advocate for NR. They'll pay me for that, but I'm an advocate for NR. Matter of fact, I pay them, right. And I'm an advocate. I'm an advocate for state associations, and I'm an advocate for local associations. And I believe from the bottom of my heart, and I can give you example that you participate in these organizations and you're gonna make money and you're gonna meet people.
And when I, I was the president of my local board in 1993, and the executive officer, which is a staff position, Walter Kowski, who now runs the San Francisco association of realtors and MLS. I told Walt that when this is when I serve my year as president here, someday, I'm gonna write a book, how I turned a year of volunteering into a multimillion dollar business, how I turned a year of volunteering into a multimillion dollar business, what underlies all of that networking?
Sure. It was about networking. It was about creating the networks and what the, what participated at the local association level as present and allowed me to do it gave me visibility. It got me invites into all the brokers offices, and I utilized that to build, to build my network. Right. And so,
[00:56:13] Andreas Senie: um, it was your platform.
It was your stadium. It was the platform, it was the state,
[00:56:18] Saul Klein: the platform. And, and you mentioned, you know, S I R and C, C M to me is the best designation. It's you know, the people I know who are CMS are. Head and shoulders. Boy, they're just topnotch, uh, practitioners. So I, you know, I love the C cm certification.
So NA has certifications and designations, and they're just educational programs that result people call it alphabet soup. They say, nobody knows about it. I say, you know about it. And if you know about it, that's all that matters. And if you know about it, you can explain it to a consumer. Oh, consumers don't know if consumers don't care.
Yeah. They will. When I'm done talking to 'em about it,
[00:56:50] Andreas Senie: well, it's a level, it's an expectation of a certain level of confidence and competence. You have to have a certain level of competence to get these designations. Yeah. Especially the C CMS and the S IRS of the world. You have to impose the X amount of deals before they'll even consider talking to you.
Yeah. So it's, it's the original, this was CCM was before there was a real estate degrees. Right. So, and like, like NAI, NAR, your ePRO we'll get you online. We'll do that because people started to go, how do I get online? Um, And, and that's we created that course, right? Oh, you did. I did recall that. Uh, my wife was, uh, is, is an ePRO.
Uh, there you go. Yeah, the, so, but back to back to back to ice, why it matters and all of this, this, well, commercially this mushroom of, of from 80 vendors to 8,000 reach
[00:57:44] Saul Klein: program. Go ahead. Yeah. So mention, uh, ice again, because we're gonna come back and talk about ice a lot of different times, right? So one of the major recent acquisitions attempted acquisitions is black Knight and black Knight is an MLS vendor, but it's more than that, much more than that.
We think of it as an MLS vendor, right. And they own optimal blue and, uh, collateral analytics. Which people don't think about. So as ice is building this digitized loan process, re just redoing the entire mortgage market as they do that, they're buying the pieces. And one of the big pieces, they bought $13.1 billion.
They paid for it. And something like a multiple of 12, right. 12 times, you know, brokerage firms sell for multiples of a half. a half to one, right? Yeah. But, uh, ice and black Knight purchased something like 12, I think was the most huge why? Cause it fits into their big plan. Now it, the, the department of justice got it.
They think, oh no, too much control for ice. So they wanna look at this. And then interestingly enough, Fannie Mae came out against the acquisition. Now you gotta remember you got the primary market and the secondary market and ice is pretty much getting control of the primary market. The GSEs got control of the secondary market.
Now the GSEs are in conservatorship anyway. They really shouldn't even be in business. If you think about it, the us government's underwriting this. If you could bring private capital in to replace the GSEs, you probably really ought to do that. That's the big, now that's the big argument. That's the big conversation.
The big conversation is, do we really need GSEs? To what degree? Can't we have a housing finance industry finance by private capital, right? As opposed to the government and government guarantees. And the answer is if we could make risk more visible, if we could price risk properly, we could bring more capital into the marketplace for the finance.
And we probably wouldn't need the GSEs. Now the GSEs don't like that, even though they're in conservatorship, they don't like that idiot. So what happens is you got black, you have, um, ice with black Knight acquisition and you've got who's opposing it. Fannie because ice is getting control of the primary market.
Fannie's got control of the, the GSEs of the secondary market ice could actually jump in and take control of the right. Cause they got the technology. Right. And
[01:00:10] Andreas Senie: so realtor.com show that Zillow. Now, here you go again. If they've got the technology in the data, go ahead.
[01:00:16] Saul Klein: Who's again, now ISIS technology, I think advanced to realtor.com and Zillow and the rest of course, right?
