Is there a need for an agent or broker in the technology-rich real estate market currently accessible to the public? What role, if any, does an agent play in this evolution? Can the seemingly transparent and stress-free real estate world of companies such as Open Door, Knock, Orchard continue to assume the “agent” role? We will analyze each of these questions and break down certain “myths” that exist that may or may not be factual. Likewise, we will look at how all of these innovations pertain to the future of the buying and selling process.
To start with the aforementioned “myths,” it is imperative to look at a little bit of history. Contrary to popular belief, the emergence of a digital presence to replace an agent’s role did not emerge in this past year. This presence can be traced back about 35 years. The first true step in the innovation of real estate and its gaining more of a digital presence was in 1996. Innocently enough, this grew out of a minor change. The initial goal was for the betterment of the overall buying and selling process, with maximum convenience in mind. This first digital “baby step” saw MLS and newspaper home listings become much more accessible online for the first time.
It was at this time that the National Association of Realtors (NAR) licensed the website Realtor.com to a company called Homestore. They launched a public website showing property listings on a large, national scale for the first time. Realtor.com would become the exclusive online listing source for several huge, national media outlets at the time. Noticing that this could lessen the role of the realtor, NAR backtracked a bit and put restrictions on Homestore. Seeing the situation could turn into a costly problem; the NAR chose their convenience over that of the buyer and sellers. They began disallowing Homestore from including pertinent information for the consumers. This included recent and past home sales to accurately determine the prices of their inventory.
Even with the NAR putting restrictions on Realtor.com, they began realizing that the writing was on the wall. It would only be a matter of time. The NAR’s withholding of information aside, they realized the internet and digital direction the industry was heading was inevitable. The emerging digital platform was expected by most in the industry to help lessen costs and erase excessive fees in the home buying process. However, just the opposite was happening with Realtor.com. By 2005, tech experts and real estate professionals would begin to look into other digital possibilities.
What had first appeared a breakthrough to add convenience and lessen costs would prove to come back to haunt the NAR and Realtor.com. Their initial “haunting” would come in October 2005 with the introduction of the first independent home search engine, Trulia, this was the equivalent of Google for real estate. Trulia went directly to the source for listings to avoid the restrictions NAR had put on Realtor.com before them. Thus, now all pertinent information needed for potential home buyers was easily accessible.
Trulia went further than Realtor.com was ever even expected to. They didn’t just show homes for sale or that had sold. Crucial statistics and demographics were now available through Trulia. Stats showing important areas such as crime, schools, and commute times were now at the buyer and seller’s behest. Maps and local area amenities and trends for surrounding areas and even exact neighborhoods were at the searchers’ fingertips. Early that next year (2006), another website emerged that would eventually prove a powerful independent home search engine. This was Zillow. They would introduce the Zestimate. This gave consumers instant access to home price estimates. For the first time, there was no need to communicate with an agent in any way.
Trulia, this was the equivalent of Google for real estate. Trulia went directly to the source for listings to avoid the restrictions NAR had put on Realtor.com before them. Thus, now all pertinent information needed for potential home buyers was easily accessible.
Trulia and Zillow’s emergence saw both independent home search engines overtake Realtor.com. The number of visitors to each website grew by staggering leaps and bounds. Both companies would go public, Zillow first in 2010 and then Trulia the following suit in 2012. The two companies eventually merged in 2014. Consequently, according to 2019 statistics, a combined 216 million potential homebuyers visited the two monthly. This is compared to 76 million visits a month received at Realtor.com.
Unfortunately, this promising early rise of the websites did little or nothing to absolve home sellers of any expenses. Case in point, in 2005, the standard six percent commission received by agents totaled $60 billion annually. Scratching their collective heads, many in the real estate field felt maybe some things would never change. This thought is supported as recently as 2018. The same 6 percent commission accounted for over $80 billion in agents’ and brokers’ pockets in that year.
So, yes, they saw and attracted considerable numbers in the visitor column. But truth be told, home search engines like Trulia and Zillow did little to help buyers or sellers. Other than allowing them to find and utilize listings on the two sites, they did not help at all. As a matter of fact, sellers were now in worse shape than ever. These sites, such as Trulia and Zillow, gave buyers easy access to more information than ever before. In comparison, the sellers gained no advantages whatsoever.
