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Some surmise technology will ultimately cut agents out of the homebuying process. The notion that real estate agents will be made obsolete by technology just like travel agents were is not only unsubstantiated but quite the contrary to what is occurring in the industry.
Technology, governmental regulations and litigation are rendering the real estate agents more relevant than ever. In an economy where home prices are typically three to five times the annual household income of the buyers, a home purchase is significantly more complicated and risky than booking a vacation.
It is possible to leave out agents entirely. A buyer could locate a home on fsbo.com, refer to Zillow for a valuation and write an offer using boilerplate contracts from LegalZoom.
Assuming the seller accepts the offer, the buyer could use Yelp to find a home inspector, yellowpages.com for a title company and insurance for a homeowners policy. The buyer could obtain a loan from quickenloans.com, which might close on time.
Any agent reading this is probably laughing right now. The process of purchasing a home is riddled with potential pitfalls. It is important to recognize that the primary role of the agent is not to find the perfect house or to navigate the best neighborhoods.
While these are certainly great perks, especially for a buyer relocating from far afield, the primary role of the agent is risk management.
Agents, not websites, are the only parties qualified to make sure sellers don’t sell too low and buyers don’t pay too much, as well as to ensure sellers disclose everything they are obligated to and that buyers obtain the appropriate inspections for the property.
Technological advances have had an impact on the industry. Consumers are empowered to take control of their house hunt, and more often than not they discover the house they ultimately purchase before their agent does.
Recognizing the real condition of the property, understanding the solutions for undesirable or dangerous conditions, evaluating the comparable sales and, ultimately, negotiating the contract are all processes that require expertise.
Consumers love “guesstimates,” but they also recognize they are about as accurate as predictions made by weather reporters.
Real property is as idiosyncratic as the people who buy and sell it. To date, there is no technology that can overcome this fundamental fact and mitigate the risks associated with it.
Consider a tract home built in 1956, in a subdivision where there were only three floor plans developed. An extremely smart computer could determine which of the homes with the same floor plan sold recently and calculate the average price for that floor plan. And then provide that number as the price a buyer should pay for the house.
Unfortunately this smart computer does not recognize that the subject property is located on a corner, that it has asbestos in the joint compound, that it has a recalled Federal Pacific electric panel, and that it has a brand-new pool and spa.
It also isn’t aware that the basement was finished and that there is an additional 600 square feet of living space. So what is a reasonable offer price now?
Technology also cannot compensate for evolving governmental regulations. Let’s imagine the subject property above is also located on a creek in a neighborhood where there is a local creek ordinance that won’t allow any part of the property located within 50 feet of the creek to be rebuilt if it is damaged by a natural disaster.
The similar homes across the street don’t have a creek behind them. The city in which this home is located has a residential energy conservation ordinance, which makes it incumbent upon the seller to ensure all toilets are low-flow and that the attic is insulated with R-13, both nonexisting in 1956.
Local regulations and ordinances change regularly, and the public is largely unaware of how this impacts their property value and their legal requirements upon transfer.
Sellers who choose to sell FSBO are unlikely to be aware of all the disclosure requirements and governmental regulations, which makes them wide open to a lawsuit should they fail to meet their obligations.
Likewise, buyers should be hesitant to represent themselves in the purchase of a FSBO because it is likely they will find unwelcome surprises after they close or when they sell in the future.
None of this is news to agents, who have seen time and time again the dysfunction that arises when a transaction goes awry. It is no wonder that most agents don’t even list their own homes when it’s time to sell; they hire a colleague to sell it for them.
Agents know they will receive top dollar and have the benefit of the brokerage’s errors and omissions policy when they list with another agent.
In a world of increasing complexity working with a real estate agent is imperative. As technology makes finding a home easier for buyers, the agent’s primary role is shifting from property locator to project and risk manager.
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