5 Reasons Why Real Estate Professionals Aren’t Dinosaurs
Are real estate professionals dinosaurs? No. (But this guy is.)
Are real estate professionals going the way of the dodo?
A spate of recent commentary suggests that the role of the real estate professional is diminishing. The Wall Street Journal asked, “Are real estate agents dinosaurs?” VHT.com discussed how listing aggregators have shifted consumer attention away from agents and brokers. And 1000 Watt Consulting predicted that the real estate business will change as the wall between buyer and seller crumbles.
All of which leads one to think that real estate professionals may soon be extinct. But I disagree.
I would argue that you cannot liken a real estate agent to a traditional middleman, such as a bank tellers or travel agent. It’s one thing to ask a consumer to withdraw cash from an ATM, or book a flight to Chicago, without assistance. But it’s quite another to expect a consumer to negotiate and traverse the often-complicated terrain of buying or selling a home without an expert advocate on his side.
Let’s take a look at the five reasons why disintermediation – that is, cutting out the middleman – is unlikely in the cards for the future of our industry.
1. Comprehensive and complete property information is not available
For a consumer to make the best real estate decision – and the average client makes this decision once every 7 years – he must be able to see and compare all the available properties to determine the best fit, price, and valuation.
The multiple listing services (MLS) list most, but not all, available properties. By contrast, a local, knowledgeable real estate professional is also aware of an inventory of homes that are not currently on the market – “pocket listings,” in industry parlance. Without consulting an agent, the consumer has no way to know about these options.
2. Negotiation is the norm
We are not selling consumables, airline tickets, ball bearings, or books. Real estate requires negotiation — sometimes below list price, sometimes over, and sometimes with off-market homes that are not yet priced.
Multiple factors determine that pricing, including replacement costs, exclusive features, speed, urgency, financing, egos, and both parties’ unique motivations. In short, a real estate transaction – even using standard California Association of Realtors forms – is a complex investigation, negotiation, and closing.
3. No two products (properties) are alike
If you cut out the middleman, you’d better be sure that the product you’re purchasing is homogeneous and standardized. But unless you’re talking about a new neighborhood home development of 50 units or more, homes are like snowflakes: no two are identical.
They differ in square footage, floor plan, exposure, topography, finish work, price, and, most importantly, the emotional connection of the buyer or seller. A real estate professional’s unique market and product knowledge is priceless in these negotiations.
4. Transactions aren’t simple
Middleman-free transactions tend to be simple, such as a purchase that can be completed with a credit card plus a receipt. Once again, examples would be airline tickets, ball bearings, books, and some standard consumer products.
By contrast, a home search and transaction are complex. Even after a deal is ratified it requires the navigation of (and expertise in):
¥ Purchase / sale contract negotiation
¥ Disclosure review and inspection recommendations
¥ Escrow and title policies
¥ Appraisal due diligence, comparable findings and valuation
¥ Inspection report review and risk assessment
¥ Contingency removal and negotiation
¥ Risk management
¥ Property insurance
¥ Home warranties
¥ Closing and post-closing concierge services
5. Decision support requires knowledge and experience
Information, which used to be the province of real estate professionals, has become transparent and easily accessible. Know where to look, and real estate data is at your fingertips. However, information doesn’t equate to knowledge and experience – assets integral for navigating and successfully completing real estate transactions.
Access to information is not the attribute that defines a real estate professional. Rather, his or her value is determined by advice, decision support, and recommendations on how to proceed – or not – in a transaction. That experience and knowledge creates value for the client well in excess of any market-based (and often negotiable) fees.
We as agents recognize that the real estate industry is shifting and changing, and that advances in technology – most obviously, the Internet and the rise of listing aggregators – have altered the sales cycle. Consumers are better informed than ever and are often conducting a great deal of their own research before they engage with a real estate professional.
But that doesn’t mean the real estate professional is irrelevant. We recognize that our role as an advisor is changing at a rapid pace; however, our ability to innovate, reinvent, and enhance our clients’ experience will continue to secure their confidence in us.
For all these reasons, and for the five factors discussed above, I don’t believe our professionals are dinosaurs. Rather, I see it as the dawn of a new era of expertise and relevancy.
Matt Sevenau specializes in residential real estate, second homes, vacation rental properties, and income property. He can be contacted at Pacific Union International in Sonoma at 707.934.5630 or Matt.Sevenau@pacunion.com