Want to talk irony? In a twist entirely adverse for serving the initial purpose they’d hoped, Zillow and Trulia became dependent on the exact demographic they tried helping others become less reliant on. The real estate agents. How could this happen? Well, plain and simple, the websites need money to operate. Thus, smart agents would collectively pay these sites billions every year to advertise near their home listings. So, the initial goal here was to help the buyers and sellers. To knock down at least some costs they endure from agents in this process. Unfortunately, once dependent on income from the agents’ ads, Trulia and Zillow would be assisting the realtors and not the consumers as originally planned.
Unlike previous efforts, the innovations in the past decade or less are not just those of tech companies. Many of these independent search engines and sites have “smartened” to the realtor process. Thus, many became licensed brokers. What exactly does that mean? Well, for one, they can perform all or at least most parts of the selling and buying process. This includes the financial end with no agent and no agent commission fee. But wait, wasn’t that to be the case back in 2005-06, too? What is different between these new sites and companies and what we saw when Zillow and Trulia first appeared?
Remember we said, “eventually, all things change?” Well, moving on to the present and looking ahead to the future, and despite failed initial tries of Trulia and Zillow, there are two factors that no industry is impervious to. Technology and Science. Both of these are always evolving, and many times are a driving force in “re-inventing” the way things are done. While no final verdict is in of yet, this combination has undoubtedly played a large in the past decade’s evolution in residential real estate. Consequently, advances in technology and science have allowed companies like Orchard, Open Door, and Knock to “change the game.” Oh yeah, and the billions of dollars these companies have at their disposal doesn’t hurt their survival chances either.
Technology. Science. Billions of dollars. Have to say, it appears that’s a pretty trio to have working in your favor when setting out to “change the game.” But how do these new companies work? What is going to make things different this time around? The first and maybe most important difference we mentioned above. These search engines have become “licensed brokers.” So, when a buyer or seller approaches Orchard, Open Door, or Knock, they are now experiencing the real estate version of “one-stop shopping.” The steps and information that previously could only be accessed through an agent but now is easily retrieved through these companies, is staggering. Given they are now licensed, Orchard, Open Door, and Knock all eliminate the stress and costs of the whole “readying” or “staging” your home for the purchase process.
How are they able to do these things? Well, to start, they are actually inspecting the homes. Thus, they can accurately price each down to the smallest of specifics. Things requiring agent assistance before such as, upgrades, renovations, and premium features and factoring each into a sales price, no longer calls for the realtor assistance. Even more unfathomable years ago, but a very real part of the independent search engine real estate “evolution” is the funds they offer throughout the buying and selling process.
These companies are, for the first time allowing the online buyer to make instant, strong offers on a home they like regardless of the status of their old house. Things such as “finding a buyer” or having a contingent sale were once major setbacks in comfortably placing an offer. With Orchard, Open Door, and Knock offering up to $25,000 to get a buyers’ old home “fixed up” ready for listing, putting forth your best offer is made a whole lot easier. As if $25K is not enough, these companies also pre-approve those eligible for a new home loan, including the down payment. So there is nothing at all holding these searchers back from sealing the deal once they find the home of their dreams.
The two most important factors to any real estate transaction and building a customer relationship are transparency and trust. These independent websites considered this, as they give a buyer or seller insight into every aspect of their transaction as never before. They help the client to 100 percent access and transparency in every step of the process from contract to closing. They even make you privy to their inspection process and show how they arrive at the value of your old home. Speaking of that “old house,” in the case that you have already closed on the new purchase, the worry of double mortgages has also been eliminated. Wondering how? Well, simply put, Orchard, Open Door, or Knock will buy the house from you and list it for sale. They literally have all bases covered and advise and inform you the entire way during the process.
In fairness to the real estate agents and brokers, we don’t want to imply that they are not good at their job or not hard-working, honest people. Over the years, we’ve had the pleasure of working with some wonderful men and women within that field. We wish these folks nothing but the best. But speaking from a financial standpoint and for overall convenience in what can certainly be a stressful process, it is hard to imagine agents miraculously discovering a way to compete against these newer, industry revolutionizing methods that the digital brands can provide. History has certainly shown the agent or broker to be resilient and find ways of surviving with their lofty six percent commission cut intact, time and time again. However, if they can not find some methods to “keep up with the Jetsons” and figure it out soon, regardless of resiliency and survival in the past, our friend the realtor may be forced to go the way of the dinosaurs and become extinct as they watch these online brands “change the game” of residential real estate for good.