Disintermediation. Remember that?
Back in the late nineties, it’s what everyone was talking about: “the middleman” – Realtors – being taken out by technology.
To some, this notion now seems as quaint as its millennial counterpart, the Y2K Crisis.
For while putting listings on the Web did change consumer behavior, it did not cut close to the transactional bone.
In fact, according the California Association of Realtors 2009 Buyer Survey, 90% of all buyers became aware of the property they eventually bought through their agent.
That tells me the 15-year war over listings data is even more pointless than I thought. Turns out consumers still need a Realtor to find a home even if they search online, on their own, for months.
So the number of Realtors increased with the growth of the Web. The NAR grew fat on empty new member calories. Consumers became distracted by dreams of Travertine tile and Tuscan-styled clubhouses.
I would not call this a victory for the industry.
And I think there is another shoe yet to drop. Because it’s still hard to make a case that we need more than 500,000 Realtors, let alone a million. And consumers continue to hold the profession in low esteem at the same time they are becoming less satisfied with their own agent – something we have never seen before.
So at the risk of being ridiculed, I offer this for your consideration …
Disintermediation revisited
Yes, this has to do with technology. But the technology is merely the implement. The still-unsatisfied consumer will be wielding it. And this time it will cut closer to what I have tended to think of as the indissoluble core of Realtor value: Nuanced street-level knowledge delivered in human form.
Here are two early signs that indicate how this value may be jeopardized in the not-to-distant future:
Wolfram Alpha: Brains in the cloud
This is a technology project that has received tons of play outside our industry. Wolfram Alpha is a “Computational Knowledge Engine“ that bridges that gap between humans and data. Whereas Google can give you links to places that are relevant to your query, Wolfram Alpha can discern the relationships between disparate bits of information and present them in an intelligent fashion.
Here’s what results from my query “30-year fixed”
Right now, Wolfram Alpha derives results from over 10 trillion pieces of data, using more than 50,000 algorithms and models. Their store of data is growing quickly.
The company released an API last week and an iPhone application this week.
This unfolds in an environment where data is becoming more available (note, for example, Amazon’s Public Datasets on AWS) more accessible (Factual, a new open data project launched by a group of heavy tech hitters, launched just this week) and more human friendly (make your own data mashup at geocommons). MLSs can debate VOW rules until hell freezes over; the rest of the world’s information is going to get a lot more useful to the masses fast.
While Wolfram Alpha states out front that this is a “long-term project” and despite results that are a still little hit-and-miss, you can see the rough outlines of where this is headed.
Consumers will get the granular, contextually conditioned information they need from Realtors today from elsewhere tomorrow.
Aardvark: Trust in action
Aardvark helps users make decisions using their social graph – the people to whom they are connected online. While a service like Yahoo! Answers delivers advice from people the user does not know, and Trulia Voices and Zillow Advice often deliver it from people the user is inclined to distrust (real estate salespeople), Aardvark delivers answers from people the user knows and is inclined to trust.
Where’s a great Thai place in Rockridge?
Who is the best chiropractor in Noe Valley?
Is Redwood Heights kid friendly?
Who’s the best realtor in Upper Laurel?
How should I price my 1 bedroom condo on Lake Merritt?
With Aardvark, you get the answer from the most qualified person in your social graph.
Here’s another interesting stat from the 2009 California Association of Realtors Buyer Survey: only 18% of “Traditional buyers” and 2% of “Internet buyers” found their Realtor through a referral from a friend or neighbor. Very successful agents do the bulk of their business by referral. This suggests that a whole lot of sub-par agents get hired through other means.
If the social Web can be made into a decision support platform through services like Aardvark, then these “other means” will diminish. Good experiences delivered by good Realtors will ripple through a referral Web we could have only dreamed about five years ago.
And those “other means?” Well, the entire online real estate category is pretty much dependent on their survival, isn’t it?
It will be interesting to see how this plays out.
Peace
This is a good news post. It is not an anti-Realtor post. I see a future where fewer Realtors do more deals and make more money.
While better data and social tools in the vein of Wolfram Alpha and Aardvark may indeed disintermediate a lot of weak agents, these very same things will enable the pros to scale.
I like that. Do you?
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Great point about buyers doing more research online yet still finding homes most often through agents. If consumers are doing more work – productive or not – they’re going to question what value their agent is providing – (productive or not).
Nice post Mark. I agree the technology will continue to adapt the way REALTORS will deliver their services. I also tend to believe that the ones who thought it was “easy money” with a low threshold of investment on their part are already moving on and will continue to.
When I ran the MLS in Boise, most really good agents and brokers advised me they would be willing to pay 3 or 4 times what they pay for MLS services for two reasons. 1) They could have access to more quality tools like the ones you listed above 2) the financial barrier to entry would be higher so in theory there would be less agents and brokers out there providing mediocre service.
As a home shopper, it seems that once I zip through the existing inventory in my target geography (often classified as “existing” because it’s mis-represented or mis-priced) I have little choice but to rely on my agent to “scoop” me on listings BEFORE they hit the public internet. The value it seems often comes from what’s hidden from public eyes, even if its only for a day or two. Let’s see a search engine crack that code.
Interesting post .. Interesting debate .. I find the technology evolving faster than either consumers or the industry can keep up with. How can any of these models be sustainable businesses when there’s a new game in town every other month.
I really like the idea of the “other means” becoming less viable.
Dave
Bring it on.
Even though there are a LOT of good Realtors our there, I’m afraid there are some bad ones. LOTS of them. I’ve met them.
Now, what Amy said (above) is true, I think. Once the RE market started to decline, a disproportionate number of Realtors left as soon as their next cycle of dues to their MLS/NAR/state boards were due. Most of these were agents who were very new to the industry, lured by the promise of commission checks falling from the sky. Once these people realized that the job is a lot of WORK (and hard work, at that), they ran faster than Usain Bolt with his hair on fire.
I am not in the least bit anti-Realtor. I used to be one, many of my friends and family members are either Realtors, or connected to the industry in some other way. Traversing the slippery contract negotiation slope is beyond the abilities of most consumers, so it behooves them to hire an agent to work for them.
I hope that tools like WA, Aardvark … and whatever else happens to come down the pike really do separate the wheat from the chaff. There are good — no, GREAT — Realtors out there whose livelihoods depend on it.
I remember the panic with technology in the 1990′s and it is good to see that Realtors are still relevant and our impending demise was greatly over-blown.
Aloha,
Keahi
Anything that helps the true cream rise to the top is helpful, and social media should be a tool to evaluate agents in new ways before signing. If we combine this with easy access to relevant data, by way of tools like Wolfram Alpha, then we have as close to a 360 degree view of the agent or brokerage as one can hope to get.
Interestingly, too, tools like WolframAlpha and other data aggregates well help expose the SM phonies out there, and I think damn near everyone but they is looking forward to it.
As a home shopper, it seems that once I zip through the existing inventory in my target geography (often classified as “existing” because it's mis-represented or mis-priced) I have little choice but to rely on my agent to “scoop” me on listings BEFORE they hit the public internet. The value it seems often comes from what's hidden from public eyes, even if its only for a day or two. Let's see a search engine crack that code.