Yeah. Um, and in a much better position than they are. So here. So here you got this, where there is this major acquisition you've been reading about, but it's not done yet. And the major obstacle at this point is Fannie Mae who actually is a competitor. Guys. Well,
[01:00:43] Andreas Senie: and, and I acquired Ellie Mae mortgage resignation, 2020.
So Fannie Ellie,
[01:00:49] Saul Klein: well, yeah, a little bit Ellie, a little bit different than Fannie and Fred, but yeah, they acquired Ellie and they acquired MERS and they acquired, um, there's a, uh, file. There's a number of, and we'll post that number. You know, there's five, they spent like, you know, 30 billion before the black Knight
[01:01:06] Andreas Senie: acquisition.
And, and for anyone who doesn't know black Knight sits, uh, I wouldn't say behind it, but it's provide basic foundational data for the MLS operate
[01:01:15] Saul Klein: tax data. That's one. Yeah. That's the thing.
[01:01:16] Andreas Senie: We know those that don't know, we
[01:01:20] Saul Klein: owns optimal. Let take a look at optimal blue and loan origination and all the different things that's in.
But yeah, we know black items and MLS provider as a vendor.
[01:01:28] Andreas Senie: And if you can't rate it, you can't grade it. And
[01:01:31] Saul Klein: then part of the ice concept is an ice. This really came from ice. If you can't trade what you can't grade. And so that's part of the problem. If you don't know what the neighborhood's like, where the loan is, what about the commercial?
What about the Amazon center? That's gonna go in down the street from the house. That's got the loan on it that you're going to buy. And so they can't grade and they're buying portfolios. And then if things start to go south, these portfolios lose value. And remember these portfolios are, they create mortgage backed securities and sell them to you and our pension funds.
Right? So there's a lot of concern about how this might work and how this works. And so everything's taking place. Ice is moving down that path and black night was a purchase and there's an obstacle in the way right now. And so that's the latest on that, right? There's there's pushback on that purchase.
Ice is probably thinking if that purchase is, you know, goes off the rail. What's our next. What do we do? And so you gotta be thinking that they're thinking that right. Really sophisticated
[01:02:34] Andreas Senie: people. Right? Well, and, uh, core logic I believe was, was had a, you have co you have core logic behind black Knight, not behind, but sitting shoulder to shoulder, you logic,
[01:02:45] Saul Klein: Blackstar, really mm-hmm, co ghoster you think about co-star what they're doing in the commercial space.
And so, and the residential
[01:02:54] Andreas Senie: space they're buying up, they're coming this way.
[01:02:56] Saul Klein: Yeah, they're exactly. So actually, if you could look at ice and co-star is kinda like in the same world, and the question is who's gonna come out on top of the real estate piece of this co-star or ice.
[01:03:09] Andreas Senie: There's an article worth reading.
there's an article worth writing in reading. I know who I'm
[01:03:14] Saul Klein: rooting for, but, um, We won't say it here, but anyway, that's, what's happened. It's gonna create competition in the marketplace, a lot of interesting things. And so a year from now, people might wake up in real estate and find out they don't have the same job that they thought they had.
[01:03:29] Andreas Senie: Well, they there's right. They're consultants. They've had the same job. They they're just led astray by leads and, and dial. And there
[01:03:36] Saul Klein: might not be enough consulting to go around for all the people. right. Uh,
[01:03:40] Andreas Senie: that is, that has been a, that's always the case. Yeah. That's always been a, um, a call to arms and yeah, many times over that's a
[01:03:49] Saul Klein: fair point.
Let me add a point, one more point here on, um, Trust and confidence and building networks and that, and this you're gonna see a lot more of this because this is another great point. Land use policy in the United States is changing land use policy in the United States is changing, is gonna change greatly there's money behind it.
There's policy behind it. You're not gonna recognize the things that take place in the next couple of years. So land use policy is changing dramatically. There's gonna be, that means if you're a real estate person, that means opportunity mm-hmm . And so if we know that there's funding and policy, that's gonna create opportunity.
And so I'll go back to my example of driving, uh, potential industrial in San Diego. So I would drive him through a part of town in San Diego called MidCity. Now MidCity was the part of San Diego between highway 94 and high highway 94 on the south. And, um, and, and downtown on the south highway eight on the north LA Mesa, which is a small city on the east and the ocean right on the west.
