A look at the real estate market and technologies effects on it’s growth for the traditional real estate broker
In the late nineties it was predicted that Google will eliminate traditional real estate, then in the early 2000’s, Zillow made the same claim. However, the number of traditional commissioned brokers and companies increased. In 1991 the number of brokers was 763,965, in 2001 that number climbed to 803,803. The climb in the number of brokers continued to the current level of 1.3 million.
There are many changes and disruptions in the current real estate world. Acquisitions of real estate firms and real estate technology firms are almost a weekly occurrence. There are many iBuyer programs, and discount real estate firms attempting to reinvent real estate. While the disruptions can wreak havoc on some, they can be a great catalyst to a more vibrant traditional real estate.
The latest disruptors
Two of the latest disruptors are the iBuyer programs and discounters. These disruptors are similar in appeal to the “Guaranteed to Sell” programs that were popular a few years ago.
The iBuyer model is to make it expedient for a homeowner to sell their home. They offer cash, close to market value for the house, give the seller time to move or buy another house, and remove the hassle of showings, repairs, negotiations with buyers and their brokers and all the services associated with such a transaction. The iBuyers then turn around and try to sell the house at a profit. Currently, there are several key players in the iBuyer market, such as OpenDoor, OfferPad and Zillow. They are backed by deep-pocket investors and of course the luster of a new trend in real estate. In an interview by the Wall Street Journal, Rich Barton, Zillow CEO, said “We were comfortable saying that in three to five years we could have $20 billion in revenue in our Zillow Offers business alone.” If Zillow comes close to their prediction this number would translate to around 1% of total market.
The discounters are also gaining popularity. They offer a flat fee or a smaller percentage of the transaction to represent the buyer or the seller. These discounters depend on large volume of transactions just to make a living. Of course, a buyer or seller consumer may not be comfortable trusting their most valuable transaction to an broker who is making very little money and wants to move quickly to the next deal. Most people buy two or three homes in their lifetime and it is not certain that they will trust a hurried discounter with this elaborate process.
One thing the disruptors do well is their use of technology. They leverage technology to streamline the buying and selling process. They are spending millions to develop applications, data analysis algorithms, and websites to target buyers and sellers and to remove much of the chaos of the antiquated and frustrating transaction process.
Removing the chaos
Technology has also empowered the consumer to expect and demand a better process. For example, technology has shifted the power to the buyer. Buyers are currently approaching brokers to facilitate the transaction process instead of the process of finding real estate. Buyers come to brokers with a list of houses they want to see, in the neighborhoods they want to live in and with prequalification letter from the bank with the amount of money they want to offer for the house. While buyers are less reliant on broker to find property, they want the broker to walk with them through the complex and often chaotic world of closing the transaction, which is very time consuming, frustrating, and fraught with uncertainty.
The same technology that is available to the disruptors and the consumer is also within the reach of the traditional real estate broker. Technology can also be used by the traditional real estate broker to not only survive but to thrive during this potentially short-lived disruption from the iBuyer and discounters.
Simplifying the transaction process
While technology has made the home search process more transparent and efficient, it is time to do the same for the transaction process. Technology could remove much of the confusion and chaos of the transaction, to produce a much more efficient, transparent all-inclusive transaction and provide a better experience for the consumer. Another barrier that technology can minimize is the amount of time it takes to close, the average transaction takes 45 days, and many go over three months. A more efficient and faster transaction will translate to a happier consumer. A happy and informed consumer will appreciate the value of the traditional broker and less attracted to the iBuyer and discounters. If the client’s experience is efficient, transparent, painless and speedy then what will be the attraction of the iBuyer?
The typical real estate transaction includes some or all the following elements:
- Home Insurance
- Home Warranty
- Title Insurance
The future will belong to the brokers that use technology to facilitate the transaction in a more, inclusive, transparent and cost-effective way while reducing the time it takes to close a transaction. The technology is now available to link all parties of the transaction. Brokers, firms, clients, service providers can have real-time access to all aspects of the transaction while adhering to the rules and regulations demanded.
Brokers or clients can begin a transaction, which creates a portal that is accessible by all parties to the transaction. That portal is rule driven to adhere to rules and regulations, includes automation, notification and other intelligence to provide transparency, accuracy which will enhance the trust factor.
Imagine for instance, an offer transaction, the broker or the customer can start the transaction. A portal is immediately created and automatically populated with all the elements and processes needed to close that offer. The portal could include section for each of the service provider that the broker and the client might chose. These sections might include options, documents and communication.
Each transaction will include a section or a tab for Home Warranty. When the broker or the client clicks on the Home Warranty Tab, they will encounter a menu of items to guide them through completing this part of the transaction. The menu will include items such as property information, warranty companies comparison, action to complete the selection and possibly payments of service. All documents that are needed to bind the home warranty, communications regarding the service, etc. All appropriate parties to this part of the transaction will have instant access. This type of transaction flow will make the process more efficient and eliminate costly and time-consuming surprises that may delay the close of the transaction.
Technologies already exist to facilitate and automate much of the transaction ensuring transparency, accuracy, accountability and superior consumer experience.
In the last 20 years technology developed by Google, and Zillow did not eliminate the broker or even reduce numbers of brokers. Neither did they reduce the need or dependency on the broker. Technology will continue to validate and enforce the value of the commissioned broker. The future will belong to those brokers and firms that enhance and perfect the transaction and consumer experience.
“Make more money, save time, eliminate confusion and chaos. These are the complaints I continually hear from my fellow real estate agents concerning technology in real estate. With 18 years of experience as VP of Technology at a leading southeastern real estate firm has given me deep insight to the technology pain points of real estate agents and the agency owners. With this knowledge and experience, together with investors, real estate agents and company owners, we created the first all-in-one real estate technology SaaS platform, designed to remove the pain, and eliminate the chaos of the real estate office, Flow ROI“