The real estate industry is facing disruption, and not just on one front. New real estate brokerages are offering an alternative to the way agents do business, tech startups are providing more information and ease of access to consumers and professionals, and companies are helping consumers bypass the need for a real estate agent altogether.
Data and Service
Data continues to take on a more important role for consumers, who are looking for transparency in the market and for hard numbers to help ensure their decision to buy or sell a home is the right one. Following the housing bubble burst in 2008, it was apparent how little consumers knew about the major financial decisions they were making when it came to buying a home and getting a mortgage.
Since then, transparency and the availability of information has become vital to the homebuying process, evidenced by the rise of popular real estate information sites like Zillow and Trulia, which offer consumers free access to information about houses on the market, potential home values and recent sales.
Historically, a major role of real estate agents has been to provide information that wasn’t available to individual buyers and sellers, such as median sale price, the number of homes for sale and details about individual properties. But with so much information now available to consumers online, the real estate agent’s role must change, explains Clelia Warburg Peters, president of Warburg Realty in New York City.
“That shift from being guardians of information to really being professional service providers … [the industry has] been very, very slow to recognize and adapt to,” she says.
At Realty Executives, preparing for the future of real estate has been focused on remaining in step with the newest technological advances, including maintaining a website that’s dynamic for users – including interactive maps, easy-to-access analytics and user-friendly listing details – and keeping up with blockchain technology and the use of cryptocurrencies. “We decided to build our technology from the ground up,” van den Bossche says. “We believe very firmly that we need to be native in technology.”
It’s not just the way people pay for a house that may change – it’s the basics of the transaction itself. Van den Bossche says future methods of payment like cryptocurrency and the potential for new financing options will require greater specialization on the part of real estate professionals. Agents will need to step up their knowledge in these areas and be able to walk buyers and sellers through each process.
“The management of real estate transactions will change dramatically,” van den Bossche says. That means agents must be able to make clients feel comfortable and confident in their decisions during the closing process, whether the deal uses a traditional or nontraditional process, he says.
Consumers will also need to understand new buying and selling options offered by iBuyers – companies such as Opendoor, OfferPad and Zillow Instant Offers that are able to purchase properties with cash on a large scale and flip them for a profit. That means homeowners will likely receive an offer for less than they could get if they listed their property with an agent, made improvements to the home and marketed the home to the public. The flip side is that they will have a quick sale, no need to make updates to the house and receive a cash payment without having to pay commission.
“What they’re offering is very compelling to consumers,” Warburg Peters says. Many homeowners would be more than happy to forgo some profit in exchange for time and money saved by not having to list their house with an agent.
If agents aren’t needed in the same way or for as many transactions, what does the profession’s future look like?
The industry is already seeing change, as companies with nontraditional platforms like Redfin have real estate agents that show and list homes, but there are specialized roles for open houses, marketing and the closing process. Many nontraditional brokerages pay agents and other employees a salary, making the commission less of a sticking point, and as a result, sellers pay less in closing costs.
Van den Bossche says he expects a “course correction industrywide,” to adopt similar practices to better meet the evolving expectations of consumers.
As within other industries, emerging technologies will likely lead to a streamlining of real estate services. Warburg Peters expects the full-service real estate brokerage model will cater more to high-end clients, while midlevel and entry-level consumers will be able to save by opting to do more research themselves and hire and professionals for only certain parts of the closing process.