This past year has fast tracked an almost full digital experience for the purchase of real estate. Just like every other commodity, technology companies are looking to get in from the start and are, for the most part, streamlining the process adding benefit to both the consumer and the professional. … But is this all that is happening in the technology takeover?
We know that market disruptions are the norm. They usually start slow, then dominate. Think of the way we shop, travel, invest, watch tv and movies. A year of “pandemic living” has driven us even more to an online universe. I for one found myself living more online for the convenience and safety of my family and community.
Over the last fifteen years, real estate has progressively seen a larger online footprint, and while we knew it was coming, this past year has expedited the explosion of many new technologies in existing companies, and many start ups fueled by venture capital looking to push the envelope to make the buying and selling of real estate a full online “one stop shop” experience.
Certainly, starting the home buying and selling process online has tremendous value to the consumer and professional – expanding options and saving time. The consumer can scope out competition, read agent bios, and begin the search for their next dream space by clicking through endless photos, floorplans, and virtual walk throughs – gaining access to all (and extra) information. Technology working at its finest – as a tool. I wholeheartedly believe that knowledge is power (I mean, I chose to go to school for nine extra years), but more information is not always meaningful information.
The brokerage used to be the gatekeeper of information – that role has been replaced over the last decade by search engine sites and easy mobile apps offered by Realtor.com, Trulia, Zillow, and hundreds more websites where the consumer has all data at their fingertips. Brokerages and their agents morphed into the “trusted advisor” role, guiding consumers through the extra data, navigating neighborhoods, and linking them with home inspectors, insurance brokers, mortgage
lenders and title companies.
That “trusted advisor” role is being challenged as we see the large legacy brokerages fight to stay relevant and create their own technologies to compete with the tech companies now dominating the space. The brokerage name and size are no longer equating necessarily to market share and notoriety as they have in the past and their stock value is shrinking exponentially. Because let’s face it, if Ryan Serhant can sell the most expensive home in Florida from New York, and apartments are being rented through TikTok, you do not have to list your million-dollar beach
house with Christies International in order to attract the right buyer for your client. Any brokerage, any agent can do it with the right tools, connections, and know-how.
As these large, older model franchise brokerages fight to stay relevant and keep up they see their value dip. Almost all of the top ten real estate brokerages in this country are publicly traded. What does this matter? Well, if traditional brokerages are losing relevancy and name recognition value, their market share decreases. When that happens, as it has dramatically over the past couple years, those margins continue to thin. These downward trends always come back to the consumer. As the traditional models fade, technology companies are able to take more seats at the table.
We have seen Zillow and other technology companies step into the brokerage role as they have morphed from search engine to listing platform, to I-Buyer. Zillow and Redfin want to be the one stop shop for the consumer. They sell the home, refer the consumer to their housing stock to purchase, and want to eventually refer within to their mortgage divisions and title companies. Its an attempt at total market domination
Practically, I-Buyer models require a huge amount of capital upfront, then capital to renovate to just re-sell with razor thin margins. With little room for profit in this model, the companies would have no choice but to constantly be pushing to make cut-backs to improve that gain and reduce loss. In essence, big companies with no connection to the community want to charge a higher fee than average to “flip” your home so you are not inconvenienced with some extra paperwork transfer, time or cooperation with other consumers? I am not seeing the value add here, but the market is. Zillow is currently trading at a high of $142.69 as of today while Realogy (C21, Coldwell Banker, Better Homes, ERA, Sotheby’s, Corcoran) stock is trading at a very low $16.59. It seems it is time to either keep up, re-brand, switch models, or expire. But is that the only option? Must brokerages be like the tech company to compete for consumer business? Is this model really what consumers crave, or is there another option?
For your most important purchase do you really want someone in the background pushing for cuts in service just to increase their own companies’ profits and maintain its value in the market? I’d say that is a resounding, No. In my experience, buyers and sellers like to have someone in their corner who can help them make what may be the largest and most important financial decision of their lives. Someone who has a recognizable identity and is embedded in the community. People want to take time, to touch, feel, hold, sign in ink. They want the Mom & Pop feel of the so-called “Indie” brokerage.
For most, the purchase and sale of real estate is a huge deal. Not only is it usually one of the biggest financial commitments and investments someone makes in their life, it tends to be intertwined with hopes of all that life brings: relationships, families, memories, goals. Unlike a bag of groceries, a vacation, the next Netflix binge, or even a new car, there is no real way to pull the emotion out of the whole transaction.
In the long term, markets always seek efficiency and tend to weed out the intermediaries, streamlining the process. There is certainly a push to weed out the legacy brokerages and even downplay the importance of the individual agent, but, my friends, you cannot commoditize the
value add of the individual agent in the process or the local accountability of your area’s Indie brokerage. With the right technologies and marketing, the Indie brokerage can use its real estate “heart” to bridge the gap from big tech. As you would eat at your local family-owned restaurants, and shop with your local vendors and farms, buy and sell real estate with your local indie brokerage.
Are these big companies really blurring the line between a genuine digital marketplace and a company with a vested interest calling in to question larger ethical issues? What are your thoughts?
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