What the disruptive real estate brokerage will look like

Winning companies will make 'network effect' a mantra

Editor’s note: Inman News founder and Publisher Brad Inman invites you to join the discussion around his recent piece, “Real estate disruption may not be what you think it is.” Submit your own guest opinion piece to matt@inman.com.

In addition to the ZTR triumvirate, a few great real estate companies will rise from the ashes of the average and good brokerages and franchises that are disrupted over the next few years. These new companies will be bigger, more profitable and more innovative than the big companies today.

Brokerage image via Shutterstock.
Brokerage image via Shutterstock.

Brad Inman recently described the disruption happening to real estate brokers right now; Norm Werner clearly laid out how little value brokers are providing their agents today; and Joseph Rand describes how brokers can do better and where they can look to improve.

Jeff Turner comes closest to sharing my perspective:

Real estate brokers need to create thick layers of value, guided by a shared core mission (vision), driven by a clearly articulated set of values and aligned squarely with the products/services desired by their clients.

What will a breakout company look like and how will it succeed?

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Technology as a core competency

Creating products that get better and more powerful with every new agent, seller and buyer is the No. 1 way a technology-powered real estate company will win."

The Web, open data and the rise of mobile are disrupting traditional real estate and they offer the biggest opportunities to create thethick layers of value” that Jeff describes.

Technology and open information are in the process of turning the real estate world upside down. Differentiated technology that resonates with clients and agents is the opportunity to grow big over the next 10 years. The biggest and most successful companies will have technology as a core competence — they will think of the real estate experience as a mobile-first product because that is both what customers want and it’s where change is happening.

There are a couple of reasons for in-house technology being a winning formula:

  • Technologists view opportunities differently. If technology is what is eating the world, you have to know it inside out to compete. You can’t outsource your strategy.
  • Those who can adapt and move the fastest will benefit the most.
  • Outsourcing from vendors is the definition of commodity product.

I suspect that some of the things the successful firms will do are things vendors traditionally did in our industry. Redfin is leading the charge here.

Success is T-shaped: deep on technology and broadly capable

“Automate wherever you can, be intensely human wherever you can.” — Jeff Vincent

Pure technologists have a long track record of losing in real estate. A breakout company will be “T-shaped” where the horizontal part of the “T” represents a wide proficiency in a range of things a real estate company needs to be good at, and the vertical line represents a deep skill in one thing (technology in this case).

A successful disruptor in real estate treats technology as the differentiating factor, but understands everything else — from training to conventional marketing — needs to be in place for the technology to really succeed.

National brand

In a highly mobile and app store-dominated world, a national brand is required.

Scale matters in technology much more than in traditional real estate: the cost of developing and operating technology is virtually the same if you serve 50 or 50,000 people. A technology advantage can be scaled nearly instantaneously nationwide.

Your locally owned nonspecialized grocers and department stores are long gone. Your locally owned general purpose brokerage is going the same route.

Beyond needing scale to support investment in technology, national companies can create mobile apps that reach a national audience. Real estate is a natural fit for mobile and a successful company will consider mobile to be the primary way consumers and agents interact with their company (link to tablet vs. phone article).

Network effect

The winning companies will make “network effect” a mantra.

Creating products that get better and more powerful with every new agent, seller and buyer is the No. 1 way a technology-powered real estate company will win.

Network effect is the reason for many big technology successes: Google uses what you click on in every search to make their results better. PayPal is the dominant person-to-person money sender because most people have an account.

There are already a few examples of network effects in real estate. For instance, a couple of brokers have introduced virtual office websites (VOWs) with private agent notes. When you have more agents contributing notes to a VOW, it means the VOW is more useful to consumers, which results in more consumer use and sign-ups. More agents are driven to participate as a result of the additional consumer sign-ups.

The brokerage model will survive

Brokerages … are the ones in the best position to improve the client service experience.” –Joseph Rand

Agents can find, vet and trial the hundreds of vendors out there, but they will be drawn to the brokerage that makes it easy for them to beat the competition through better customer experience and marketing.

A national, deeply technical brokerage will have the resources and scale to put together the package that makes their agents more effective and efficient.

Galen Ward (@galenward) is the founder and CEO of Estately, a real estate search website and iPhone app used by over 2 million consumers every month.


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