The real estate industry is facing disruption, and not just on one front. New real estate brokerages are offering an alternative to the way agents do business, tech startups are providing more information and ease of access to consumers and professionals, and companies are helping consumers bypass the need for a real estate agent altogether.
But with all these new opportunities to improve the way people buy, sell and manage properties, which will stick?
Some argue that real estate agents will become obsolete, while others believe the way real estate transactions are closed will evolve. It’s hard to tell which disruptions will succeed and which will fall by the wayside, but Patrick van den Bossche, president of Realty Executives, an international brokerage franchise based in Phoenix, believes consumers will never give up the information and transparency they now have at their fingertips.
“Data is king, but knowledgeable data rules,” he says.
[Read: The Guide to Selling Your Home.]
Data and Service
Data continues to take on a more important role for consumers, who are looking for transparency in the market and for hard numbers to help ensure their decision to buy or sell a home is the right one. Following the housing bubble burst in 2008, it was apparent how little consumers knew about the major financial decisions they were making when it came to buying a home and getting a mortgage.
Since then, transparency and the availability of information has become vital to the homebuying process, evidenced by the rise of popular real estate information sites like Zillow and Trulia, which offer consumers free access to information about houses on the market, potential home values and recent sales.
Historically, a major role of real estate agents has been to provide information that wasn’t available to individual buyers and sellers, such as median sale price, the number of homes for sale and details about individual properties. But with so much information now available to consumers online, the real estate agent’s role must change, explains Clelia Warburg Peters, president of Warburg Realty in New York City.
“That shift from being guardians of information to really being professional service providers … [the industry has] been very, very slow to recognize and adapt to,” she says.
At Realty Executives, preparing for the future of real estate has been focused on remaining in step with the newest technological advances, including maintaining a website that's dynamic for users – including interactive maps, easy-to-access analytics and user-friendly listing details – and keeping up with blockchain technology and the use of cryptocurrencies. “We decided to build our technology from the ground up,” van den Bossche says. “We believe very firmly that we need to be native in technology.”
It’s not just the way people pay for a house that may change – it's the basics of the transaction itself. Van den Bossche says future methods of payment like cryptocurrency and the potential for new financing options will require greater specialization on the part of real estate professionals. Agents will need to step up their knowledge in these areas and be able to walk buyers and sellers through each process.
“The management of real estate transactions will change dramatically,” van den Bossche says. That means agents must be able to make clients feel comfortable and confident in their decisions during the closing process, whether the deal uses a traditional or nontraditional process, he says.
Consumers will also need to understand new buying and selling options offered by iBuyers – companies such as Opendoor, OfferPad and Zillow Instant Offers that are able to purchase properties with cash on a large scale and flip them for a profit. That means homeowners will likely receive an offer for less than they could get if they listed their property with an agent, made improvements to the home and marketed the home to the public. The flip side is that they will have a quick sale, no need to make updates to the house and receive a cash payment without having to pay commission.
“What they’re offering is very compelling to consumers,” Warburg Peters says. Many homeowners would be more than happy to forgo some profit in exchange for time and money saved by not having to list their house with an agent.
If agents aren’t needed in the same way or for as many transactions, what does the profession’s future look like?
The industry is already seeing change, as companies with nontraditional platforms like Redfin have real estate agents that show and list homes, but there are specialized roles for open houses, marketing and the closing process. Many nontraditional brokerages pay agents and other employees a salary, making the commission less of a sticking point, and as a result, sellers pay less in closing costs.
Van den Bossche says he expects a "course correction industrywide,” to adopt similar practices to better meet the evolving expectations of consumers.
As within other industries, emerging technologies will likely lead to a streamlining of real estate services. Warburg Peters expects the full-service real estate brokerage model will cater more to high-end clients, while midlevel and entry-level consumers will be able to save by opting to do more research themselves and hire and professionals for only certain parts of the closing process.
“Brokerage is going to become more and more like a luxury service,” Warburg Peters says.
