We are
living in an age of disruption. I think
about it every day, because recalibration, adjustment and course corrections
are the fundamentals of survival.
Huge changes
are underway in the real estate world, but many of them are occurring below the
surface, like a tide beneath the waves.
From the shore the water may look calm, but just below, the shifting
currents are creating violent turbulence.
Technology
is a primary disruptor, and it is touching every area of our lives.
We now live
in an app-driven, on-demand world.
Millennials, in particular, have been raised in an era where technology
equates to instant gratification. Want a
pizza? Tap a button. Need a ride?
Tap a button.
Want a
house? Soon, tap a button.
In the old
days, like about 36 months ago, agents still had control over data. If a property hit the MLS at 2:30 on a
Thursday afternoon, the only ones who knew about it were the brokers. We could make a mental note to call our
client the next morning, suggest seeing it at 4:30 (or some other convenient time that fit
our schedule), and still look like a great provider of service to the consumer.
Today, it
doesn’t work like that.
Zillow’s
$5.5 billion (current market cap) march into the real estate world has changed
the game. While Zillow’s data often remains
inaccurate, inconsistent, and sometime downright wrong, the one thing you can
say is that Zillow has applied crunching and disruptive pressure to traditional
real estate models.
By adding
data constantly, by increasing the value of their brand by relentlessly pursuing
new ways to provide more information about housing, schools, crime data,
assessments, zoning, rents, agents, and most recently “comparable homes”,
Zillow has effectively forced the real estate world to change.
The response? MLS systems have shifted
by becoming more consumer-centric, more transparent, and less agent-focused.
Zillow
created alerts for site users, letting them know when new listings showed up on
Zillow (even if those “alerts” were initially happening five, seven or ten days
after a home was listed, based on Zillow’s spotty data feed). As Zillow’s growing influence allowed it to
strike (or buy) deals for real-time access for data with more MLS systems across the country, the
value and accuracy of this service improved.
Eventually,
MLS’s decided they needed to “go direct” to give consumers the same choices
they were finding on Zillow.
That flipped
the model, and put consumers (instead of agents) in charge of information. And that’s okay… in fact that is
progress. But it is also disruption, and
if your value proposition as an agent consisted solely of unique access to
data, you value proposition has just been wiped from the face of the earth. (And sadly, for a large number of agents,
there is no value proposition beyond data!)
As I have written
about before, the real estate pond is overstocked with agents. We live in an 80/20 world where 20 percent of
the agents dominate (those with real value propositions, not just access to
data) and 80 percent fight for table scraps.
If you aren’t
in the top 20% (soon to be the top 10%), you will not survive the coming
years.
What can a
buyer’s agent do to create value?
Ultimately, I think the buyer’s agent is going to go the way of the Dodo
bird. But to stave off extinction, there
are some key survival traits that will allow some to outlast others.
For one, you
need to be an educator, not just a door-opener.
You need to understand economics, not just aesthetics. You need to be a negotiator, not just a
contract writer.
You need a
strong network of professional service providers who will take great care of
your clients at reasonable prices. You
need resources like insurance agents and mortgage lenders and accountants who
can provide fast, accurate and money-saving information to your clients.
You need to
be a marketer, not just a licensee. You
need to be an adapter, not a reactor. You
need to stick to your past clients like glue, providing value in unique and
creative ways and always letting them know how much they are appreciated and
how committed you remain to serving them, even after the sale.
But even if
you do all this, the current is still going against you.
There’s a
saying among experienced real estate agents:
Listers Last
Listers last
because they are in control. Listings
are the equity of your real estate business.
And soon, I believe we are moving into a world where listers will
increasingly control both sides of a real estate deal.
Within five
years, I believe that many listings will be sold (or at least
placed under contract) through an iPhone app.
A new listing appears, a pre-approved buyer sees it, and taps a button
that says “submit contract now”.
The listing agent
offers a 1% commission rebate to the seller and a 1% commission rebate to the
buyer (thereby cutting out negotiations), functions as a transaction broker for
a 4% commission, and the buyer’s agents are left wondering what just happened.
Is this
happening today? Not yet. Well, it is actually, sort of.
The
preponderance of “Coming Soon” signs (which I have written about previously)
are the precursor of this type of system.
A significant number of deals are happening in Denver right now without
ever seeing the MLS, and agents (ethically or not) are double-ending deals off
the strength of the market and a little 1 x 3 sign rider hanging in the front
yard.
Do buyers
get the same level of representation working with the seller’s agent that they
would get from their own dedicated buyer’s agent? Absolutely not.
In fact, I
think there are huge ethical conflicts about trying to double-end deals that affect both buyers and sellers and I
won’t do it unless I am specifically instructed by my seller to do so.
But my
opinion is in the minority.
As more and
more real estate data migrates online in the coming years, the perceived value of
a buyer’s agent is going to erode. Consumers,
especially Millennials, will no longer value the buyer’s agent, even though
they “don’t know what they don’t know” about the value of experience,
negotiations and the overall complexity of a real estate transaction.
Marginal
agents will not survive, and even the good ones will have a very hard time
competing with the currents of technology and consumer-empowerment.
Adapt or
die. That’s the way the world works, and
it’s time for real estate agents to get a lot more strategic about what they
are doing and why they are doing it.
