This is one of those "outlandish and inconceivable" notions that occurred to me as I was scanning a few news sites this weekend. Hey, if Jim Cramer can speak in generalities and sound bites on CNBC and induce the Fed to drop rates, then here's my two cents as I see a couple of dots that could be connected some time soon.
Question: If Jason McCarthy, who is the Development Manager of Real Estate for Google (Google Base), were to make a Redfin-type deal with Countrywide in California, what would be the impact?
Scenario: Google Base is attempting to deliver relevant real estate content to the consumer in a format most potential buyers are familiar with and aiming to be the prominent provider of property information aggregation; a new MLS system, if you will, with inventory provided by the agents and owners themselves at no charge.
Redfin is a new brokerage concept that hires in-house (employee) agents to oversee the listing transaction of an owners' home for a one (1%) percent fee, which effectively saves the owner between 2% and 5% of the purchase price in terms of a sales commission represented through traditional real estate brokerage. Redfin is VC funded and attempting to turn a profit through volume, which means that the jury is still out as to whether this type of brokerage business model will be profitable in the long run.
Countrywide is the largest lender in the country and quickly becoming the largest residential land owner in California. Using the chart, the amount of REO properties owned by Countrywide as of Sept. 1, 2007 is $995M in aggregate value, which is most likely going to grow month-to-month another 20% in October.
In the 1990's, the government established a quasi-public institution (Resolution Trust Corporation) to inventory, rehab and sell those REO properties taken back as a result of the Savings and Loan bailout. This time around, is that entity going to be the likes of a Google or Redfin. Is it inconceivable that Basewide or RedfinRTC would be established at a .5% listing commission rate on a Countrywide portfolio that is going to exceed $1B by the end of the year (if not the end of this month)?
I remember those days in the late '80s and early '90s in Houston when entire neighborhoods of 4,000 SF homes were abandoned, with the keys still stuck in the front doors for the RTC officials to pick up when they had time. But, this time around with the Google Van roaming the neighborhoods creating the little "Street View" guy for our viewing pleasure on Google Maps, it might not be that must of a stretch to contract with Google Base to inventory the entire Countrywide portfolio for a transaction fee and reduced listing commission.
Once Google Basewide has its California Broker's license, such a scenario would put Google on the Real Estate map in a hurry. Such a move would certainly get NAR's attention in Chicago (as well as CAR's in Sacramento). The 800 lbs. real estate gorilla (NAR, that is) will be forced to wake up and confront a growing threat to this industry; technology and its endless bank accounts.