It’s easy to look back & think “how did they FAIL to see that coming”?
As we moved into the information age, so many intermediary business sectors seemed to be blindsided when the Interwebs made them non-essential. A couple examples include travel agencies and stock brokerages. Gadgets also are disruptive. For example, how might Kindle impact book sellers?
Are realtors/agents failing to see it coming?
Right about now, Redfin may come to mind. But, is Redfin truly a disruptive technology? Or do they replicate the same processes virtually? Disruptive technologies change/streamline processes. Certain elements of process, now automated by technology, are made obsolete. Typically it’s the middlemen that are jettisoned from the process.
The internet continues evolve, it makes sense that we will see transformation and change that offers great opportunities to buyers and sellers of homes, but also great risk to agents.
In defense of agents
Agents provide great value. Agents provide guidance in the complicated legal aspects of the transaction: contract preparation, negotiation, etc. to avoid pitfalls on both the buy and sell sides. (Yes, that’s watered down)
Take off your agent hat
Imagine knowing what you know now, travelling back to 1990 and chatting with an attorney. You talk of a day not too far in the future where people can form a corporation, get a divorce, prepare a will and more without meeting attorney and often for about $500. Wouldn’t he/she cling to the argument that their knowledge of the transaction can’t possibly be reduced in value? That it’s not wise to neglect their counsel?
Ah yes … but you counter “But, Mr(s). Esquire, over the next two decades, information will be indexed, searchable and commoditized. You will no longer be able to justify your current fees for certain services”.
In the transaction examples listed above, an attorney is involved, but acts more as a review and filing service. Could that be the future role of agents?
What’s that leave for agents?
Local expertise? That begs the question: Will an agent, whose value could be marginalized by future disruptive technologies, offer enough value in the process to warrant 3%?
Neighborhood docents?
Again, take off your agent hat. This time, put on your futurist hat. By compiling data, it’s safe to assume there will be technologies that offer real estate indices than marginalize the value of neighborhood expertise. Such indices cold be derived via an algorithm, and be used for pricing, and future values by taking into account not only empirical data, but also a weighted version of the subtleties and attributes of a neighborhood. The possibilities are endless.
Tell us below: What not-yet-invented technology do you see as the biggest threat?
The times are changing
We are in a time of transformation that may be regarded by future generations as one of the most significant periods in history.
How agents respond over the next decade will either bring praise for their acuity or have them wondering why they failed to grasp the evolutionary necessities so obvious to them, like the travel agents and stock brokers before them.
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Consumerism, Geo-mapping columnist
Marketing columnist
This assumes, at some fundamental level, that people will want to interact with other people >as little as possible. I disagree with that assumption. Yes, there will always be the DIYers (FSBOs have been around for how long?) and the researcher/engineer types that are really much more comfortable with a machine and distrusting of fellow humans. There will also be tons of people who want to hear an authoritative voice from a human being consulting with them about important life issues.
WebMD can help sift through symptoms and medical side effects of drugs. My guess is people will still want to see physicians. I, personally, work with a stock broker cum financial adviser because I want to be able to sit down and explain my goals and aspirations and elicit some empathy and understanding. Sure, eTrade and Sharebuilder are pennies compared to my Smith Barney guy but, to me, he’s worth it.
Technology will continue to evolve and more and more information will become available to consumers of every type of product and service. Real Estate professionals that do not embrace technology will be replaced by Real Estate professionals that do not. In the end, people still need people (is there a song in there somewhere?) and providing that human interaction is what we’re all about.
Damn. I hate it when my proofreading sucks.
Real Estate professionals that do not embrace technology will be replaced by Real Estate professionals that do. [period]
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Always and interesting exercise – ponder the future and what does this mean to that as it relates to this and me and us and we.
Also, it’s a great metaphor, but it’s a paradox, you can’t see what’s coming because you can’t see what’s coming.
Thanks.
Great post Brandie! The future of traditional agents is uncertain. I can say with more certainty that the future of “listing” agents is more clear. As the Internet evolves, consumers are becoming more aware of the value (or lack there of) of the Listing agent. This is why the flat fee model is flourishing.
As for your statement “Agents provide guidance in the complicated legal aspects of the transaction”, It’s clear agents are not attorneys, so I would never use this idea to defend the “value” of agents.
Where have all the travel agents gone? Book it online!