So that area kind of that's the MidCity. Area and part, part of that was, was blighted and rundown. And the city got money available from the federal government to hire consultants in 1981 and send the consultants out to all of the businesses in the Mid-City area and explain the revitalization process and explain block grant financing, and explain how and why the city was interested in improving the neighborhoods.
Because if you improve the neighborhoods, you increase the tax base, you increase revenues to the city. So the city was willing to invest money, to teach people about revitalization that would increase the tax base. And the city got the money from the federal government because the federal government wanted this to happen.
now we're in that kind of that same ballgame. Now, now I participated in it. I was a new real estate broker. It was 1981. I got my broker's license in 77. I bought the car wash. I bought some property up in the Mid-City area, had a little one bedroom house on it. We made that our real estate office and this consultant from the city comes in and explains to us what's going on.
And we're BR we're brand new. There's four of us brand new young, real estate brokers. We say, ah, we're behind it. We'll go to all the meetings. We'll go to the city council meetings. And we started to participate in that and sure enough, over the years, the revitalization took place. And that part, that part of the city's completely turned around a house in the north park area that you might have been able to buy for $40,000 back then, or $30,000 is $600,000.
And it's the, it's the place, right. They changed the whole look and feel and they brought in funding, the city made funding available, but it took private, you know, private enterprise, the people who owned the businesses had to say, yes, we wanna get involved. Yeah. We want those trees in here. Yeah. We want new bus stops.
Where's the money come from? Oh, the money's there. Yeah. We want the pink, the signs new. Yeah. We want new sidewalks. And, and so then when I would give my tour, I would drive up and I would say, notice the new sidewalks that came right. And the city's gonna spend more money here. And it was all part of why I knew my neighborhood and I was able to transfer that trust and confidence through knowledge so that people were willing to open their checkbooks and invest.
[01:07:06] Andreas Senie: You're the original aggregator as at least in my
[01:07:08] Saul Klein: neighborhood.
[01:07:10] Andreas Senie: well to your market. And that's really the point of it all. Yeah. Well it's, I love it. Uh, do, and you don't drive the tour anymore. You use Google earth and you only buy and sell for yourself, but it'd be interesting. It's a, it's a shame. You didn't have a video camera sitting on your dashboard then with the, with the recording then
[01:07:29] Saul Klein: for now, you know what you're absolutely right.
But, and what I was teaching realtors, when the digital camera first came out was take your digital camera with you, wherever you go and take pictures of everything. Memory's cheap. Take pictures of everything because 10 years, 20 years, 30 years will be here before you know it. And you'll be the only realtor in town.
That's got pictures of that building before the
[01:07:46] Andreas Senie: remodels. Yeah. Well, and, and, and to your point, redevelopment as these, um, mixed use developments, re revitalization progress, pro programs, government funds, I mean, they can make or break a inner city or turn around a community. Zoning was there to plant and zoning is changing with change means opportunity.
Now we Z brokers are at the forefront. Go ahead.
[01:08:12] Saul Klein: So a lot of people say zoning is. Zoning has failed for a number of reasons. Zoning's got a real dark history. If you look at it. So zoning has failed. And the states in this case, in my state, California, is usurping local authority around zoning and what we've got.
And because we've had this zoning and local control, but look at all the problems we've got housing affordability. People can't afford to buy houses. The zoning isn't working because people can't afford to buy things. And so in our state, California, the legislature has said pretty much no more single families.
You can have a lot zone for single family, but you can build two units on it or you can build. So these are things, people ought research. They ought research SB, Senate bill nine and 10 in California, SB nine and 10. And they're going to be in six major cities in California in September, uh, fellow. I know ed Pinto who works for American enterprise Institute, who testifies before Congress every year about housing.
He's gonna be traveling the state of California, talking to people about. SB nine and Ken, which is gonna increase density very important for realtors and for people interested in real estate to know what that means. And, uh, ed Pinto's coming to town, he's coming to San Francisco, Sacramento, San Diego, and three other places.
I can't remember off the top of my head, but if you're a California realtor, you need to go to one of these events and listen to what ed has to say, because it's gonna give you an advantage because abs SB nine and 10 are gonna be the talk of the town, whether you like 'em or not, you need to know about it, right?
[01:09:43] Andreas Senie: There's there's huge money. And, and there are develop developers dedicated to coming in and overriding local zoning laws for affordable housing that municipality didn't keep up, they show up and they build these apartment buildings with affordable as a, a portion. Why? Because as you said, housing is necessary.
