Over the past decade or so, we’ve witnessed massive shifts in how consumers purchase products and services. Whether it has been in travel, consumer goods or legal services, technology has enabled the consumer to work more in a self-service mode, as well as save on costs, fees and expenses. But, will we ever see the day when real estate brokers are no longer relevant?
Considering that a real estate purchase is often part of a multistage process, we have to try to understand if each stage can be served and managed by a technology solution, without a broker involved. Let’s explore the typical stages of a consumer real estate process:
1. Need: A buyer decides to purchase a home.
2. Location: The buyer identifies a region or area to look in.
3. Selection: The buyer selects one or more homes of interest.
4. Inspection: The buyer physically or virtually visits one or more selected homes.
5. Offer: The buyer assesses the market value of a certain home, and makes an offer based on market conditions.
6. Negotiation: The buyer and seller negotiate a price acceptable to both
7. Escrow: The home becomes a pending sale, and the buyer escrows a deposit, conducts a formal inspection and performs due diligence on the title, open permits and other property encumbrances.
8. Closing: The seller hands over the keys and title. The buyer hands over the funds (via the escrow agent).
Historically, a real estate broker has been the facilitator in all of the steps above. In fact, the selection process is often handled by the broker, based on his or her knowledge of the inventory in the market. The MLS provides a list, but the broker provides the knowledge.
Similarly, the negotiation of a fair price is often mediated by the brokers, as advisers to their buyers and sellers. Residential real estate usually carries an emotional consideration by both the buyer and the seller, so even the understanding of market pricing is often not sufficient to bring the parties together.
In discount real estate, such as we are seeing with Zillow’s direct buy model, there may be circumstances where a home is purchased in an online shopping cart. But I don't see this as a growing trend. In more expensive real estate, especially luxury real estate, the buyers and sellers rely on the expertise of a real estate broker adviser. And, in some cases, the buyers or sellers want to take a step back and allow their brokers to handle the sale with little effort on the part of the buyers or sellers. More often than not, a buyer will say to his or her broker, “What do you think?” when trying to decide which property to pursue.
Technology does, however, have a growing role in this process, both as tools to help brokers and buyers as well as systems that ensure the accuracy and legitimacy of transactions. Some examples are:
• Tools that will streamline how inventories are posted and marketed. Today's MLS listings are syndicated to traditional web-based portals and websites, and by the nature of these technologies, they can take days or weeks to post. Soon, listings, marketing materials, showing requests and offers will be delivered in real time, through apps and targeting mobile devices. The meaning of "just listed" will change to a more accurate "just listed this second."
• Brokers will have tools that they train via artificial intelligence (AI) to assess and outline the value and desirability of neighborhoods and properties, and their clients will have access to the data via apps and tools. For example, a buyer may use a specialized app to identify a neighborhood to explore. This broker-driven tool will advise the buyer, and the buyer will get instant, online feedback -- all based on the broker's programming. It will be almost like getting a digital opinion by the broker, but using only AI and technology.
• Systems that will capture and report real estate transactions as they happen, in real time via smart contracts, allowing brokers and buyers to make important decisions about properties they are pursuing. If a buyer is about to make an offer on a home in a neighborhood, and during this negotiation other sales are taking place, this as-it-happens data will have a profound impact on the buyer's purchase strategy.
• The blockchain will put the parties together in real time, enabling the signing of contracts, escrowing of funds and filing of government documents to be easy, direct and hack-proof. The "paperwork" in a real estate transaction will become minimal, trusted and seamless, and the brokers will be able to focus more on creating deals and the relationships with their clients.
So, to answer the question of whether the entire real estate buying process could eventually eliminate the broker, I would say that it’s highly doubtful. Brokers will continue to develop tools to make the process easier and more convenient, but based on my own experiences, buyers and sellers will always place value on the real estate broker relationship. The tools and technology will just make these transactions easier and safer to conduct.