If Realtor.com or Trulia.com ever open their doors to allow sellers to post their homes for sale direct, we are all done, including the flat fee brokers!
Interesting you chose Redfin …
When it started, the idea was for buyers to do their own homework, Redfin would help shuffle the paperwork and they’d give a rebate at the end. Jump forward and Redfin looks more like a traditional brokerage set up … agents tour homes with buyers, for instance, because that’s what buyers wanted. The two differentiating factors are a slick website and a rebate.
And so when you ask the question of whether Redfin really changed the real estate industry or did the real estate industry change Redfin, the answer’s the latter.
Put another way, wake me when the evolution is over. We’ve talked about it for years and the nuts and bolts of this business – knowledge, customer service, etc. – still haven’t changed.
Future technology? It will need to something like a holodeck (google it if you don’t know) or a in-home-simulator, like where they train pilots.
Actually, I feel that my clients want to touch and smell the place… so maybe an afternoon when the door is left open so they can walk through. We can call it, Open House.
Maybe using existing technology like a common lockbox system so we can easily show every listing… what are those agents thinking?
Okay, you want the future? Watch for the Interweb 5.0
Brandi –
There are more than enough business models in real estate to accomodate the knowledge of the consumer. In my area, I don’t see the flat fee model flourishing; the opposite is true.
To deny the lack of knowledge we bring to the table is to assume the average client knows everything they neeed to know about the real estate process and transaction.
I find it is not the case. My most recent clients have many questions and need guidance ( these are not first time home buyers). The question will become, not do we offer value, but what the client is willing to pay for the service and knowledge. I maintain there is room for all business models.
This is just more of the same blather. On the technical end you would need more than a great web site, more than even the holodeck that Doug suggests. What you need is the transporter system a la Star Trek. “Beam me into the house for sale on Maple, Scotty!” Buyers need to actually SEE the house – in the flesh. Beyond that, local knowledge is key. There is no program that can calculate differences between individual homes. Real estate is a product like no other in that no two properties are EVER exactly the same. Finding a computer model that will recognize the minute differences between individual properties is a fantasy. But taking buyers from home to home and estimating a home’s worth is only a small part of what agents do.
Personally, I think that it is just driving the venture capitalists and web developers CRAZY that they haven’t been able to crack the real estate egg open into a gold rush. They think they can smell the money and yet they can’t crack through and its just driving the nuts. All they have to do is create a “system” to reduce cost. Soooooo easy – NOT. So they create all sorts of conspiracy theories of real estate cartels and the like. I’m no fan of NAR but it lacks the power to stop a process like this if it were doable. The public wants it too much and the DOJ is NOT on NAR’s side.
Many models exist, but they haven’t taken off – if anything – commission rates are creeping back as a result of the downturn. Why? Because most of these models don’t “get” what agents and brokers actually do and they fail to recognize that real estate is a transaction like no other. Homes aren’t ipods that have a fixed cost. Home buyers hem and haw and hesitate far longer than than for any other type of purchase . On the other side, sellers may toy with selling for years before they actually list. Getting to a meeting of the minds on issues such as price…can be very challenging and getting to the closing table can be fraught with obstacles. The result is a failure rate that is higher than for other purchases and a time-line that is far longer. What other model has a marketing plan that can extend for a year or more for one sale? Nurturing a single client and incubating leads necessitate building systems that will cultivate that person for months or even YEARS. The transaction itself is very complex and has many stages and is time consuming in the extreme. Each stage represents a potential abyss into which the deal can fall into. So from initial contact to closing, this is high-touch, VERY time consuming and expensive process with a high rate of “failure.” For these reasons, higher margins for profit are required or the cost of doing business will quickly overwhelm any profit gained from the transaction.
The crazy skinny margins that some of these models propose prevent them from being viable. Also, the assumption that all agents in all areas are working for a lofty 3% are not really valid. Many rebaters are competing with full-service agents that have already sliced commissions to the bone.
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Hi Ken M – thanks for your thoughts. I think we need to agree to disagree on one point you made: that it’s an assumption “that people will want to interact with other people >as little as possible.” Consider the Millennials that have grown up with disruptive technologies as the norm. They’re likely to have always sought advice online. And, they’ve always had access to online services such as bill pay, travel booking, stock buying/selling and tax prep. Given that, interaction with real live people has never been a necessity to them, even though at one time people were an absolute necessity in the transaction.
