As Seen in Forbes: Are Real Estate Brokers Obsolete?-with Response
The more we simply make minimal accommodations to deal with a radically changed environment (even if the change was gradual), the more fragile we become… Businesses fall into the same trap, all the time. They stretch and stretch and stretch to accommodate a changed environment until they are too fragile, with no fall-back position, no redundant capacity. They become fragile, so they are catastrophically vulnerable to the first disruptive innovation, or the first unanticipated regulatory change.
He then invited readers to imagine what various industries would look like if they were designed today. Since I’ve recently been exploring a few real estate options, my mind immediately went to the role of real estate brokers.
Before I begin, let me first say that my intention is not to “attack” one profession, but rather to use a specific example to make a general point that applies to every industry: the only way to avoid becoming obsolete is to reinvent your role before the marketplace does it for you. Said another way, you need to disrupt your own industry.
When the concept of real estate brokers arose, there was no Internet. Brokers controlled all the information. From afar, it was impossible to know almost anything about a property. In addition, there were far fewer ways to advertise properties.
Last night, I spent an hour looking at properties in another state. To do this, I used Realtor.com, Trulia, Google’s search engine and Street View, Zillow, local tax assessors’ databases, and numerous web sites maintained by a wide range of brokers.
In 95% of the cases, the brokers’ sites had the same information or less than the 3rd party sites. I could not find “exclusive” listings that one broker had and another did not. This, by the way, is a problem pervasive in most industries: how to make money when everyone has easy access to all information? (One answer is to use common information as your starting point, rather than as the be-all, end-all.)
In the event that one listing catches my eye and I call “my” broker, he will likely email me a link to the listing for that property, which I have already seen online. He will then offer to show me the property, and once that has happened he will begin the sometimes subtle and sometimes blatant process of nudging me to make a bid.
If I make a bid, then things will really get messy. In my experience, negotiating through brokers is the most inefficient and frustrating experience imaginable. By far, our best real estate experience was when we bought a house directly from the sellers.
I’d like to suggest that 95% of of a broker’s role could be handled better by well-designed technology systems. Bidding, for example, could be handled by an automated system that includes legally-binding documents that would be instantly accessible to each party’s attorney. Ten years ago, I bought a boat on eBay and even then it was an easy and pleasurable experience.
Online bidding could enable buyers and sellers to learn much more about the others’ interests and needs; in many cases brokers play games with such information, either holding it back or deliberately distorting it to better produce the outcomes they desire.
For example, I’d like all potential sellers to know that I can be extremely flexible with my closing dates, should they still need to find a new property to buy. It would be great if they knew that up to a certain price point I can be a cash buyer, and that the absolute most I can pay is X.
Likewise, it would be wonderful to know what is most important to the seller. For example, many sellers have horrible experiences because they accept the highest bids from buyers who turn out to be unqualified or unpredictable. If a seller is more interested in speed and certainty than getting the highest possible price, then buyers could construct a more attractive offer.
The hardest broker role to replace is the one that adds the least value: letting buyers into a property. For obvious reasons, sellers do not want strangers walking around their homes alone. But the role of opening the door could be handled by a person earning perhaps $15 an hour, rather than someone who will take $50,000 from a $1 million transaction.
The fact is that one thing keeps the broker’s role alive today: the regulations that govern the real estate industry. Once upon a time they might have been designed to protect consumers, but today they mainly protect realtors.
If you are a broker, you have two choices. First, you can reject my point of view and defend the status quo; this should work for a few more years. Disruptive innovation always starts from the edges of an industry and right now it surrounds you, but has not yet penetrated the thicket of regulations intended to keep such innovation at bay.
Second, you can work to reinvent your role, which means figuring out new ways to add value in a world that is dramatically different than the one that existed when your role was designed. To do this, focus on things you can do that clients can’t already do online… and remember that with every passing day clients can do more and more online.
- Be obsessed with sharing information rather than hoarding it. This means taking far more initiative to collect and manage information, rather than simply using the same information everyone else has.
- Be absolutely trustworthy, which – as Don Peppers would say – means doing the right thing proactively, rather than simply not lying, cheating and stealing.
- Wipe the slate clean, and imagine that there are no real estate brokers yet. Find meaningful reasons to create and shape a middleman role that significantly benefits both buyers and sellers.
Bruce Kasanoff (@BruceKasanoff ) is the author of How to Self-Promote without Being a Jerk.
This is a great response, as seen in Inman:
Retro homeownership image via Shutterstock.
The real estate industry is no stranger to being on the defensive. A recent editorial in Forbes, titled “Are Real Estate Brokers Obsolete?” was yet another example of what is becoming a niche industry in business blogging and journalism — debating the value of the real estate agent/broker in the information age.
Often this debate is, not surprisingly, far from a debate at all; rather, it takes on the real estate establishment and challenges the consumer to do the same. I can’t say I blame people for thinking this way.
I remember going into a local real estate office as a soon-to-be first time homebuyer and the excited nervousness that filled me. An agent greeted me, took me back to an office that had more awards hanging on the walls than my high school’s trophy case and then invited me to have a seat.
