The future is flat-fee
Perspective: Tech-savvy Gen Yers will rule in 2020
By Inman News, Thursday, March 18, 2010.
Editor's note: The following is a guest essay. Inman News is exploring what the next decade may hold for real estate professionals in "2020 Re-Envision: The Future of Real Estate Brokerage," an editorial project that peers into the future of the residential real estate brokerage industry.
By ANDY SALO
What will real estate be like in 2020? The simple answer: Nothing like it is today.
Over the next 10 years, I believe most real estate agents are going to have to radically change the way they do business. Specifically, listing agents will likely disappear. They will be a convenience for the elite, not a requirement for the average homeowner.
Buyer's agents will still be needed, but in a different business model. Generation Y will make all of this happen.
By 2020, Generation Y, also known as Millennials, will be all grown up. Gen Yers will likely turn from the somewhat self-indulgent, please-give-me-praise generation to the generation that is more responsible, adult-like, and indeed will have a lot more purchasing power and decision-making ability than today.
What will that mean for real estate?
Generation Y is the first generation that has never known a world without the Internet. Most have been connected since they were in their teens. In 2020, most will have had two decades of being online. Being online your whole adult life means you are very comfortable with searching, communicating, transacting and every other online activity done today.
Imagine that 10 years from now there are 100 times more online real estate-related capabilities than there are today. Searching for a new home, posting your home online for sale, getting detailed competitive market analyses from multiple sources, receiving online offers, negotiating online, and more.
Don't believe it can happen? There is a Web site that lets you post your Web site for sale, along with all the details about it (akin to a seller's disclosure). Buyers ask questions of the seller (due diligence), make bids, and ultimately buy the Web site in a similar manner to an eBay auction. ...CONTINUED
All rights reserved. This content may not be used or reproduced in any manner whatsoever, in part or in whole, without written permission of Inman News. Use of this content without permission is a violation of federal copyright law.
You must login or register to post a comment.
Submitted by Sales Manager on March 18, 2010 - 10:57am.
Amen Andy. Too many agents and brokers are kidding themselves into believing, even with new technology, they still can factor themselves into 7%, 6%, even 3% commission payouts in real estate transactions. It worked for Boomers and their parents, it's not working for Boomer's kids (or grand kids). When they have to pay out $12,000 or much more when the marketing tools are plentiful and cheap, 'getting listings' is an economic model (like a lot of others these days) that is no longer sustainable.
Submitted by MLS4owners.com on March 18, 2010 - 1:34pm.
Flat fee has been a viable option for the last 10 years in the Pacific Northwest and many other parts of the country. It's great that consumers have broadening choices with a wide range of service options. Our customers are wrapping up their first billion in sales, and it will be interesting to see what the next decade brings.
Ken Whitney
MLS4owners.com
Submitted by Tyler Webb on March 18, 2010 - 1:39pm.
Andy,
You got me thinking. But on reflection, I don't think so. Your proposition is that a professional real estate agent brings nothing of value to the buying and selling of valuable assets. Quite frankly, I do not think you can support that proposition.
One quick example. Your business website has a calculator to compute how much a seller saves if they avoid what you refer to as "costly commission rates". I must have missed the calculator that tells the seller how much they can gain by using a professional agent. Many times the experience is that there is significant gain by hiring competent representation. They get 15% more for the home, pay a 6% commission and walk away with 9% more money.
Generation Y can get their will prepared online for $65, but once their estate reaches a certain level dollar-wise, I can assure you they will be knocking on the door of the best estate attorneys in town. They are not stupid!
The future is competent and professional real estate agents.
Tyler Webb
Associate Broker
Champion Realty
Annapolis, MD
www.REcrab.com
Submitted by Todd Held on March 18, 2010 - 2:01pm.
I agree with Tyler wholeheartedly.
The focus of the article seemed to be the "advertising" aspect of the transaction. That's the one thing an unlicensed assistant can handle. What about the guidance through the transaction? The advice? Dealing with "issues"? negotiation strategy?
It still stands that buying a home is probably the largest financial transaction a majority of Americans will ever make, how is a computer going to advise them? Anyone that can prepare a market analysis of a home without having walked through it is in my opinion perpetrating a lie. That funky smell that fido has left in the carpet can be very detrimental to the pricing AND marketability of a home.And believe me, many sellers don't realize the smell is even there.
See you in 2020 ;)
Todd Held
Associate Broker
Submitted by berge charles on March 18, 2010 - 3:04pm.
cb
What makes predicting so much fun is that we get to predict. We often predict the future simply by declaring something to be true. Or that something will happen. The mere act of declaring (predicting) something to be true somehow proves something to be true. This is called proof by 'Proclamation.' It is true because I said it is true. The entire process is conclusionary by nature. And often not supported by logic. Kings and Queens used this technique to control and rule their subjects.
Seriously though, much of what the writer says may come to pass. Whether the future of real estate is characterized as flat fee or not (some) consumers may still desire assistance when buying and selling property.
Consumers will likely contine to purchase services from an agent on an a la carte basis. They probably will no longer want or need to purchase and pay for the entire entrée. Or they may use the services of an attorney instead.
Listing agents are indeed likely to lose relevance. Also, the existing two-tier broker-agent scheme may give way (evolve) to a single-level agent licensing system.
Technology has an indifferent way of shortening the economic food chain. We all need to reinvent ourselves in an effort to remain relevant to the real estate transaction.
Charles Berge
Real Estate Broker
www.AuctionRefer.com
Submitted by Ted Mackel on March 18, 2010 - 3:30pm.
