As the CEO of a real estate group and someone who benefits from the traditional real estate brokerage model, it’s an important question – Can technology efficiently replace real estate agents?
I’ve lost count of the number of online conversation threads berating the real estate sector for merely being a conduit for easy commission. The apparent simplicity of listing a property online and managing prospective buyers’ payments makes real estate brokerage seem ripe for tech disruption.
From a 30,000 feet view, it should make sense. We’ve already seen tech transform how other industries, like travel, operate. Global internet access gave rise to online travel agencies, which, in turn, prompted the advent of self-booking tools such as booking.com, Airbnb and Trivago, which effectively cut out the traditional travel agent role.
Many people believe the same can be done with real estate. In the last decade, tens of billions of dollars have been spent by investors on hundreds of companies with new business models designed to disengage brokers from the property value chain. We saw a boom in ‘for sale by owner’ sites, where individuals could easily list and sell their properties.
We have also seen many formats of fixed fee agencies worldwide, like Purplebricks, where you pay a fixed fee to use the platform and upload your listing, with a zero-commission guarantee. Beyond that, we have had i-buyers who provide you with an instant valuation and purchase rather than having to go through a broker, and there have been various models that provide automation and AI to replace the agent.
However, most of these models have either failed or run out of cash after huge losses. Today, over 95 percent of all real estate transactions around the world are still conducted through a real estate broker. What became clear is despite its imperfection, the traditional agency model is resilient as they retain a key element; agents are fully aligned with the objective of selling your property as they will only get paid upon completion of the sale.
This fundamental alignment of interest creates an absolute focus on resolving the idiosyncratic issues needed to complete a transaction. It also drives other success factors, including rationalising the sale price and iterating the listing before the property is advertised.
Most people do not see the preliminary work done, from getting the photos, writing descriptions, prepping marketing, drafting layouts, gathering documents, AML check and regulatory approvals. With a human agent and a focus on the commission, agents ensure that each step in the pre-listing is designed to ultimately create a sale.
The tech exists to enable sellers to handle all of those steps, but from e-agency formats in the UK, we have seen that sellers are actually poor at completing those steps, and the value lost due to poor images or low positioning on a portal can be far greater than the potential commission payment. In addition, buying or selling a home can be incredibly stressful, so the comfort of having a qualified, experienced individual who knows the area, knows the ins and outs of the industry and is your go-to throughout the process is invaluable.
Proptech startups that try to digitise the brokerage process tend to make the mistake of throwing the baby out with the bathwater. They build a whole new structure rather than keeping the elements that work and adding tech to fix the consistently problematic parts – such as follow-up or communication.
When considering the future of real estate brokerage and ways to improve customer experience, we need to retain the elements that are working well. Today, most large agencies already have deep integrations with technology. CRM systems drive all customer and property listings processes. These are integrated with a whole range of marketing and content suites.
Gamification software drives motivational programmes, and integrations with portals mean that all properties are listed in real time. The future will likely be a far more empowered experience for the customer, but for the foreseeable future, that will likely be driven by real agents working with better tech rather than just the tech without agents.
Buyers and sellers can expect more immersive and three-dimensional content on listings, better virtual viewings, and better communication from agents as they are supported by automation, AI far more content and simpler and easier payment process. However, the core of this increasingly tech-driven service will still be the quality and hard work of great real estate agents.
Ryan Mahoney, CEO at Betterhomes