Now I can't, or wouldn't blame zone, just zoning on, on. Affordability the affordability crisis there . But outside of that, you know, spot on you and I could talk for hours on all of this and go every which way
[01:10:18] Saul Klein: we have got a lot of paths. We can walk down
[01:10:20] Andreas Senie: for sure. The, I want to, uh, 1242 here. We've been on for an hour and 42 minutes.
So this our longest conversation one on one. What is the biggest takeaway outside of go to your local zoning meetings? Hell you don't even have to go. I think they're on zoom now. Check the zoning minutes and federal funds. You listed two local to your state. Is there anywhere else people should be tuning in, uh, outside of the data advocate and that is where they should be tuning in.
[01:10:51] Saul Klein: we're trying to keep up with all email@example.com. So if you go there, we're gonna do our continue to do our best to, to write about this. Yes, I would go to. A E I, this is one of the best resources. Matter of fact, they have a toolkit and it's an amazing toolkit. What if you bought this property and you made these changes and what would happen, and I'll send you the link address, it's amazing, right?
Because you did, but really go ahead important to start to look at smart growth, smart planning, using the data to help you make decisions. So data to drive decisions from data to insight idea. So if you go to the housing center of AEI, that's a great place to go. Um, American enterprise institute.org.
Another one is up for growth up for growth.org, where there we're 3.5 million units short. And everybody says we're 3.5 million units short, but nobody's put a plan together to do anything about it, but this nonprofit has. And so I think that's a valuable place to go into the urban Institute is another, there's plenty of good resource available to people to start to learn this.
And, um, It's I think every day in your plan, as you do, you're planning the solitude every day. Put, give a little time to learning a little bit about the, the growth opportunities in your area. Go to the AEI site. I wrote 'em down. Another one is foot traffic ahead.org foot. Traffic ahead. Another thing that people are talking about, you know, this is more density, increasing density to increase walkability.
Increasing walkability means less driving, less driving means a more clean environment. There's all these reasons, right? And then people say, I don't really wanna walk. And then they talk to the millennials and they say, I really like this idea, right? So now we're back into know your audience. And in real estate development, you mentioned mixed use mixed use, been around since they built, started building buildings.
back in the old days, you, you know, you go to old parts of town. I, I had an aunt that owned a owned a, like a little grocery store and they lived upstairs. This was very common. right. Mixed use kind of. And, and now a lot of these projects to get 'em used, right?
[01:12:58] Andreas Senie: Well, for the town to sign on, you've gotta go next juice to for cuz the end of the day, you've gotta, the town has to approve the neighbors have to approve unless it's being superseded by the government.
[01:13:10] Saul Klein: If that, and now you hit another point coming down the line. That's this whole idea of NIMBY, NIMBY, NIMBY are destructive. Not in my backyard. I mean, this is the craziest thing I ever heard of. It probably started in California, but you know, so I'm a real estate guy. And when I buy real estate over the years, when I would buy real estate, I would buy it based on what it was zoned and what it was zoned would tell me what I could do with it.
And what I could do with it was gonna tell me probably how much money I could make. And so I bought real estate and I held it. That was my thing I would buy and hold. It would be if I bought real estate that build something on it, then held it for 30 years and then hell the neighbors tell me they didn't want it.
that's baloney. So having the community, being able to have input on what you build on your property, that's baloney and that's been going on and it's outrageous. And that's why we don't have enough housing because nobody wants the housing built in their backyard. And so NIMBY nimbyism well, thank goodness.
We've got a new movement coming and that's, NIMBY's the yes. In my backyard people and the yes, in my backyard, people, they want this kind of thing. Right. And so, but the, the NIMBY, the, the, the ability for the people that live in the area to supersede the zoning to me is a sin. And I understand concerned neighbors and all of that I'm one, right?
And I own real estate live in a neighborhood at the same time. If it's zoned for, if the government said this is the structure, then to allow people to invest based on that. And then to let the people who live there override it at some point in the future, that's just not fair.
[01:14:45] Andreas Senie: Yeah, no, it's not even anytime zoning by right.
Is, can be overruled means the plan is out the window. That's the, the bath and the bathwater gone for the owner, the investor, the developer, cuz as you said, point it out. If you can't rate it and you can't understand what it's worth and what it will be worth because there's no regulation around it.
That's basically what that is taking away. That regulation, that ability to, to plan for.
[01:15:13] Saul Klein: So we'll see you can't create, create which you can't create. So I'll give you another story. So there's a big lot here in San Diego. That's been controversial for years because the neighbors don't wanna, so people wanna build apartment buildings there and people have tried to build different things there and they won't let 'em build anything.
