When it comes to technology, the choice is between disrupting and being disrupted. Real estate brokerages are no exception. Adapting to the times and technology is the key not only to success but to survival.
Earlier this week, TheRedPin, a real-estate tech startup in Toronto, called it quits and entered receivership. TheRedPin was one of the early adopters of technology in the sector, and tried to harness the value latent in real estate transaction data with artificial intelligence and deep learning. Yet the journey from a promising start to receivership lasted just seven years. Traditional brokerages, in comparison, last for decades if not longer.
Data and knowledge-based industries are in a state of disequilibrium. Since they rely heavily on technology, which is evolving rapidly, getting the right model is proving hard for many. Thus, laggards and leaders both share unique risks and vulnerabilities.
As the real estate industry transforms, brokerages and agents strive to adapt. Some are predicting a demise of the traditional brick-and-mortar brokerage model. Others suggest that the days of real estate agents are numbered.
Voxel Worlds is a tech company in the U.S. that aims to complement real estate industry with virtual reality tools. Max Agrad, their president, argues that “the Internet has solved the information asymmetry problem faced by homebuyers.” Thus, he predicts that “real estate agents will be obsolete in a few years.”
Technology will continue to transform the real estate industry. The brick-and-mortar brokerages are likely to adapt click-and-order paradigms. Still, we see the real estate agents remaining at the heart of buying and selling real estate.
Better technology will improve the way people search for information about the real property. But helping during the search is only one aspect of what a real estate can bring to the table.
Even contemplating a world where offers are made, negotiated and ultimately accepted digitally, there are still many ways an agent can provide value.
For one, real estate agents calm anxious buyers and sellers.
As soon as a binding offer is accepted, buyers wonder if they have paid too much while sellers wonder if they have sold it too quickly and a better offer might still be out there. Providing perspective on the wider market and understanding trends are not easy skills to replicate.
It is for this kind of reason that eXp Realty, a U.S.-based brokerage that uses a virtual office environment, continues to add agents to its roster. The company announced this week that it has doubled the number of real estate agents to 12,000 in a matter of months. The company now trades on NASDAQ and has reached a market cap of one billion dollars. It has expanded even into British Columbia.
At the same time, traditional brokerages, such as Long & Foster continue to survive and expand. Co-founded by Wes Foster in 1968 and staffed today with 11,000 agents, the Virginia-based realtor is the largest independent real estate brokerage by sales volume in the United States. They have seen and embraced change over the past 50 years.
Ignoring the forecasts of doom and gloom, Home Services of America, an affiliate of Warren Buffet’s Berkshire Hathaway, acquired Long and Foster last September.
Also, it doesn’t have to be an either-or choice between brick-and-mortar and click-and-order. There is room for fusion between the two models. Consider that the U.S.-based Zillow Group Inc., a real estate information company with a market cap of over US$12 billion, has partnered with Century 21, a traditional real estate brokerage in Canada to display Century 21’s listings on Zillow’s web-portals. Already Zillow carries detailed information on over 110 million homes in the U.S.
While real estate businesses will adapt to survive, and some may disappear making room for new innovative ones, real estate agents are likely to stay for a longer time. Their utility will not diminish in a tech-centric environment. That’s the reason why Wes Foster believes “good agents will always be needed.”