As a result, the number of agents in the industry will likely decrease. “I would expect that the number of real estate agents in the United States 10 years from now will be significantly reduced,” Warburg Peters says.
There does appear to be room for real estate agents to specialize. According to the National Association of Realtors’ 2018 Member Profile, based on the responses of more than 12,000 of the organization's 1.3 million members, 72 percent of Realtors report real estate as their sole occupation, which leaves 28 percent who earn money by other means or may work part time as an agent. The median gross income for Realtors nationwide in 2017 was $39,800, down from $42,500 in 2016, according to the report.
If the role of the traditional real estate agent decreases outside of the luxury market, agents not representing high-end clients have a lot of room to specialize in individual parts of the real estate transaction, from guidance in shopping for a mortgage to marketing fixer-upper properties or facilitating the closing process. They could also work to help aggregate the best data for consumers, or they could simply enter a different career field.
However the real estate industry evolves and modernizes, the goal for individual homebuyers and sellers remains the same: to make a purchase or sale that leaves them satisfied. Here are four things to keep in mind as you navigate a real estate deal in a changing industry.
Seek the platform that works best for you. You may want to assemble a team of real estate agents, attorneys and accountants to help you move forward with a real estate deal, or you may prefer to get a sale done as quickly as possible so you have cash in hand. Both options are available to you, and both can be beneficial, depending on your situation. Research all your options, and go with the one that will leave you happiest with the transaction.
You’ll still be able to find an agent. The real estate agent profession is not dead and probably never will be, though it’s likely to evolve. There are still agents available, and you can find them through a search online for professionals in your area, by clicking on a property for sale on a listing site or by grabbing a name from the “for sale” sign on the house down the street. You don’t have to worry about not having an agent to help you, Warburg Peters says, as she expects to “continue to see the existing brokerage model, but fewer highly skilled brokers.”
Consult a professional. A real estate agent isn’t necessary for everyone, but you’ll likely need the assistance of a real estate attorney, housing counselor or marketing professional, depending on the deal you’re trying to complete. Ultimately, there will always be some nuances you don’t understand, and it’s best to get assistance where needed.
Don’t rely on others to give you the info. It’s the age of data, and there’s no excuse to not conduct your own research on the local housing market, including where you can afford property and how much your current house may be worth. A simple search to get you started should yield multiple sources – from Zillow to the U.S. Department of Housing and Urban Development – to help you make a more confident decision.
Are these must-haves on your list?
One of the first steps you take when deciding you want a new home is determining what you need in order to be happy there. The list of your must-haves can get long, and you reasonably can’t expect to find a house that perfectly matches all your criteria. “Someone has a list of 10 things – if they can find a house that has seven or eight of those, they’re doing pretty good,” says Jeff Plotkin, a Texas-licensed Realtor, attorney, certified public accountant and vice president of Habitat Hunters Inc. in Austin, Texas. Deciding what needs win out in your next home search can be tough, but there are a few key features and amenities many buyers seem unwilling to live without.Right in your price range
Right in your price range
Being able to afford your new home is a given, but buyers are often faced with having to choose between stretching their budget to have the master suite they want or having more reasonable monthly mortgage payments. Price often wins out in the end – you’re less likely to enjoy that master suite if you’re eating soup and foregoing vacations for the next five to 10 years to pay it off. In the 2018 National Association of Realtors Home Buyer and Seller Generational Trends report, home affordability was one of the three most important factors for respondents who recently purchased a home – behind only quality of the neighborhood and a location's convenience to work.In your preferred location
In your preferred location
Homebuyers care a lot about being able to get from point A to point B – as well as points C, D and E. Your future neighborhood can dictate what school your kids go to, how long it takes to get to work and how easy it is to stop at the grocery store when you forgot an ingredient for dinner. Plotkin says buyers put a lot of stress on where the house is, rather than what’s in the house itself. They’re looking for “proximity to schools, shopping, entertainment, public transportation,” he says.Interior over curb appeal