Hiya Ken – always great to hear from you.
Hi Fred – thanks for the props! Good point on the flat fee brokers.
Hi Jonathan – Don’t fall asleep … I don’t think the evolution of any business will ever be over. And I agree, the nuts and bolts haven’t changed, but that doesn’t mean the role of the agent may not as technology evolves.
Hi Paula – I agree. There is room and necessity.
Hi Ruthmarie – wow. Clearly your passionate on this, and I appreciate your thoughts. With the exception of my thoughts being referred to as “blather”. It sounds like what you’re saying is the role of the agent can’t change because an agent offers value that can not be duplicated by technology, nor will technology ever be able to demystify the transaction. I guess we will just need to check back in 5 – 10 years and see how it looks.
On two of your points, I respectfully disagree based on first-hand knowledge:
1. A program DOES exist that can calculate the differences between individual homes, plus it takes into account other area factors/economics/demographics (micro and macro). It will be introduced on a broad scale this year. The output isn’t just value, but potential.
2. VC’s are currently running fast from RE tech investments as they haven’t realized any upside from their current portfolio companies.
I’m not sure if you guys are interested in how to better understand how to interact with “Milllenials” and how they want to interact with people over 40, but there is an excellent book on the subject avail at Amazon that I read, “From Boomers to Bloggers…” by Misti Burmeister. Interesting observation.
Is it ok to put in a link? http://www.amazon.com/Boomers-.....0980220904
I am 46 and deal with a lot of 28ish folks… and they want all experiences.
They expect technology, want to get into homes, and be treated like adults.
-doug
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I have a few points to add:
1. Regarding generational interaction, the digital natives (like me) that grew up with computer technologies still research online first, not in order to question an agent but for affirmation of their research when an agent agrees, for security that their thoughts are in line with reality and for saving time. Often, GenYers will have a list, want to see 3 homes and will pick one quickly because they’re armed with information. They still want someone to walk them through and affirm their decision and overwhelmingly here in Austin, they’re really hiring someone to walk them through negotiations, not to find a home. As for listings, many of them have bought an address-specific url, blogged about it and put interviews with their agents on YouTube to have their friends weigh in. None of this eliminates the agent, it just makes the process public.
2. To answer your question about what technology could threaten agents: I think that standardization of forms nation-wide could possibly threaten the agent’s role as their value is not just in local expertise but in contract negotiation. IF all real estate transactions were standardized by law (which is excruciatingly unlikely), a company like Legal Zoom could easily supplant the industry. Thoughts?
With all respect Brandi – A program can’t SMELL a house…get views from every window….check the garbage in the neighbors back yard and whether the grass is mowed, be sure that the bathroom updates include tumbled marble (or is it just ceramic tile??) be sure that the electric is totally updated and that there is no hint of water in the basement. Certainly it can’t measure how well the home owner took care of the property or the impact of the broken dishwasher and dirty dishes in the sink.
The fact that you are touting a program that measures demographics on a macro and micro level but doesn’t take into account all of the nitty gritty above -shows just how little you understand the consumer in this matter.
I came into this field from a science background thinking I’d leave everyone in the dust using the technology. To me, the traditional models were stodgy and outdated. And on the brokerage level, I’d agree that many models are outdated. But the feeling that I had that there was plenty of fat in the system – lots of room to offer nice discounts…didn’t hold up under close scrutiny. Agents weren’t just being “greedy.” Like you, I grossly underestimated the difficulties involved in the sales process. I wanted it neat and tidy. Real estate is messy. You can try to quantify the variables all you want – the nature of the beast does not lend itself to rational algorithms, websites and computer programs. Those who try to predict the demise of real estate agents and their commissions need to do what I did: get a license and LEARN.
Learn what it means to deal with the public who are NOT rational about the value of their homes or about how much a home they want to buy should cost.
Learn what it takes to take get two sides that are miles apart and bring them to an agreement – and keep them together long enough for the transaction to close.
Learn how a petty dispute over a $500 light fixture can put a $500k transaction in jeopardy.
Learn how homes on the same block can vary tremendously in value depending on how they were kept and updated and even the impact of a messy neighbor on property values.
Learn the true costs of fronting money marketing a listing for months on end only to have no transaction take place.
Learn how long it takes to cultivate a real estate lead into a client and then an actual transaction.
