Real Estate Disruption Is Happening – Are You Ready?

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Real estate disruption is happening as we speak. And even could cause a certain amount of pain for many agents, due to numerous factors it will continue to change the industry.

However, what actually happens (and its impact on real estate professionals) might look different than a lot of people forecast.

At this point in time consolidation of many different brokerages by big players shows no sign of slowing. In the US for example large companies have been acquiring brokerages for quite a while. But while these large players own the actual businesses, at the moment individual agents still own their relationships with clients. That might be changing if some of the current trends continue to take hold.

In the consolidation model the large corporations have their brokerages operating on rather slim margins and incent their agents to encourage their clients to purchase related products. Another way to look at this would be the agents bring in leads that can then be monetized by the corporation in the form of affiliated products to sell to their clients. These products could be appraisals, mortgages, title insurance, and other fees that get associated with every transaction. And with other competitive pressures, fees across the board have declined over the past 10 years.

As fees decline for the actual real estate transaction many believe that the number of agents working in the industry will decline. An alternate scenario could be that the traditional role of the real estate agent as a home ownership expert may rise again as the transaction-only model will increasingly become commoditized

But what does this mean to the future of the industry?

There are a few indications of the direction that the industry is going. Consumers by and large still support having a professional to guide them through the process. Just as they continue to require professionals in the legal and accounting industries they will still see value from those professionals who help them use their time and dollars effectively in a home purchase or sale.

However there are indications that there will become an ever increasing gap between a platform that allows buyers and sellers to connect with low fees and low personal touch and agencies that provide real value over a lifetime relationship with clients. The result of the former is that the number of agents will decrease as technology fills the gap for those consumers who are primarily price motivated.

Keep in mind that for the vast majority of consumers a real estate purchase is not a frequent transaction. So they will still require agents that keep up with trends and provide transactional and market expertise

There will also be experimentation with different fee structures. This will continue on for the foreseeable future and likely culminate in different models based on different consumer segments and preferences unless government legislation intervenes.

But like many high-value industries relationships will remain paramount. And if there is any lesson to the previous decade or so of technological innovation it’s hard to duplicate quality relationships with a technology platform alone. So it is paramount to continue to develop deep relationships with clients that will endure over many years. There are many ways to do this but it really comes down to how you create real value for your clients by understanding their true goals and using your expertise (and hard work!) to get them there.

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