And so recently they got a church got approved. Now I'm thinking a church is great because it's only busy on Sunday. Churches don't pay taxes. And so the neighbors ought to love this, right? So the neighbors, Nope. They don't want a church. So they fight that. Now. Guess what? They got homeless camp. right, right.
I got all these homeless and now they're complaining about the owner. the owners should do something about
[01:15:52] Andreas Senie: this, right. And then while he's been trying to do something and he is been shut down time and time again, and, and you'll, and that story's nationwide, you owners getting stuck, unable to move that property.
And although real estate is generational wealth, you, it
[01:16:08] Saul Klein: still taxes obviously paid. It's not, it's not tax.
[01:16:14] Andreas Senie: Shelton's
[01:16:14] Saul Klein: a great example.
[01:16:17] Andreas Senie: Everywhere. Anywhere there could be something. There is some, we are supported by those office buildings, those retail shopping centers, this, this mix, um, unlike other towns where the town wouldn't have it, the people wouldn't have it.
So they pay the brunt of those taxes.
[01:16:35] Saul Klein: Okay. This is interesting in San Francisco, the San Francisco, uh, trying to pass an a. A vacancy tax, a vacancy tax. Wow. So, you know, you can't get Mo it's hard to move tenants out of buildings in San Francisco. You gotta give them all kinds of stuff. It's and if you get a vacancy and you're a mom and pop, you might not wanna put anybody else in there cuz it costs you 40 grand to get 'em out.
And so San Francisco, they don't the city doesn't like this. So they're actually trying to pass a vacancy tax. So if you're, if your building's vacant, they're gonna tax you on it. Now part of the group they're going after for the vacancy tax are all the in uncompleted residential property. So if somebody builds a Highrise building in downtown San Francisco ands got 300 vacancies, cuz it's not done yet vacancy tax X.
[01:17:23] Andreas Senie: Yeah. And, and the model to build that and own it and develop, it would not include that whatever percentage, I mean that could kill the deal in and of itself or at least kill a huge amount of profit. Uh, and many of these projects are built in stages because of cash flow. Now you want to take that away with the vacancy tax or.
Change the entire way it's approved. You'd have to approve it in stages. Start separating it out. Wow. Uh, always a lot to talk about with you Saul and our audience. Thank you for tuning in as a special, thank you. Speaking of networking, CRE tech, New York, 2022 to our listeners exclusively use Creo 20 N Y for 20% off that sir tech tech, New York.
And let's not forget, download or show anywhere. You get your audio, subscribe to the YouTube channel to learn more from Saul, Saul. I believe you also have a YouTube channel, the data advocate, so you can find Saul direct there as well and do share rate and review us. So I wanna invite you back cause I want to continue this conversation.
We may even break this episode into two episodes at this point. Uh, you're up for that. I'm sure. And you're joining us next month.
[01:18:36] Saul Klein: Anytime you let me know, I'm usually usually around and there's always new things to talk about, right?
[01:18:42] Andreas Senie: Oh, there's, there's always shifts in things that matter. And if for those paying attention, fortunes are made and lost during cyclical change and we are running
[01:18:51] Saul Klein: if you're in California, even if you're not go to the, the a ei.org, the housing center for American enterprise Institute, and look up those presentations by ed Pinto and Tobias Peter on, on SB nine and 10.
And, uh, they're gonna be real interesting. It's your future if you live in California, so you wanna pay attention to it. And there's nobody better to talk about this than, than, uh, ed and Tobi. So go to American Institute, look at that. And, uh, I guarantee it'll provide you with information you're gonna use with your clients
[01:19:26] Andreas Senie: and the simple math here for those, uh, going well.
Why double density, double the building, double the income, double the value. That's a simple statement and saw something. We haven't done you and I in forever, uh, 30 episodes. What book are you recommending these days? Ah, well, you don't have it ready? Do you? So I got you. I don't
[01:19:48] Saul Klein: actually just, I just bought a new one and I have to send it to you and cause I haven't read it yet.
So I get to read it before I give it to you.
[01:19:55] Andreas Senie: Fair enough. Uh, to our audience. Thank you. Looking forward to seeing you first, Thursday, every month, 6:00 PM. Eastern for the entire round table. Saul and I will be there continuing our discussion on all things real estate, along with our other hosts. And soon to be announced, the follow up to this conversation, more sector interviews, including, uh, Private capitals talking about securities, Keith, lamp's gonna be joining us for a sector interview.
Stay tuned, come back. Search for us. Find usre AI. I'm Andrea saline. Thank you everyone.