Andy,
I will try not to pick on you. :)
Fee structures will change in the next 10 years, but not by much. Flat fee - Sure $10k to list your home or $5k it will always be a negotiated fee otherwise it will be illegal. Set pricing in an industry is illegal.
This is also another example of the lack of understanding of what an MLS is. An MLS purely exists as a universal compensation agreement between "Listing" Brokers. MLSs are all about "Listing" Brokers sharing commissions. The Data (Listings) are in the Broker Commission sharing pool.
If you eliminate commission sales you eliminate the MLS.
Another important piece of information is that you need to be licensed to transact in Real Estate. This will not go away. Those that transact Real Estate work as commissioned Sales people and those commissioned Sales people create MLSs to increase business through commission sharing.
Ultimately the commissions that Brokers will charge either flat or by percentage will be an agreement between the Broker and the clients.
The positive side effect of the MLS for Home Owners is that the competitive nature of commissioned sales "creates a market place" Since it was the Brokers who created the pool of inventory for universal compensation, a market was formed.
There is a place for everyone in the real estate business. Flat Fee, No Fee, Big fee, little fee, Medium Fee, High Service, Low Service, No Service; but the idea that MLSs will disappear and the cost to sell a house will cost less than a couple dozen "Big Macs" is ridiculous.
Houses don't sell themselves Sales is a contact sport.
Respectfully Disagreeing,
Ted Mackel
http://www.homebuysblog.com
Submitted by William Metzker on March 18, 2010 - 5:57pm.
Andy--You neglected one important fact, which is that Gen Y/Millenial homebuyers are mostly all college-educated. Not only that, but because of demographics, Gen Y college graduates have competed with far more people than X'ers or Boomers to get their degrees, and, therefore, tend to be quicker and better educated than previous home buyers.
You are spot on with your analysis, even though you may have omitted salient facts (in the interests of space, if nothing else).
IMHO, MLS' are becoming increasingly irrelevant. Agents who claim to be "trusted advisors" or say "now is a great time to buy" are irrelevant already.
Anyone--and any company--in a real estate-related profession needs to futurize (and many young ones are), or just simply go gentle into that good night, becoming unseen outtakes in some future "Glengarry Glen Ross" production.
Submitted by Mollie Wasserman on March 19, 2010 - 2:46pm.
Andy, you should check out what we're developing with ACRE®. We now have 200 real estate professionals who have gone through the ACRE® program. We train agents to provide quality, transparent choices both in the services the consumer can obtain and how they can be paid for.
Mollie W. Wasserman
Founder: Accredited Consultant in Real Estate®
Course and Coaching Program
http://www.TheConsultingTimes.com
http://www.ACREonYouTube.com
Submitted by Bill Fooks on March 19, 2010 - 4:20pm.
Bill Fooks
TFT realty Marketing Service
Warwick, RI http://www.fooksteam.com
I believe that flat fees are good. AS prices drop, the flat fees will be need to support the expense of running a service business. I believe these fees will be higher than those of the currnet percentage fees. They will be higher fees for the less expensive homes, as a percentage of the sale price, and lower for the more expensive homes, in relation to the sales price. At the present, the higher priced homes pay for the overhead of the lower priced home. As you can see, the lower middle class and the middle class will tkae a beating in this environment. Expenses are still expenses. So, go to it guys and listen to the regulators coming right behind you.
Submitted by Tyler Webb on March 19, 2010 - 4:46pm.
Ted makes a great point. Buying and selling homes is a contact sport. Additionally, like politics, all real estate is local. Technology will surely play an ever-increasing and important role in the residential sales transaction. Not replacing the agent, but helping the agent be more professional, effective and efficient.
Tyler Webb
Annapolis, MD
@recrab
Submitted by Spring Haigler on March 21, 2010 - 10:17am.
Charles Hendershot hit the nail on the head..."Technology offers great tools for selling but it will never replace the physical showings of real estate. For most, technology is the result of these busier schedules. Technology can also create more anxiety and this can keep people working longer hours mostly due to training and updating new technology. People may also withdraw from the technology boom to spend more quality time with their families. It is doubtful they will have the endurance to show their home themselves for four to six months, attempt to negotiate, go through the drama of home inspection, and perhaps have a closing." The only thing I would say differently is that "busier schedules are a result of technology".
Technology may the best thing that ever happened to real estate industry. I believe we will see more a la carte services, but I don't see flat fees completely replacing the need of full service agents. Technology may be able to replace a lot of things, but it won't replace the need for business through relationship building.
Submitted by Daniel Carcasson on March 21, 2010 - 2:51pm.
This article is DEAD ON except I don't agree with it occuring in 10 years. I give it five. My company is now doing flat fees and my business has tripled. I have not lost a listing in the past year and I have picked up a bunch of new buyers from my extra listings.
www.forsalechoice.com is my company
Submitted by Brian Friemel on March 29, 2010 - 6:39pm.
Technology will influence significant change to the industry in the next 10 years. But I'm doubtful that the agent will disappear. Let's look at the influence of similar technology on other industries over the last 10 years.
In the year 2000, everyone in the world was betting that petfood (Pets.com), toys (etoys.com), and groceries (Webvan) would be bought online. And indeed, to some extent they are today. But compare the frequency of online transactions for these physical goods to the purchase of services (banking, travel, social networking) and there is no comparison. To predict that the purchase of the most expensive physical good one owns will move primarily online ignores the history of the use of technology.
For physical goods, technology has been used to reduce marketing expense (already happening in real estate) and to improve efficiencies (just starting in real estate). It is unlikely that the internet will replace the physical marketplace for physical goods.
Visit my company's website to learn how our product improves the efficiencies within real estate agencies.
www.PulseRealtySoftware.com