Russell Shaw writes brilliantly on Zillow and disintermediation of real estate agents by digging up some old quotes of by Rich Barton.
“People want Realtors, he said. But is it rational to pay Realtors what they are paid? He says he thinks they are overpaid because customers are doing more of the work themselves.
Zillow, for instance, has a number of other features that do the work of the agent. Someone wanting to compare properties can use pull-down menus to estimate the value of remodeling projects that are not reflected in the price. Because of the Internet, agents are spending less time with clients, Mr. Barton said. Agents have to ask, What kind of value am I adding?
Mr. Barton does not exclude the possibility that the role of the agent, and his site, may change.”
As Mr. Shaw points out, Rich Barton wants us all to earn less, but he is willing to let us keep our jobs. At least for the time being. That’s so nice, isn’t it?
According to this article in The Wall Street Journal,
Mr. Barton said major change in home selling is inevitable over the next five years or so because there’s an unsustainable disconnect between the commissions charged by most agents and the value of their services.
So they’re going to let us keep our jobs, but apparently, they’ll be the ones deciding how much we should make.
There are so many new real estate sites out there now. Some have ties to brokerages, such as Blue Roof and Redfin. Others are disconnected to any actual real estate sales, but serve as portal sites to sell advertising, such as Zillow and Trulia. Others are “skimmer” sites, that try to sell leads to real estate agents, such as HouseValues, Homegain and RealEstate.com.
Most of these new businesses are not started by real estate brokers or anyone actively involved in real estate. Or if they are, the founder/brokers are soon fired, asked to leave or bought out. Most of the founders and CEO’s are business school graduates, software engineers, venture capitalists or have backgrounds in high-tech. They had nothing to do with real estate and chances are don’t now either. They could just as soon be selling widgets as real estate, and the ads or leads they sell could be for cars or computers, just as easily as they are for real estate. Again, it doesn’t matter to them.
Taking a quick look at these companies information, 100% of them were founded by men, and, by looking at their mastheads and “about” pages, most are run by men.
And isn’t it funny that, according to the National Association of Realtors, a majority of residential real estate agents are women.
A lot of these women have entered the workforce after their children are grown. They are people-people, not strategists, not computer programmers, not business school grads. They are attracted to the business for a variety of reasons but if you ask them, a lot will say they like to help people.
So, I can just see these Real Estate 2.0 guys sitting around a table talking: “We went to Harvard Business School and are only making $XXK a year and these real estate agents just went to some public university or even worse, a community college, and are making just as much as we are! And most of them are the same age as my Mom! Let’s use our superior intellect and design a better website and skim their customers off the top and then sell their clients back to them, for a price!”
Are these business school and IT grads going to schlep around from house to house in the evening and on Saturdays and Sundays, in the rain, perhaps with the Buyers kids in tow, week after week, month after month, searching for a dream home? No. But real estate agents do it, and those business school grads and real estate repackagers and website designers and computer programmers want a cut of the agents labor.
What stupid women! Silly housewives! They should have been busy learning html and computer programming and search engine optimization and java script and stuff like that, instead of driving people around to look for their dream home!
These Real Estate 2.0 managers and CEO’s want a cut of the agents labor, in the form of commissions. But one thing everyone should keep in mind is that if you don’t make it worth an agents time to be available 24 hours a day to go run out and preview the latest listing or to write up a sales contract or hold a first-time buyers hand through the whole sales process, the good ones will leave the business and you’ll be left with those not up to the task.
One can’t buy a house over the internet like one can buy a book or a new IPod or a pair of slacks. Someone has to get the Buyer into the house, probably into lots of houses, over the course of many weeks or many months. They have to be tour guides, educators, counselors, financial advisors, entertainers, sometimes babysitters, negotiator, and friend to many people. To say that has no value is wrong.
The subtext of what these real estate repackagers are saying is that the average real estate agent makes more money than she deserves, and they want a cut of the pie. And they know how to get it, by building websites to lure the new, young buyers who are entering the real estate market and who are used to researching and ordering everything online.
I don’t have a ready answer to this or a solution except to urge active brokers to keep up with technological advances as much as possible. Inevitably, the wired buyer will migrate towards the wired agents. However, there will always be those who require and need the assistance of a warm caring “people-person” to assist them in an important financial decision. Agents have a responsibility to keep themselves educated to deliver service and value in this changing marketplace. The business may change naturally as the agents and the customers and clients move through life. The average real estate agent is right around 50 years old. Yes, about the age of someone’s Mom. And the business will change. But to continually harp on the idea that these women (and yes, I know, some residential agents are men!) don’t bring value to the real estate transaction is underestimating the value that many do bring through caring and compassionate assistance on one of life’s important decisions. I don’t want to reduce this to a sexist or ageist argument. It’s more about a morphing business culture in the face of technological change and how best to adapt to these changes. But none of these advances and changes exist in a vacuum and there are real world consequences and meaning behind all parties actions, and it’s just something to keep in mind as we move through the process.