- Tying together the automated segments of the real estate sales process is a new challenge to brokers.
- Three major technologies will shape your next three years.
- Tech broker models will leapfrog not only standard brokers but also outside competitors such as Zillow.
Technology has already changed or automated many of the individual real estate sale process segments; at this point, all an outside competitor has to do is to tie them together into one advanced system — initiating a whole new model of selling real estate.
Brokers can either leapfrog the exponentially racing technology advances and automation trend or continue down the same road protesting vehemently as they are supplanted.
Within this article, I will note where to expect the greatest changes in technology that will affect your business over the next three years and suggest where you should invest the greatest amount of innovation and money with the designation “shove your technology right here.”
Within two years, the ancient direct mail postcard and door hanger advertising in neighborhoods will be overshadowed by predictive analytics software. Predictive analytics will continue to improve as these real estate services tap into Google-like database information and the algorithms are perfected.
Immediately these services include companies such as SmartZip, but watch for CoreLogic and new entrants pushing into this arena. Also anticipate Google, Facebook, Zillow and realtor.com to make predictive analytics part of their advertising services for the real estate industry. Probable additional data sources feeding the analytics include IBM’s Watson or Google’s DeepMind systems.
Shove your technology right here, but don’t anticipate building your own proprietary systems. It’s just too large scale, sophisticated and expensive to develop your own predictive analytics. Very large franchises could do this, but they won’t commit to the all-in investment required to make it work well within the 24-month window they have.
Using predictive analytics to target probable sellers and buyers will become one of the hottest technology applications in real estate over the next two years as brokers only care about one thing: leads.
For the next five years, brokers will continue capturing leads via word-of-mouth (WOM) referrals. But past this timeframe relying on WOM referrals as your primary new business tool will only remain viable if brokers evolve their business models to match the efficiencies and cost savings of the new tech brokerage models (TBM).
Expect technological and automation efficiencies from TBM to bring down gross commissions to 4.5 percent within three years and to 3 percent within five years. You will have to provide significant automated services and capture all efficiencies technology offers to compete at the quality and cost of the TBM.
Tech broker models
Tech broker models are brokerages that develop or proactively adopt the earliest stage technologies even at the prototype or alpha stage of development.
TBMs will do this if introducing the technologies offers the marketplace superior services; it automates any portion of the sale process thus producing cost and process efficiencies, and it potentially creates for them a strategic advantage in the market now or in the near future.
TBMs are proactive visionaries and risk takers as opposed to standard brokers who are reactive and risk adverse. TBMs are the catalysts of change in the real estate industry.
Unlike standard brokerage models which begrudgingly adopt new technologies, typically after others outside of the industry demonstrate their viability and have already greatly impacted the marketplace (Zillow and AVMs), TBMs aggressively seek and apply them very early.
TBMs refuse to wait even on the standard sources of innovation such as Zillow Group and CoreLogic, choosing instead to leapfrog the entire industry with the full understanding that only through innovation and risk will change occur and strategic advantages be created.
The home search process
The internet completely changed how homes are shopped for and found. Today, 44 percent of the time, buyers find the exact home they purchase by themselves on the internet (2015 NAR survey). Two decades ago, this was impossible with home data locked within the Realtor MLS vaults.
Advanced home search algorithms moving toward AI functionality will soon replace archaic price range and bedroom count based searches. Once these new search functions become readily adopted by the marketplace, expect a rapid shift from buyers finding their own home 44 percent of the time to 70 percent of the time.
If the advanced search algorithms are first introduced by Zillow or realtor.com, anticipate broker and franchise sites becoming nothing but internet space junk.
Shove your technology right here today to meet the needs of the 70 percent of buyers’ who within three years will find the home they purchase by themselves with advanced search tools provided on the internet.
Your return on investment is at least twofold: higher volume of potential buyers immediately and greater volume of data to train advanced predictive analytic software over time.
Home sale process
International advertising of homes with a full series of photos, videos and complete information is instantaneous and free. This technological efficiency has long since been in place but the cost and time savings captured at the brokerage end of the industry has not been realized by the homesellers paying the commissions.
They will be within three years, as gross commissions reach 4.5 percent due to pressure from TBMs.
AVMs will further improve in both accuracy and quality of information, allowing sellers to determine a very close price range for their home and understand how to prepare for sale or even improve the value of the home before sale.
This information will be provided automatically via the internet, which will create greater services and efficiencies and apply downward pressure on commission fees.
Only shove your technology right here if you can offer the marketplace information vastly superior to the AVMs of Zillow and CoreLogic. Otherwise, you will have to capitulate their superior market position and buy your technology or leads from them.
Greater efficiencies and downward pressure on commission fees will also come from the ease of dissemination of advertising materials everywhere on the internet via RESO and Project Upstream — bringing marketing costs and effort to nearly zero. TBMs will leverage this opportunity to the maximum.
Shove your technology right here immediately or be left in the dust of the TBM. Offering sellers these services via the internet must go hand-in-hand with any predictive analytics you use. If you do not get control of these prospecting tasks, you will be at the mercy of buying all of your seller leads in the future.
Office space does not create leads; you should spend as little as possible on physical space.
Websites offering superior technology and automated services have replaced the need for office space, just as electronic contracts and signatures, email and texting have replaced much of the need for endless physical meetings.
In spite of this substantial increase in efficiency (less workload, travel and out-of-pocket costs for the agents) there have been nearly no cost savings to the homesellers who typically pay both the seller side and buyer side agent’s fees. TBMs and outside competition will change this over the next three years.
Shove your technology right here, right now. Technology replaced the need for office space a decade ago. Keep some small boutique artsy space if you wish, but put no less than 20-times the yearly budget of your physical space into your technology, automation of services and internet presence.
Everything you do should create a superior customer experience, cost savings and efficiencies — and a strategic advantage over your competition.
If you remember only one word, it’s “leads.”And you only get what you want (leads) when you give the marketplace place what they want better than your competition does.