So previously we’ve discussed Salary based Realtors being a new potential trend for big companies, and the pending huge growth of independent Realtor firms. However, we have yet to cover the possibility that the Internet will wipe out the Realtor. (Let us start off by saying we think this is a terrible proposition for the consumer as it will bring numerous problems into the fold.)
Consumers are demanding home information and more and more it’s coming from sources other than a Realtor. Look at Zillow.
People want answers to three questions regarding the real estate market:
- What homes are for sale?
- How’s the market right now?
- What’s my home worth?
Previous to Zillow, consumers had to call a Realtor to get a valuation of their home. That Realtor would have to do a CMA of the property and then the homeowner would have to deal with the salespitch of the Realtor. Zillow saw that consumers wanted instant answers and no sales pitch. So their business model served that purpose. Later they started to answer the question of “How’s the market?” with their real estate market reports.
Now, many Realtors will argue that Zillow’s valuation is far off actual value. Zillow itself admits it’s “Zestimates” are off by 8-20% depending on the market. But homeowners are either oblivious to this fact or they just don’t care. Their need is being satisfied. This alone should worry Realtors that don’t look to answer the home owner’s craving. Consider also that as Zillow nails down their data to become more accurate, we could see Zestimates within 5%. Zillow’s data comes from public record searches right now.
As valuations are becoming more accurate, and Zillow is answering the question of “How’s the market doing?” look at the question of “What Homes Are For Sale?” Consider that according to Hitwise, a website tracking company, of the top ten real estate related websites just two are brokerage companies: ZipRealty (A salary based brokerage company) at #4 and ReMax at #7 ! Agents can now place their listings on Zillow. Zillow is number #3 because it’s answering all three questions. Zillow has repeatedly said they aren’t interested in entering the brokerage business. And in fact they are doing what they can to try and push agents.(A smart move on their part since their income relies on advertising from brokers.) Zillow’s Director of Community Relations, David Gibbons is quick to point out that “a Zestimate is and always will be an estimate.” He goes onto mention, “…our Advice, Directory and Mortgage Marketplace (not just for sale listings), are all designed to connect homeowners with reputable and knowledgeable local professionals. There’s a large variance in the range of expertise among pro’s in the RE industry and so a major reason 73% of (CA) sellers use Zillow is to find a Realtor they can trust.” Clearly let’s state that in no way is Zillow looking to be a replacement for the Realtor. We simply bring them up in this post to point out the fact that Zillow is filling a need that the consumer had.
Can you find an answer to these three questions on brokerage websites? (Although you can on some agent sites: See Here the big three buttons.) Not really…. Companies with huge technology budgets could create a product that offers similar functionality to Zillow with more accurate data. They could have ALL listings for sale instead of just those syndicated to them. They could provide real data on how the market is doing that updates immediately. The data could be given down to the neighborhood level, not city wide like Zillow does. Yet, do you see this offered? No. Today, even brokers without technology budgets can find companies like Altos Research to provide amazing data on how the market is doing.
That brings up the next point: As consumers learn where to get answers to their three main real estate questions, can someone provide them a solution to put the full transaction process online as well? Redfin offers something like this. You can complete much of the transaction online and in doing say buyers and sellers receive a commission refund (in states that allow it) of 50%. There is still a Realtor involved, but as that moves forward does the Realtor become necessary? Can Buyers and Sellers facilitate their own transaction process listing the home online, schedule the showing of the property online, offering a standardized contract online, setting up a standardized inspection resolution process, and proceeding to closing?
If real estate agents don’t step up to gain trust through customer service and education increases. This is a very real possibility. As Zillow answered the demand, so will someone else. Take a look at the example of ForSaleByOwner.com . They stepped out onto a branch in 2008 by suggesting through a press release that you could list it on their site for a low fee, yet they would put it in the MLS for you which would then push it out to sites like Realtor.com This created a HUGE uproar in the Realtor community. How could they do something like that? One of the last remaining tools in the Realtor arsenal that can’t be provided by someone else is MLS access. By our understanding what the company was doing was actually listing the homes through a Realtor in California who would then put the listings in the local MLS regardless of where the home was listed. This would then push it out to the syndication sites including Realtor.com. But they were responding to a perceived demand by consumers that had a distrust of agents or a belief they provided little to no value.
Now let’s take a second to make an argument here for why the Realtor is necessary:
- No matter how much a computer can process data, it’s never is as good as a human that understands the market and can shape the data into real world. Data tells a story but it takes interpretation to weed through fact and fiction.
- Hiccups happen in transactions. Realtors are the glue that hold them together. When Buyer and Seller want to come to a meeting of the minds sometimes it takes an outsider to meld the two parties together. Emotions can run high when dealing with the biggest investment of one’s life. For example in today’s market agents are seeing “low-ball” offers. However, these offers might in many cases yield a transaction when the two parties come together. But on first look if the transaction is only online, the Seller might walk away from the table thinking a transaction will never come together.
- Buyers need a hand to hold when going through properties to look for things to avoid. 4 layer roofs, troublesome foundations, improper electrical fixtures, etc. These are things that Realtors are trained for, but many Buyers don’t know about. A Realtor can help to avoid huge problems down the road by helping in this capacity. They can also help at inspection time when realizing what to watch out for and what isn’t a big deal. On a report, GFI protection needed sounds scary, but in actuality it’s usually not something worth fighting over.
- Even with all the technology on futuristic shows like Star-Trek there are still doctors there. Professionals know what they are doing because it’s their lives. It’s experience that can’t be programmed into a computer and the average Buyer and Seller just don’t have. It’s the same reason why most individual investors put their money in mutual funds instead of individual stocks. They know they don’t have the time or energy to watch the market and trade accordingly. A professional like a Realtor is necessary in the transaction.
However, if brokerages don’t start answering the concerns of Buyers and Sellers, competition will heighten and you will see companies offering products that try to supplant the Realtor.