What followed was akin to something from “Raiders of the Lost Ark” as from behind that desk, he produced a magical stack of listing printouts with a sly smile that seemed to say, “You’ve come to the right place.” He was the gatekeeper AND the keymaster. Those days are thankfully behind us.
I’ve spent my entire real estate career working within one brand, and that brand was very forward thinking when it came to information and sharing. Beginning in 2006, they started the first nationwide network of IDX websites and within six months consumers could search over three million listings around the United States. The last decade has seen IDX become industry standard with new innovations related to listing search and promotion coming at a furious pace.
The real estate industry has changed as a result, but not just because of the fantastic technical advances our industry has seen. The real estate industry has changed because people have changed, and people are the constant in this business.
Much of what is discussed in these types of articles seem to have much more to do with a poor choice of real estate agent (game playing with information, agents not communicating flexibility or motivation to the other party, the buyer’s agent not prequalifying their clients) than it does the industry in general.
That does not absolve us from needing to look in the mirror though. NAR’s 2013 member survey found the average age of a Realtor to be 57 years old, yet the average age of home buyers was 35. Age certainly does not dictate your technical prowess, but it is fair to say that many in our industry have seen themselves dragged into this new information age kicking and screaming.
They have hardly adapted their business model from what worked in decades prior and they have essentially done the bare minimum required to keep their business functional in terms of technology. Forget optimized landing pages, drones for virtual tours or a social media mix being part of your business plan — these agents do not even have email set up on their phone.
We all know these agents, and most of us work with a few of them. Few agents will look you in the eye and say that the industry does not need to do a better job as a whole in adapting to changing client expectations, mortgage regulations and technology. The industry will do these things or the industry will suffer the consequences.
Where does this leave us? Is an online auction model the way to go, as the author seems to suggest? Do agents go the way of the dodo bird?
Auctions are part of the real estate landscape; however properties have been listed on eBay for years and it hasn’t exactly been a game changer. A home is more than just another item being sold; it’s not a boat or an iPad.
A computer pricing algorithm does not know if those countertops were put in correctly, what lies beneath those new floorboards, if that third bedroom used to be a garage. It most likely doesn’t know the motivations of the previous owner, upcoming development changes that may affect property values and it certainly cannot negotiate.
To properly sell a house, real estate agents spend their career learning about neighborhoods, zoning laws, rates of return on investment and financing. There is no magic pill or real estate agent cheat sheet, and you cannot “Google” it. I can enter an online search for how to fly a jumbo jet but I doubt seriously anyone reading this would want to see me in the pilot’s seat.
The real estate industry is about “real property” but it’s also about the real human beings who buy and sell those properties. Every transaction has its own story, every seller has their own motivation and every buyer has their own goals they wish to achieve.
Real estate professionals spend their lives as mediators and educators, using their experience to help a successful outcome to occur. When negotiations get testy, agents can be a much needed cooler head to prevent emotions, misunderstandings or hurt feelings from derailing a positive transaction.
Low-cost brokerage models and FSBO champions will often claim that by cutting out the real estate commission, you can see a higher net from a transaction. But they fail to mention that most buyers are savvy enough to discount their offer due to this knowledge.
Concerned about honesty? A professionally licensed real estate agent is governed by the laws of both municipal and industry legislation and when working with an agent in this agency capacity, they are bound by law to be honest and work in your best interest. In the rare instance that they break that agreement, you have multiple recourse options at your disposal.
Finally, working with a real estate agent is about time. Properties sell faster when an agent is involved, saving sellers carrying costs, stress and the added workload of being their own real estate professional. You expose yourself to far less liability personally and often once attorney’s fees are factored in you rarely save much money by opting to go at it alone.
As real estate professionals we give our time so that our clients do not need to use any more of theirs than is necessary. We are compensated for this service as are millions of professionals offering their expertise and time to their clients in thousands of different industries.
We will continue to see articles like this as the next great industry technical innovations roll out. As an industry and a community of professionals, we should see these stories not as attacks but as opportunities.
We should look at ourselves in the mirror and ask those questions of our own business model and methods and if we don’t like what we see, we should take steps to rectify the problems. Then when the next dialog is opened on the subject of agent competence and the need for the human element, we should take part in that discussion.
Successful agents already know that part of providing excellent service is the education of their clients not only on the home buying or selling process, but the agency process as well. It is one thing if the general public isn’t sure what exactly the benefits are of working with a professional real estate agent — it’s quite another if we cannot answer that question ourselves.
We cannot let the bad apples spoil the bunch; we must lead by example, influencing our industry and those who work within it to raise their standards.
At a brokerage level we can set the tone by creating a corporate culture of education and business development that is not only client-centric but helps to ensure that we are proud to associate with every agent whose business card has our name on it.
As agents, we can and should embody the changes we wish to see in this industry and be a part of the solution, not part of the problem.
Bret Calltharp works as business development specialist for the Metro Vancouver Properties Group, a 10-office Re/Max franchise in Vancouver, British Columbia. He can be reached at firstname.lastname@example.org.
– See more at: http://www.inman.com/2014/04/11/can-you-explain-to-buyers-and-sellers-why-technology-has-not-made-real-estate-brokers-obsolete/#sthash.AGo3Tr0T.dpuf