In 2010, a lot of industry talking heads and outsiders were predicting that real estate agents would be extinct by the next decade. A lot of people speculated then (and still do today) that real estate agents would go the way of travel agents and stock brokers. They said consumers would be able to navigate the home transaction in a similar fashion with online tools and “disruptive” companies for a fraction of the cost on their own without any guidance from a trusted advisor throughout the process.
Agents are alive and well and thriving and commission amounts are hardly unchanged since 2010. The real estate industry is experiencing some massive and sweeping changes, but agents are here to stay and will not disappear from the transaction anytime soon. The agent role has evolved from an “information gatekeeper” role to a Superhero “information hub” in today’s real estate world!
On average, an American consumer will only purchase 2–3 homes in their entire life, and for most people this is the largest financial decision they will ever make. The fact that you only go through the transaction process so few times, and the fact that it is such a nerve wracking and financially burdensome commitment is the reason the agent will remain relevant far longer than most people think. People trade stocks daily and take trips all the time, so these transaction experiences can be automated and replaced more easily by technology.
Humans are not robots (yet) and the purchase or sale of a home is a very emotional process. Homes are where people cook dinner with family and close friends, have kids, have holiday celebrations, and make memories that last their entire life— the most private things in your life happen in your home; comparing flights side by side on Expedia or shorting some Tesla stock on Robinhood are very different experiences than choosing a place to call home.
Let’s take a look at the evolution of the real estate industry over time and how the agent role has evolved from the almighty “information gatekeeper” to what I am calling the Superhero agent who is a top notch “information hub” in today’s real estate world.
- In the late 1800s, real estate brokers regularly gathered at the offices of their local associations to share information about properties they were trying to sell. They agreed to compensate other brokers who helped sell those properties, and the first MLS was born, based on a fundamental principle that’s unique to organized real estate: Help me sell my inventory and I’ll help you sell yours. (NAR Article).
- The format of this early setup in the industry has hardly changed in present day America.
- From late 1800’s to Early 2000’s: This period of time marks the reign of the “information gatekeeper” agent. During this time period, consumers relied on their local agent to even know what was on the market and MLS associations started holding (and still do today in many cities) weekly agent meetings to share industry updates and then tour new listings that are coming to the market. The agent and MLS associations were the only gatekeepers who had access to listing data so the power of their information is what drove their value.
- Traditional “information gatekeeper” agent workflow during this time period: agents attended meetings in neighborhoods where they sold homes, learned about new inventory, left the meeting, informed customers of new listings, and then took them to see the homes. Consumers had no direct access to listing information and they were forced to use agents to even know of market inventory. The “information gatekeeper” agent was the most important person in the room in the transaction process because consumers had to work with an agent to get information about homes.
- February 8th, 2006-Present Day: The era of information gatekeeping ends and the reign of the Superhero “information hub” agent begins. Zillow launches on this date and their site gets over one million visitors in its first three days of launching. Consumers can now access listing information directly and browse homes online 24/7 to see what is on the market in areas where they have interest in living.
- The Superhero agents of today are “information hubs” meaning they have realized their role has evolved and attending to the needs of the consumer is their main focus. Agents are no longer the gatekeeper to listings, and many times consumers find the home they want to purchase completely on their own. The Superhero agents today deliver value by being an information hub for their client — giving them supreme confidence and guidance navigating the minefield process of going through an entire home buying or selling transaction. Their value is extremely great in today’s world but it has changed drastically over the last 15 years.
- The Superhero agents of the future will possess the following traits:
- They will be master networkers and experts on the areas where they sell homes
- They will understand all of the trends in the industry and be able to explain new concepts and changes in the industry concisely and professionally to their customers
- They will be leaders in their respective communities
- They will always think in terms of what is best for the customer
- They will welcome innovation, particularly advances in technology, and understand it is a natural path for the future
These Superhero agents that embrace change will become more successful than they ever imagined by utilizing technological tools to 10x their output in the future.
- I believe the role of the agent is actually getting more valuable as more technology hits the industry and consumers have multiple options to acquire or dispose of a home. Consumers need guidance to navigate the home buying and selling process and the local Superhero “information hub” agent is more relevant than ever in these conversations. Superhero agents will be able to thoughtfully answer any question that is asked of them from potential customers, and by being the most informative and up to date agent in the room their value will increase immensely.
- Information hub agents will make considerably more money over the next decade than they took home over the past ten years. Superhero agents will be able to sell twice as many homes with the aid of technological tools to save them time.
- Commission rates will get compressed as we move into the future, which is a net positive for the industry because part time agents will get pushed out. Only full time serious agents will remain in the marketplace, and the consumer experience will get even stronger than it is today.
- Venture capital money will continue to flood the real estate space. The astronomical fund raising rounds have not even scratched the surface of what we will see in the next decade investment wise in the real estate space.
- All of the big nationwide brokerages are in a technology arms race; they all know that if they have the best internal tech or tech platforms available to their agents through their brokerage company, they will be able to attract the top agents and talent to their firm, thus increasing sales and revenues for the firm. Smart agents are transitioning into information hubs for their clients, and agents want to work for the brokerages that allow them to focus all of their time on their clients and let technology handle all of the repeatable and boring behind the scenes tasks.
I love to read, and one of my favorite authors is Seth Godin. His recent blog post inspired me to write this post: The travel agent’s problem
until next time.
over and out.