How technology is affecting Real Estate

[Brendan Blumer]

We’ve seen the internet modernize Real Estate with the free flow of information, mass exposure for properties, and even inter-corporation data exchange. But how do these changes affect the big players in the market today? What does it mean for the client-agent relationship when an agent gets a call from Zillow or [REMOVED]?

With the internet’s massive cache of information, such as transaction history, neighborhood maps, detailed street-level images, school district information, and more, large brokerage houses around the world are facing competition from a pervasive force outside the realm of traditional Real Estate. Consequently, they’re searching for ways to stay relevant to the consumer and survive the information revolution.

Many large firms are exploring franchise models or forming expansive collaborations that bring together fragmented agencies through a network-style cooperation. Meanwhile, as information continues to flow freely, we will continue to see customer’s brand loyalty shift from these large companies to individual agents working for them. Subsequently, brokerage houses will need to focus on creating environments for agents that encourage self-promotion, self-branding, and independent client acquisition.

Today’s internet-savvy consumers start several steps ahead in the process than buyers did even just a decade ago. Instead of seeking a Real Estate agent to help them form an opinion on a potential purchase by providing relevant data, consumers are seeking knowledgeable agents who can verify their already developed concepts. The client-agent communication is just one more source of information for the consumer rather than the primary resource. The agent is relegated to a secondary role, which breeds shallow client-agent relationships. This fuels the need for stronger personal branding and more individualized service.

While agents focus on creating a brand to attract customers, they also face the challenge of defining their service. The tangible benefits a Real Estate agent offers are expanding and fragmenting, and they are struggling to secure fees for their services.

The role that agents needs to play in today’s marketplace is more focused on support and service than in previous years because their advice is no longer proprietary and their research resources are just as easily accessed by their clientele. Very personalized services individualized to each client are becoming a necessity for setting an agent apart from the crowd. This is compounded by the fact that consumers have nearly instant access to so many agents.

Going forward, we will continue to see large groups of independent agents branding themselves to a niche segment of the market or a specific type of relocation. From a corporate perspective, companies can help agents succeed by offering competitive virtual office space and proprietary technology. This will also help large firms attract the best agents. In turn, these efforts will keep the brokerage firms on solid ground with an increasingly tech-savvy customer base. As they see their agent supported with progressive, industry-leading sales philosophies, they’ll have greater reason to engage in business with the organization.

[Brad B.]

Interesting post. I think it exemplifies certain key aspects of this whole ecosystem.

First, you hit the nail on the head by addressing value posed by the immense information resources and mass sharing being done. This does allow the consumer more choice and intelligence prior to ever making a phone call. This most definitely puts pressure on the existing business model of brokers and agents.

Second, as Mitch asks, where is the benefit for the investor?

I see it this way...

In reference to the first point, most of the new technology being developed and marketed is aimed for mass appeal - the consumer. They target bringing the most eyeballs as possible and then provide a referral service or other services to the professionals that would most benefit. This is ok, and seems to be adequately working for the most part - although I would love to see real metrics on conversions brought through major website's referrals. To me, it doesn't feel like it's new or unique in terms of a product offering that leverages the power of this vast information resource, just another means of dressing up an existing business model to give it legs for a little while longer.

Regarding my second point, I think there's a huge potential for the real estate investor. The challenge is two-fold - how to more efficiently acquire, maintain, and manage the investment; and then how to get maximum returns on that investment. This means that information sharing could be used very effectively to streamline and introduce efficiencies into back-end operations. It could also be used to reach better, more qualified buyers of our product.

I think there's a definite opening for directing both of these seemingly divergent segments into something the updates the whole start to finish process to make it a mutual win for both the consumer and investor. It's going to take some time though to work through the technology challenges, legal challenges, and the personal bias challenges from the "old guard" who want to do the same things the way they always have done them.

Based on what I've seen, my guess is that we're still 3-5 years out on anything truly novel in this market, but it looks like some bright minds are starting to put real thought and effort into making headway into solving these challenges. I personally look forward to watching and participating.