Interior over curb appeal
A handsome exterior keeps potential buyers from quickly driving away, but insight from new construction marketing site HomLuv.com reveals that it’s the interior that most often serves as the deal-maker. HomLuv’s website allows homebuyers to begin their search for a new home from the room they care about most, whether that’s the kitchen, living room or master bathroom. The one part of the house people don’t seem too worried about? Outside. In the roughly two months since HomLuv launched, “no one has chosen to look at exteriors first,” says Mark Law, vice president of product management for BDX, a home builder marketing company and parent company of HomLuv.The right number of bedrooms
The right number of bedrooms
While the interior of the home allows more wiggle room to compromise on your needs, there are some details that buyers must have. The right number of bedrooms would be the big one. Family expansion is often a primary reason homeowners start looking for a new house, so leaving out that extra room would defeat the entire purpose of the sale. According to the NAR report, 85 percent of homes purchased by respondents in 2017 had three bedrooms or more.Window treatments for reference
Window treatments for reference
Staging matters in a home. As much as we think we can picture how a vacant house will look with our own furnishings and decor, at the end of the day we need some suggestions. Law says builders will include big picture windows in bedrooms or over the tub in a master bathroom to let in natural light, but if the photos show the space without curtains or blinds, house hunters will inevitably see a design flaw. “They’ll say, ‘I’m not an exhibitionist,’” he explains. To avoid turning homebuyers off, window treatments should be included in listing photos and for home tours.Move-in ready
The condition of the home you shop for often goes hand in hand with your budget and the neighborhood you hope to live in. If your budget is at the lower end of the price range in the hottest community in town, you’ll likely find yourself buying a house that needs a little love. If your budget doesn’t restrict it, chances are you’ll have your pick of properties that have been turned by real estate investors. “The [buyer] demand is for 100 percent move-in ready condition,” says Bobby Montagne, CEO of Walnut Street Finance, a private money lender focused on home flipping in markets in Virginia, North Carolina and the District of Columbia metro area.Possible to picture your vision
Possible to picture your vision
Even if you’re one of the detractors who prefers a fixer-upper, it’s still necessary to be able to envision how the space will look once you’ve added your personal touches. Based on reactions from HomLuv users, details as small as the cabinet color in a photo can change the way a person thinks about a house. Law says he’s found preferences differ from region to region – darker cabinets may see more love in the South, while in California the preference is for white kitchen cabinets. “You could offer a free puppy and free pots and pans with the house, but if the cabinets are dark they still don’t want it,” he says.Warranty available
For newly built homes and those that have been recently flipped with significant work, you want to know that the professionals involved stand by their work. New construction homes often come with a warranty from the builder or the option to get a third-party warranty, and you should ask the investors involved with a flip for the same level of protection. “A good builder [or] a good flipper does not have a problem with that,” Montagne says. If an issue arises within the life of the warranty related to the workmanship, you can rest easy knowing you’re covered financially for the repairs.Potential for value growth
Potential for value growth
Your home isn’t just where you’ll live – it’s also an investment. There are a few easy decisions you can make that reduce the chances of losing out on potential growth in value over time, whether that means buying in a neighborhood where home values are steadily growing, finding a home in a desirable school district or avoiding living next to a strip mall. “When you’re buying a house, you’re not only buying it for yourself, you’re buying it for resale,” Plotkin says. “So most people are not going to want to back up to commercial [property] or a busy road.”Read More
She has appeared in media interviews across the U.S. including National Public Radio, WTOP (Washington, D.C.) and KOH (Reno, Nevada) and various print publications, as well as having served on panels discussing real estate development, city planning policy and homebuilding.
Previously, she served as a researcher of commercial real estate transactions and information, and is currently a member of the National Association of Real Estate Editors. Thorsby studied Political Science at the University of Michigan, where she also served as a news reporter and editor for the student newspaper The Michigan Daily. Follow her on Twitter or write to her at email@example.com.
Devon Thorsby | June 5, 2019
Homeowners should not fret, as long as they're prepared for the possibility of a downturn.