The Power Of Choice In Real Estate
Last week at Connect Now, realtor-couple Heather and Steve Ostrom described to me an experience they had working with an iBuyer. “We met with the iBuyer in the house,” Steve said, as if it was a real human being, But in fact it was an inspector who was contracted to help the iBuying firm evaluate the property.
In this case, no actual person was involved in making the offer on the Ostram’s listing.
Home buyers and sellers today have more choices, thanks to iBuyers and many other virtual services, products and technologies. And many new choices are on the way.
Take buying a home without actually visiting the property. Redfin says that in Q4 of 2020, two-thirds of its buyers made an offer on a house that they had not physically seen. That’s because listings are becoming much more robust, including 3D tours, comparison tools, home history, investment value, floor plans and details on the neighborhood such as a walk, school and crime score and even the flood risk.
Choice creates a more vibrant and transparent market.
With it comes a sea change for the real estate industry. Their tight grip on the consumer, the listing and customer data is loosening as choices for the public grow.
At one time, the industry’s influence over the consumer was unwavering.
In the early 1960s, it was the power of the brands, beginning with Century 21 who followed the lead of franchise companies like McDonalds. The idea of 100,000 Century 21 agents parading around in their gold coats may seem silly today, but everyone recognized them. And consumers were moved to select a particular agent by these aggressive branding campaigns.
Franchise power also influenced agent decisions about where to work.
The broker owner became king in the 1970s to 2000. Their hold on the MLS data and their sway over the agents gave them a powerful high-margin business that seemed impenetrable. Big and powerful, they ran a closed system and were the gatekeepers for who could get in.
At a RISMedia “Power Broker” cocktail reception two decades ago, I overheard an older broker-owner tell his son, “These are the people who run the industry, no one else matters.”
If ever there was a case study for the dangers of hubris, this may be it.
Fortunes turned quickly.
In the 1990s, the power of the top-producing agents emerged. The ones with the biggest referral networks were rewarded with better commission splits, fancy offices and other perks.
Then, the only technology was the fax machine: “I will fax you the listing.”
With the Internet, the power of information grew ascendant and agents were no longer the ones who the consumer saw first. As important, agents did not control which listings their customers saw.
Night and day, consumers jet across the internet, looking here and searching there for the house of their dreams. The power of information gave consumers more control and diminished an important role of real estate agents — finding the right house. But the agent was not lost in this technology shuffle.
Most of the Internet search engines make their money off agent advertising, so the importance of using a Realtor is emphasized, giving them a brand boost.
But agents lost much of their leverage. So, teams emerged, giving agents more market power to face disruptive forces that saw commissions fall and listings harder to come by.
Power of choice
Today, consumers have more options than they have ever had.
They can use a team or find an agent who is an employee. They can deploy a Realtor who is transactional and facilitates an iBuyer. With a touch on the screen, consumers can find agents on Homelight, Zillow, realtor.com, Instagram, TikTok or Facebook who specialize in luxury, waterfront or farmland.
They can use an agent associated with portals like Zillow or Redfin. These companies make the first point of contact with the consumer and are now using their brands to deliver agents and their own branded real estate services.
Choice is manifested in other ways. Shoppers can use technology to visit houses, examine a Zestimate, get a digital CMA, make offers and close online, including virtual notaries and digital mortgages.
Consumers can go the traditional route of a home loan with a local bank, but they also have choices like Knock’s Home Swap and Homeward, which offers a financing alternative to what a borrower might find with Bank of America or Wells Fargo.
New sources of funding are paperless, more efficient and faster to close, making the old dogs look irrelevant in the digital age.
Some say too many choices can be confusing. But do you feel that way when you go on Amazon? No, because with more choices come better technology tools to help us make smarter decisions like comparison shopping, ratings and product details.
Back to last week’s Connect Now: the home seller, who the Ostroms represented, chose not to go with the iBuyer after all. And Steve and Heather were there to advise their client on why in this case it was a bad idea.
This is not a case of them losing their client to the Internet: the seller was their customer. But they were all-in helping them navigate the new options that are out there.
What seems eternal is our desire to seek help when faced with complicated choices.