The Beginning of the End Of Real Estate Agents
The end of real estate as we know it is coming but it’s not going to happen as you might expect. This week Inman Connect hosted it’s week long look at technology, real estate, success and other things, include a biologist with a wicked beard. One of the new “scary” companies (scary to real estate agents that is) is a company called Solopro. Basically Solopro allows consumers to shop for services in an a la carte fashion from real estate and real estate related professionals in exchange the consumer gets a fat 3% rebate.
The real estate agents immediately go to social media after reading news that Lowes is throwing support behind this effort. My question is how is this different then a rebate drive brokerage like Redfin or a flat fee company? It’s another offerring that will appeal to DIYers just as these other services do. I don’t believe this is a game changer. There’s several reasons.
- The market isn’t ready for it. Real estate agents are still a necessary evil for even those people who hate agents. It’s been proven time and time again that an agent adds value even if they are not that competent. This is a case of Webvan. Great and wonderful when it came out and yet the market wasn’t ready for it. Now look around 13 or so years later and see all of these grocery delivery options available. The Uber generation is alive and well now.
- Agents and Consumers don’t understand the terminology. This isn’t a knock on consumers in particular, but rather agents. Agents are awful at communicating the value of the services they provide. For example, solopro has the option to hire an agent for a CMA. For a consumer to pay for the CMA they would need to see the value of it. Why not simply get an appraisal? The best value-add an agent can bring to a transaction is often negotiations and there’s no option here for that other then hourly rates.
- Consumers really don’t want to pay upfront for much of anything. My perspective is from Atlanta, I could however see this playing well in San Francisco where the average condo is $1 to $2 Million. Look at the flat fee market and you’ll see their fees are largely under $1,000 to put a home on the market. They’ve not been able to raise prices in Atlanta in over 13 years. I think if given the choice many agents (myself included) would rather be paid upfront instead at the end. This transfer of risk is what creates these enormous commissions.
- Driven to Zero the lowest common denominator comes out. In marketplace “apps” or websites the vendors compete the only way they can, via price. This creates a race to zero. The only agents that are interested in a $50 CMA are those without any business. Jarvis Team Realty in Atlanta for example often saves clients 3% or more and the amount of time we save clients makes it worth it alone to hire us.
Now that you know that Solopro isn’t a game changer you might wondering why I started off saying this is the beginning of the end. I honestly don’t think there’s any technology that is consumer facing that will change the industry to a point where it’s widely accepted enough by consumer and agents alike to create this massive shift similar to what happened in travel. The change will come from within. As the older generation of real estate agents (currently the average agent is a 55 year old white woman) retire/quit out of the business this new technology based generation will step in. They will demand tools and services to make their job easier. Lockboxes now have bluetooth, services like ShowingTime remove the need to coordinate showings and feedback. Companies like MyOutDesk make it cost effective to hire an administrative staff and agents are expanding all over the country.
As these agents expand and demand they will unwittingly allow the very vehicle that propelled them to success become the thing that will erode their business. Each piece of technology takes a piece off the agent’s plate but in turn, commoditizes the act down to a small monthly fee. In the end there’ll be nothing to stop a well funded company from bolting together or creating their own suite of products that does exactly what Solopro wants to do now. The difference will be instead of “disrupting” the industry now, it’ll be the agents that lay their own path out of the industry.
That sounds like a bleak future, but it’s really not. The reality of it is that the problem with real estate is one of leadership. Once the industry goes to technology and commoditization it will leave the true leaders, the true fiduciaries still standing. Service that looks out for the best interest of the clients, saves time and money and fights for solutions cannot be replaced. If you doubt this, use expedia and have an issue and tell me you don’t want to pull your hair out when the customer service person asks you to spell Mariott three times. No, PROFESSIONAL real estate agents will always have a place and make a good living. It’ll be those, the 90% of the industry, that sell 12 homes a year that will be out of business, just not now and not because of solopro.
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