It’s also interesting that you just fall back to your computer “models” and don’t address a lot of the issues I brought up. More substance on the messy issues that aren’t going away any time soon might help legitimize your point of view. But you don’t go there.
Also, I have to say that when working with buyers, finding the home is the “easy part.” Most of what I’m worth is tied to negotiation and holding the transaction together – and in the event of a listing – pricing the home appropriately as well as positioning it for sale and marketing it to attract appropriate buyers. You pretty much gloss over those issues as insignificant.
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Wow, Ruthmarie, so you know, your comments come across to me as personal and somewhat of an attack. Not a problem, I’m always up for a stimulating conversation, but not a catfight. However, if you prefer the latter, I invite you to contact me at Brandie@marketingTBD.com or 510.599.2785. That said …
My personal practice is to form opinions based on facts I can gather. Let me point out a few things I believe you assumed, and therefore got wrong, based on your comments:
1. You made an assumption on the technology I mentioned.
While a program can not “smell”, all the things you mentioned are just points of data. Other ways of compiling/slicing/aggregating data at the property level DO exist. i.e. MLS listings, and agents comments/notes, which include the details of tumbled marble vs. ceramic tile, updates to electrical, the chicken farm next door, condition of property, etc. And, once they are created, they are indexed and forever associated with the street address and parcel number.
Another fact you didn’t have prior to your comment is the team outlining the program had nearly a century of real estate experience between us. Given that, of course intangibles were a huge consideration! We’re not obtuse.
I’m not sure where “I didn’t go” with regard to any “messy issues”, but again, I’m happy to do so if you need me to. I simply ask you clarify what you need me to address.
2. Next, I doubt you have a complete understanding
of my knowledge of the consumer, nor my knowledge in real estate (but in all fairness, how could you). The points you suggest I learn: dealing with irrational buyers/sellers, negotiation, variations in value, marketing costs, the intricacies of a transaction – I, in fact, know quite well having observed 2 parents in the business (before it was a boon). My father (now a retired broker) survived nearly 40 years in the business, and my mother was an agent for approx. 26 years. That said, I NEVER underestimate the difficulties involved in the process. It was exactly those difficulties that led to a lack of “COE” written on my father’s desktop calendar during tough times. I learned at a very young age when COE isn’t written on the calendar for one, two or three months at a time, it’s bad. And, during my 18 years at my childhood home, there was more than one down-cycle.
In addition, I am a real estate investor and have built a successful carrier within and around the industry for nearly two decades. I get it. I’ve lived it.
The point of the post was to opine on the future/evolving role of agents (I’ve watched it change substantially over the last 40 years) … and what it could morph into based on unforeseen emerging technologies – NOT to diminish nor disrespect agents in general.
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Lani – Great thoughts, as usual. Thanks!
I keyed in on “None of this eliminates the agent, it just makes the process public.” Interesting, since we are becoming firmly engrained in a time where crowd-sourcing opinions on everything is the norm…. It will be interesting to see how that evolves. For example, if agents will be pro or con user opinions on listings/neighborhood. To your point on national standardization – yeah, I don’t see that coming anytime soon. Too many chefs in the kitchen (and a few short order cooks as well)
Interesting discussion!
To be clear, Redfin doesn’t think that technology will eliminate agents. Heck the number of agents associated with Redfin is growing at a rapid clip!
And as Jonathan points out we have adapted over the years to offer a blended service. Something we think that makes us different though is that we recognize when home buyers want to use the Internet (searching for homes) and when they want to talk to an agent (for instance to see homes or for guidance with the offer and closing process).
However, I still think that we are disruptive. What I think makes us disruptive is our level of transparency. On our website we show you all the homes for sale, that we can, with as much information about those homes, without requiring any sort of registration or buyers agency agreement. I think we’re also very transparent about the quality of our agents and customer experience by surveying every Redfin home buyer and seller regardless of whether their offer/listing is successful and then posting those reviews online.
We’re also disruptive in the sense that our agents aren’t paid on commission but instead earn a salary and earn bonuses based on those customer surveys. This is much different than most real estate companies. We also have structured our real estate team differently in order to make it more efficient. That is we have agents who specialize in showing homes while others specialize in negotiations and a third specialize in co-ordinating the transaction giving us a greater level of efficiency that lets us pass on a refund to the customer.
What does the future hold? I think its greater efficiency through specialization.