Remember all the talk about real estate industry disruption? The other “d” word being thrown with it was disintermediation, i.e., getting rid of the middleman. It’s always been assumed that the middleman expected to disappear was the agent. But there has always been another middleman in the real estate process. The brokerage.
According to McKinsey Analytics, when it comes to the likelihood of automation, brokerages have more to worry about. McKinsey gives brokerages a slightly over 50% chance of becoming automated. Agents chance of being replace by automation stands at only a 27%.
Even better news for agents, some claim that real estate can never be a point and click industry. Zillow’s chief marketing officer, for one, feels agents are here to stay. It’s just that their role is shifting to one of a local market expert rather than an information arbiter. And Redfin, whose original goal was to replace agents to lower cost of residential transactions, found that home buyers wanted real, live help. Data may be everywhere but it’s not enough to get the deal done.
Where automation does play a part is making agents more productive and efficient by taking care of rudimentary, repeatable tasks. Ideally, it gives agents more time to handle the interpersonal tasks and garner the local knowledge that, for now at least, machines can’t collect and process.
Right now, with the right platform and proper licensing, residential agents don’t need a traditional brokerage at all. Sites like Zillow and Redfin provide the listings, audience and tools, many of which are automated to agents who sign on. All the things a traditional brokerage is supposed to provide. And while the jury is still out on whether agents or buyers prefer online brokerages/facilitators, some residential brokerages took note, creating transaction platforms of their own.
There’s no doubt that there are plenty of tasks in a commercial real estate transaction that can be automated. And CRE startups are trying their best to do that. But there are still too many electronic silos, a message that companies like VTS and HighTower have heard as they continue to pivot and expand their features and integrations. None match the capabilities of residential platforms. Then again, commercial transactions are not nearly as standardized.
But just think if LoopNet/CoStar decided to expand their offerings to become a brokerage platform on the lines of Zillow. With the basic infrastructure in place, as soon as brokerages pay for all those premium listings, they’ll be that much closer. Let’s hope they’re too busy with Apartments.com to think about it. So it’s important that existing brokerages realize there’s an opportunity to gain the upper hand. They’ve got the agents. They’ve got the clients. They can offer superior customer service. They just need the platform.
A few years ago, I read something that has stuck with me. That the brokerage of the future needs to act like a software company as much as a brokerage with the emphasis on how technology can serve agents and clients rather than the other way around. As for the agent of the future, rather than being replaced by a software platform, they’ll need to be able to work with it. Hopefully both will meet the challenge.