Saturday, July 2, 2016


As someone who has carried a broker's license for 22 years, I've seen a lot of changes in the real estate business.  Contracts used to be hand-written on carbon paper, then came the advent of the fax machine, then came email, and then came electronic contracts.  Now my clients sign documents on their phones.

MLS books used to be dropped off at real estate offices every Thursday.  Then databases moved online to subscriber-based systems, then data was aggregated wildly and without sufficient oversight to 1,000 different websites, and now data is ubiquitous to the online world, sometimes accurate and sometimes not.

I believe that another round of huge changes are coming to the real estate world, driven by technology, innovation, greed, and the black hole of "leadership" at NAR, which has sat idly by on the sidelines while disruptors like Zillow and Trulia (now merged) have rushed in and, by many metrics, taken control of the industry by taking control of the consumer's online experience.  

(Interestingly, Denver is one of only a few major markets that currently has no licensing agreement with Zillow or Trulia, meaning that agents must manually upload new listings and manually take them down from these sites after they sell... which means the integrity of Z/T's data-feed in Denver is an absolute mess.)

There are serious flaws and problems with this, and you could write a 100 page thesis paper and still not address them all.  NAR extracts confiscatory annual dues from agents (usually $500 or more per year per agent in most markets), then uses that money to run television ads, lobby Congress for favorable housing legislation and hold lavish parties for itself from its Chicago-based high rise headquarters.

We can't rely solely on a myopic, fat cat, dues-fed organization that spends its time and resources inefficiently wining and dining politicians to protect our interests. 

Zillow, on the other hand, raises huge money by selling advertising to agents.  It uses that money to improve its technology, strategically advertise and promote its "Premier Agents", who qualify for that lofty title simply based on their ability to write a sizable monthly check that clears the bank.  

(Disclosure item:  Although I have nearly 100 past client reviews currently posted to Zillow, I have never spent a dollar on paid Zillow advertising, much to the chagrin of scores of Zillow advertising reps who have been relentlessly telemarketing me for years.)  

Zillow spends no money on lobbying Congress or seeking favorable legislation for homeowners.  It cares little about consumers, or real estate brokers, for that matter.  It wants nothing other than eyeballs on its website and profits for its shareholders and fully-vested senior executives.

NAR is a self-absorbed trade group.  Zillow is a self-absorbed creation of Wall Street.  And many agents are funneling thousands of dollars each year at both, but really being served by neither.  

It creates anxiety, for sure.  In some ways, it mirrors our country's political landscape, with dueling parties both serving their own interests while the real needs of its constituencies go unmet.

But I digress.  

Because of this lack of leadership, I believe the traditional role of real estate agents is going to change significantly over the next few years.  Increasingly, the two-agent system (seller's agent and buyer's agent) is likely to morph into a single agent functioning as a transaction manager, with Zillow serving as the primary matchmaker.  

There will be less representation and more facilitation.  It will also change the nature of negotiation so that it becomes less about advocacy, and more about getting the deal done.  It will put agents in the uncomfortable and ethically-questionable space of trying to serve two masters, and it will unleash a whole new batch of ethical and moral confusion.  

The tradeoff will be that consumers pay a single commission (instead of two), and because the public often under appreciates the value of a good broker, consumers will think they are saving money by eliminating one agent from the transaction when in reality they will be doubling down on the ethics and competence of a single broker, who will earn half a traditional commission for doing twice the work only if the deal closes.  

I am convinced this is the model Zillow is working to perpetuate, because it will create a class of "Super Agent" who has no choice but to advertise on its site, which will match home buyers, home sellers and so-called Premier Agents to put the deals together.  

It will seize control of the industry while keeping the legal liability and fair-housing responsibilities pinned to individual agents and brokerages.  It puts them at the center of the transaction financially while minimizing their exposure to litigation and lawsuits.  It's a beautiful Wall Street-crafted model that any one-percenter would love. 

As the number of agents declines, NAR will see its membership (and revenues) dissipate.  Its influence wanes and Zillow becomes the pre-eminent voice for real estate.  Lobbying and legislative advocacy go away.  Tax policy changes and the tax-advantaged nature of real estate erodes.  Values are negatively affected.  Brokerages close amid sharply decreased profitability and the industry consolidates.  Zillow doesn't care, any more than Enron or AIG or Bernie Madoff cared.  

When leaders fail to lead, chaos ensues.  You just saw it play out with Brexit, you're seeing it in the current US election, and soon enough, in my opinion, you'll see it begin sweeping over the real estate industry.

Could my opinions of Zillow and NAR change?  Sure, if their behavior was to change.  If I saw a serious commitment to making the world a better place for buyers, sellers and real estate brokers, of course I would get behind it.  But for now, I can't count on that.  I'm just trying to strategize my own place in a rapidly changing real estate world.