Real Estate is About People - Not Technology

November 6, 2018

 

We progress into the digital age and the computer geeks toil diligently in their garages to create the next "App" that will replace the real estate agent.  The "industry" responds as though each new app is another nail in its coffin.  In my humble opinion, The death of real estate is greatly exaggerated.

 

I appreciate new technologies that increase efficiency.  Technology can make the mundane and repetitious more efficient for sure, but the very nature of automation can make things more complex.  Case in point - email.  No one can argue that simple email has made communications more efficient;  it's an essential business tool of today.  If you add in the millions of viruses, bank fraud, spam, etc., can we say it's made things more efficient or more complex?

 

Each state licenses their brokers differently.  Their laws, education, responsibilities, etc. are governed by unique sets of laws for each state in which they're created.  The predominate manner in which brokers and agents work is through the "Independent Contractor" agreement.  Sales Agents affiliate with brokers, who shoulder legal liability for the agents actions.  Independent contractors are their own bosses.  They cannot be forced to comply with anything beyond law, fair housing, and ethics.  There are no schedules to adhere to nor compulsory breaks or lunch times, and the broker can only mandate a work product - not the manner in which it is created.  They are self-employed and their own boss.

 

There is a principle in real estate we learn called "The Principle of Competition".  This principle is the theory that when there is money to be made, competitors enter the market.  In the beginning, money is plentiful as there are few competitors.  As more competitors enter the market, money and margins dry up and the market saturates.  This principle can be applied to any business - or any facet of any business.   We're seeing this play out across the spectrum of real estate at every level.  The market is hot, so more people are moving in.  Data is plentiful, so there are more software companies moving in.  Smart phones are everywhere, so there are more "app" developers.  The media is interested, so there are more TV shows.  

 

Portal websites are now players in the industry.  At one time there was only Realtor.com and the portal was merely an advertising venue for Brokers.  Now there is Zillow.com, Homes.com, Redfin.com, and Trulia.com just to name a few.  Every major real estate brand has the exact same data content that all the Portal websites have.  Competition is fierce, and margins are declining.  Every one of them has a new way to skin the rabbit, a new way to handle leads, and a new way for customers to contact.  Real estate consumers and brokers are awash in choices, which leads to more complexity.

 

Artificial intelligence and predictive analytics are now the big rage.  There's a few players, and every portal is attempting to develop their own suite of analytics.  Data is king and whomever has the most, wins.  If these programs deliver all that's promised, we can all set up the Wall Street version on the stock market and retire.

 

The major brands are doing their own thing.  Realogy, owner of C21, Coldwell Banker, ERA, Better Homes and Gardens, and Sotheby's has ZAP and CBx, and Keller Williams is developing Kelle.  ReMax is also in the hunt.  The major brands are pursuing a "soup to nuts" back office system that integrates everything.  Customer relations, websites, drip campaigns, analytics, predictive analytics, appointments, etc.   Top Producer, an old yet still relevant back office system is a great tool, but never really got traction in the industry for a host of reasons - primarily because real estate agents are independent contractors and they will only do what they want.   The result of all of this is complete confusion on the part of the real estate agent and broker.  More choices, more complexity.

 

The sea of competition for raw data, analytics, apps, smart phones, management software, portals, brands, and other additions ensures the process grows ever more complex and subject to fraud and misrepresentation.  Real estate agents simply don't want to learn a new program every 3 months.  They don't want software with steep learning curves.  They don't want to be compelled to use anything they find a hindrance to their day to day activities.  Learning a new software program is just that to many agents - a pain in the behind they neither have time nor desire to learn effectively.  They cling to the tried and true.

 

Real estate agents and brokers are constantly barraged with marketers and emails touting the latest and greatest software and the reaction of the industry is predictable - absolute confusion and uncertainty from too many choices.  No one knows what way to go, what app is best, or what portal is most effective.  The result? They bury their head in the sand as it relates to software, and continue to do what has made them successful for decades, i.e. meet people face to face, talk on the phone, show property, and write contracts.

 

The data the portals use and the listings the portals advertise are a byproduct of the agents day to day activity.  None of this software exists without that fundamental human contact between the seller or buyer and the broker.

 

So where is the industry heading?   As the market softens, real estate brokers and agents will stop spending money on what they perceive as non-essentials, and musical chairs will begin for the software companies.  Apps will serve to make some of the processes more efficient - signing documents, scheduling appointments, keeping up with your contacts.  The fundamental aspect of this industry - a relationship built on trust through face to face contact, phone calls, emails and consistent follow up will win the day.  No matter how you slice it, real estate is a hand to hand, face to face business.  There is no app or software that can replace the human experience - and buying or selling your home is one of the most human of experiences.

 

In summary and in my view, real estate brokers aren't going anywhere.  Sure - the methods of communication will improve, broker models may change, the repetitious and mundane aspects will be automated more effectively, and the data will become more universally accessible.  However - you will never smell cat pee in an online picture, never see the dust bunnies lurking in the corner of a video, and never hold a computers hand when you buy your first home.

 

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