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Eliminating the agent or a more likely scenario transitioning the real estate agent into homeownership experts....

The Real Estate scene will change ..

From Inman News

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Real estate disruption won’t be what you think

It really comes down to the agent-client relationship

Real estate disruption is inevitable, and the industry eventually will experience a massive overhaul. However, disruption may come in a form far different from what most people expect. Looking at the current state of the real estate business, there are a handful of major players at the corporate level that own pretty much everything in the industry, from brokerages to mortgages. The only thing that these conglomerates do not own is the agent and client relationship.

Currently, large companies allow real estate brokerages to operate on slim margins with the goal of incentivizing agents to push their clients to purchase ancillary products. In this scenario, the real estate agent acts as the lead pipeline for financial and transactional products. These ancillary products come in the form of appraisals, mortgages, title insurance, home warranties, home inspections and an endless number of fees associated with every transaction.

Gerald Bernard / Shutterstock.com
Gerald Bernard / Shutterstock.com

For example, Bank of America owns the appraisal company it uses. How is that even legal? (See for yourself here: www.landsafe.com.) Although many think that disruption to the industry will come in the form of eliminating the agent, a more likely scenario is that disruption will come in the form of real estate agent empowerment as agents transition into homeownership experts.

Empowering agents with the information and tools to help consumers save money at the point of close and sell their homes for top dollar brings relevance back to the agent. Disrupting the status quo will come in the form of decreasing closing costs, increasing the effectiveness of agent marketing and empowering the agent and consumer with the tools necessary to decipher an infinite amount of real estate information.

Ultimately, the market will decide the future role of the real estate agent. However, one fact remains clear: Consumers continue to demand a real estate professional to guide them through the property transaction.

Here are three additional insights into the future of real estate industry disruption:

1. The number of agents will decrease

Technology eventually will appeal to a portion of consumers who want to conduct their entire transaction online. Some savvy consumers will handle their own marketing, financing and closing, so fewer agents will be needed. However, agents able to prove their worth will continue to thrive because a majority of consumers will value the insights of a real estate professional.

2. Technology will put downward pressure on transaction costs

There are countless fees associated with every transaction: closing costs, loan origination, inspections, title fees — the list goes on. The growing role of data analytics will allow companies to make smarter and more cost-effective decisions regarding all aspects of buying, selling and owning a home. Increased efficiency will pressure companies to reduce cost to stay competitive.

3. Consumer behavior will continue to support the agent commission structure

Without drastic legislation and a sheer drop-off in consumer demand for real estate agents, there is no clear indication that the current commission structure will change. Consumers will continue to need a real estate professional to open the door, talk their ear off and handle the negotiation process when emotions fly high. Real estate is a relationship-based business, and until the relationship is taken out of the equation, technology will struggle to find mainstream adoption to replace the real estate agent entirely.

Will Caldwell, a San Diego resident, is the CEO and co-founder at Dizzle, a mobile real estate tech company that helps Realtors generate more word-of-mouth leads

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Comment by Violetta Polyakov, Broker on January 12, 2015 at 10:18am

We need to make NAR work for us and our local boards finally do what they are supposed to do - close MLS and make it proprietary, do not disperse information over the net and allow everyone access. I do not agree with this article. Getting away with brokers/agents will mean many duped buyers and sleazy investors stealing away deals from inexperienced public. There are so many things that can and does go wrong in every type of transaction that only a newbie to Real Estate can even imagine a realm in which all these hurdles can be solved by buyers and sellers directly without education, knowledge, experience and contacts in the field. Technology for most part is not helping but creating additional work and additional hoops for professionals to jump through - trulia, zillow and such with their total lack of actual value or information. What about commercial real estate, time shares, rentals, leases, retirement communities, international investments – I want to see how all these can be done without an experienced broker.

Comment by Jay Pegram on January 9, 2015 at 11:07am

Doors can be opened automatically with security cameras and bar code readers. Bids can be submitted online. And some properties can be sold without negotiations. No need for a broker at all in an automated process. 

Comment by Ronald D Bourgeois on December 22, 2014 at 2:20pm

Hi Marvin Von Renchler,

I'm retired but still working just to keep busy and pay for my toys.  Your response (in my opinion) is right on, I've had a 'gut' feeling for the past few years that we are at the end of the Agents Golden Glory Days.  Now I hope I'm wrong but I can almost see the invisible writing on the wall.   I think it's just a matter of time and BPOs will go down the same path. 

Comment by Marvin Von Renchler on December 22, 2014 at 1:18pm

I agree with a lot of what you said. Ive been saying it for YEARS. However, I believe you to be off the mark about commissions.In the Portland Oregon market we are saturated with agents. Our economy is poor. We didnt have a recovery---at least not as represented by media. We had a lot of low end and distressed properties picked up by investors. That was almost all of our 'recovery'. Brokers are starving and to just keep bread on the table are doing outrageous plans and super low fees to survive. Many now will post a property into the MLS without any seller representation at all. They are reduced to advertising people just as if they worked on the phones at the newspaper classifieds. Its hard to win a listing when the person in front of you will slap them into the MLS for $150. Its so prevalent that our MLS has a listing category that provides for no representation. Competition is also dropping fees across the board with many companies. Now this isnt anti-trust talk---Im all about the consumer and our type of system. The market is set by what consumers are willing to pay and we all have to live within those restraints. Im just saying that there IS 'clear indication that the current commission structure will change'. Fact is, as I said, it already has .

Lets be real and forget that we all need people to need us. What exactly do we provide? What will we be expected to provide? What is our VALUE to a consumer? We all know that most real estate is found by buyers who use the web. So what does the SELLER need? Simply to be advertised. Sure, representation and contract help will possibly be needed and thats why the flat input fee brokers will (Some of them---not all) offer that for an additional small fee. Some brokers actually place the words 'Do not call me for any reason, talk to the seller. I do not represent the seller' in the listings!  Consumers are assailed with super discounts now. They are savvy to the power of the internet. Why should they pay large fees for that?  This takes us to brokers who represent buyers. Buyers brokers dont have the overhead/output of listing brokers. The public knows this. However, though its said the seller pays the fee,  the buyer is also paying it in the price.

We will see a large decline in agents. It can be no other way. We will see a large correction in fees. It can be no other way. Now Im ducking to avoid the thrown stones but the only reason we have our profession is that lawyers charge by the hour and dont play taxi. There is no doubt that we are needed in a transaction but does a seller need to pay $30,000 commission on a $500,000 home? Can we justify that?  We no longer tightly own the MLS systems. We might just as well open them all directly to the public and all become buyers agents. One big national FSBO site would close all the MLS systems down.

 

How about commission structure? Many brokers are taking small monthly fees per head and giving the agents 100% commission. Again, they do it just to keep bread on the table. With low commissions there isnt enough to go around. Service can suffer, thats all there is to it though I  know super low fee/commission agents who are professional and do the best job regardless of fee.

This aint our grandpas real estate profession any more.

Comment by howard perry on December 22, 2014 at 12:26pm

Great insight

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