The advent of new technology has disrupted everything in the past 10 years and it appears as if real estate is about to finally have its day of reckoning as well. Ultimately, technology has made doing business so much faster, easier, and cheaper.
This shift has made disruption possible on all fronts in real estate and the fog is starting to clear where all can see what is truly happening. In short, all verticals within the real estate market are being hit on all sides by disruptive forces.
Disruption in lead generation
On the lead generation end of the spectrum, big tech companies like Zillow and Homes.com are selling leads or referring clients to agents for high prices and generating incredible profits. These are clients that, at one time, would have gone directly to the agent, but instead got caught in the web of big tech and sold to the highest bidder.
These companies have the money and tech-savvy to grab a large number of clients and sell them back to the agent, demanding a large percentage of agent profit per deal. Agents are forced to oblige because obtaining new clients has become harder if they all offer the same service at the same price. Most agents can’t compete online as the large VC-funded companies invest heavily in real estate SEO.
Disruption in agent splits
On the brokerage side, disruptive companies like eXp, Realty One, and Compass are constantly finding ways to offer better splits, better technology, and revenue share to their agents to pull top producing agents away from the traditional brokerages. Some are even offering massive signing bonuses to basically buy top producing agents and teams.
These companies are making it tough for the traditional brokerages to retain their top agents who are continually looking at how to keep a bigger slice of their commission to increase their profit.
Savings to the consumer
For the average consumer, they look at this new landscape and wonder why doesn’t any of the savings go to them? Why does big tech get to have a cash grab for selling me to the highest bidding agent? Why don’t any of these new companies lure me in with savings rather than taking the massive newfound profit to lure in agents with better splits?
This is where the new disruptors come in. Companies like 1 Percent Lists and Redfin are seeing massive growth by leveraging the savings created by virtual offices and tech to attract the client with lower fees. These companies don’t need to buy leads, they leverage their value proposition to generate their own. Find out more on a 1 Percent Lists franchise here.
Providing consumer value
We began our low-cost franchise option offering tools and tech to quickly and cost-effectively spread nationwide. They use our value proposition coupled with cutting-edge digital marketing to generate a high volume of business for agents. This more than makes up for the lower fees that we charge.
Other discount brokerage models effectively turn agents into employees with small bonuses when they sell something, but the safety net and salary they provide is a nice perk to their agents. Either way, these companies generate a ton of very high-quality leads due to their value proposition.
Passing the savings to the consumer
This new breed of discount real estate broker is starting to gain a lot of market share of listings by leveraging technology to reduce the cost to the consumer.
This puts traditional agents in a tough spot.
- How do they overcome the allure of these lower-cost competitors to the public?
- Is it possible to win if they are continually losing listing market share?
- If beating out these low-cost brokers means working more hours and purchasing more buyer leads, is that really worth it?
- Are they netting more money going this route?
- Are they making more per hour worked?
Technology disruption has effectively created a war and traditional agents and brokerages are beset on all sides. Traditional brokerages have to somehow offer better tech, training, and offices to keep their top producers from leaving for better splits or an easier path to success.
The new companies going virtual to offer better splits and profit shares all sound great as long as their agents are closing lots of deals which are charging high commission fees but if the lower cost disruptors like 1 Percent Lists and Redfin continue to grab market share those splits and profit share might not matter.
The next few years in real estate will be pivotal.