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The Future of Real Estate -- With Fewer Agents?




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.

But with all these new opportunities to improve the way people buy, sell and manage properties, which will stick?

Some argue that real estate agents will become obsolete, while others believe the way real estate transactions are closed will evolve. It's hard to tell which disruptions will succeed and which will fall by the wayside, but Patrick van den Bossche, president of Realty Executives, an international brokerage franchise based in Phoenix, believes consumers will never give up the information and transparency they now have at their fingertips.

"Data is king, but knowledgeable data rules," he says.

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."

Transactions

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.

Agents

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.

"Brokerage is going to become more and more like a luxury service," Warburg Peters says.

As a result, the number of agents in the industry will likely decrease. "I would expect that the number of real estate agents in the United States 10 years from now will be significantly reduced," Warburg Peters says.

There does appear to be room for real estate agents to specialize. According to the National Association of Realtors' 2018 Member Profile, based on the responses of more than 12,000 of the organization's 1.3 million members, 72 percent of Realtors report real estate as their sole occupation, which leaves 28 percent who earn money by other means or may work part time as an agent. The median gross income for Realtors nationwide in 2017 was $39,800, down from $42,500 in 2016, according to the report.

If the role of the traditional real estate agent decreases outside of the luxury market, agents not representing high-end clients have a lot of room to specialize in individual parts of the real estate transaction, from guidance in shopping for a mortgage to marketing fixer-upper properties or facilitating the closing process. They could also work to help aggregate the best data for consumers, or they could simply enter a different career field.

However the real estate industry evolves and modernizes, the goal for individual homebuyers and sellers remains the same: to make a purchase or sale that leaves them satisfied. Here are four things to keep in mind as you navigate a real estate deal in a changing industry.

Seek the platform that works best for you. You may want to assemble a team of real estate agents, attorneys and accountants to help you move forward with a real estate deal, or you may prefer to get a sale done as quickly as possible so you have cash in hand. Both options are available to you, and both can be beneficial, depending on your situation. Research all your options, and go with the one that will leave you happiest with the transaction.

You'll still be able to find an agent. The real estate agent profession is not dead and probably never will be, though it's likely to evolve. There are still agents available, and you can find them through a search online for professionals in your area, by clicking on a property for sale on a listing site or by grabbing a name from the "for sale" sign on the house down the street. You don't have to worry about not having an agent to help you, Warburg Peters says, as she expects to "continue to see the existing brokerage model, but fewer highly skilled brokers."

Consult a professional. A real estate agent isn't necessary for everyone, but you'll likely need the assistance of a real estate attorney, housing counselor or marketing professional, depending on the deal you're trying to complete. Ultimately, there will always be some nuances you don't understand, and it's best to get assistance where needed.

Don't rely on others to give you the info. It's the age of data, and there's no excuse to not conduct your own research on the local housing market, including where you can afford property and how much your current house may be worth. A simple search to get you started should yield multiple sources -- from Zillow to the U.S. Department of Housing and Urban Development -- to help you make a more confident decision.

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