Real estate agents – RIP?

There has been enormous speculation since the dawn of the Internet that disintermediation would spell the end of two of the most important components of the home buying process, the real estate agent and the mortgage broker.

On face value both seem likely candidates for extinction. Both add cost to the end consumer, both cloud the transaction by bringing a level of apparent complexity to the marketplace (often more than is needed!) and ultimately they act as a gatekeeper between the consumer and the end product.

So with so much PR being afforded companies like Zillow, Trulia, Reply.com and Sellsius.com are your local realtors an endangered species?

In theory, the future for realtors doesn’t look so good.  Homeowners could place their home for sale on Zillow, Ebay or Craigslist and watch the offers flood in. Yes, technology makes it look easy but on closer inspection I don’t think real estate agents should be worried.

An interesting parallel is to look at what happened to the mortgage broker. In the early 2000’s websites like mortgage.com, quickenloans.com and eloan.com were touted as being the end of the mortgage broker, a place where borrowers could find the perfect loan and cut out the middleman and associated fees.

Instead, the process involved too many parties to automate to a satisfactory level and with too many decision makers, contracts and documents, was not consumer friendly.

Ultimately, people decided that the home purchase transaction is too important to be performed in isolation on a computer.

And I think it's the same with the real estate agent. Anyone that believes technology will displace your local realtor is dreaming as long as the agent brings their ultimate competitive advantage to the table - their relationships.

Relationships are what separate all of us in a state of equilibrium and it’s something that is very difficult to automate. Nor can I see real estate agents sharing their relationships and valuable network of prospective buyers. Relationships are very difficult to emulate and are the result of a set of unique interactions between people.

And let’s not forget the power of negotiation. Negotiation is something best left to experts and like it or not, most real estate agents are better than most of us at negotiating. Why risk doing it yourself and getting a sub par deal?

The home purchase is too important to be decided by an Ebay auction or Zillow listing and I think most of us like the “warm and fuzzy” we get when dealing with a professional human. We are social animals, after all.

What do you think – where do you see real estate agents in 20 years?

If I were a betting man I’d say the real estate agent is here to stay…and in fact prosper!

Comments

[Jason Spencer]

Thanks George, it will be a very interesting 12 months in this space. I think we might find the good real estate agents thrive and learn to work with some of the new technologies like StreetAdvisor to enhance the buying process!

[George Garrett - Landmark Real Estate Specialists]

It is refreshing to see someone who recognizes the value of a real estate agent!

Many people said the same thing about travel agents and the internet. But the key IS the relationship. Who are you going to call when you're in Rome and your room booking is wrong? Expedia? Orbitz? They don't care, they have your money. Likewise, are these internet real estate sites going to head off problems with buyer financing, inspections and appraisals? Will they advise you as to the best course of action for your situation? And realize that most buyers looking on these internet sites are looking for a bargain - they don't want to give you what your home is worth on the open market. The realtor brings professionalism and expertise to the table and I'm glad that someone is finally on our side!

[Jason Spencer]

Thanks Cliff, what are your thoughts on Redfin and the recent press on 60 minutes?

[Cliff]

Agents aren't going anywhere. These sites are just weapons added to their arsenal.

Anyone who says different has some VC money tied up in Zillow...