In a recent post, Millionacres financial expert Matt Frankel predicted that real estate agents will be nearly extinct within the next ten years. I think he's wrong. But I wish he were right.
In whatever industry the agent role exists, being one requires no particular expertise -- only the ability to get in the middle of multi-person transactions and take a side, become a part of the negotiation, and then claim a commission in return for "advocating on behalf of the client." In the entertainment business, sports, culinary, travel, and even in social services, agencies supposedly exist to connect the dots and improve conditions for their clients -- but a lot of the time, they actually complicate the situation. This is definitely the case with real estate agents, since the lack of exclusive client-agent contracts makes the field a start-to-finish free-for-all.
As it pertains to real estate, many are hopeful that middlemen, and the commissions they charge, will go away as online platforms allow people to do better research and connect with sellers directly. Ironically, right now, the thing that's preventing it is the actual platforms.
I'm completely hooked on Redfin (NASDAQ: RDFN) for browsing properties -- I spend as much time compiling my Favorites list as some people spend daydream-shopping on Pinterest (NYSE: PINS) or Poshmark. But Redfin has no chance of replacing a buyer's agent for me, and here's the main reason why: It's not set up to at all. Though Redfin and Zillow (NASDAQ: ZG) might talk big about disrupting the industry by allowing people to go direct and save money, iBuying and rental listings platforms are, at the moment, a lead-generating source for agents.
How the platforms work for me as a consumer
I live in Miami-Dade, a competitive real estate market where buyer's agents are fully baked into the process. Here's what happens when I get interested in a property on a property search app and try to send a message to the listing contact.
I can't -- unless I give my personal details to the platform.
Once I do that, one of two things happens:
A. A broker calls me and tries immediately to set an appointment with a buyer's agent.
B. An agent -- 80% of the time not the listing agent -- contacts me and tries to get me to start an online account with them, or at least look at a list of MLS listings that they do NOT represent. If I put out five queries, I'll get three calls from three different people, all sharing the same listings that they don't know anything about.
On many platforms, insult is heaped on inefficiency, as it typically turns out the property that caught my eye is not available. Redfin listings are typically very up to date, but it still doesn't make up for the fact that:
This entire online browsing process is just a pretext to capture my information and distribute it to agents and brokers who have signed up to receive leads.
Conclusion: "Going direct" is not an option
Just like there's no way to avoid insurance brokers when you shop for a quote online, there's no way to avoid buyer's agents when you shop for real estate online.
I compare real estate platforms and agents right now to the big fish that swim around and let a school of tiny fish (cleaner wrasse, but maybe they should be called agent fish) pick their teeth clean. They have the same sort of symbiotic relationship.
Are websites like Zillow and Redfin making shifts in their business model to eventually push middlemen, including buyer's agents, out of the picture? Maybe. But probably not ever entirely. If anything, it makes more sense for platforms to cut the listings agents out by undercutting on commission and directly accepting the smaller commission share (as Redfin already is doing).
Looking at buyer's agents based on their merits
Moving away from the platforms entirely to the larger question, do buyer's agents deserve to exist? Yes…some.
There are plenty of people who would prefer not to do their own property research -- sorting through 100 homes to find one that meets specifications. So agents who don't mind spending time on the phone asking "Does this property have a bathroom on the ground floor? Do the HOA dues cover parking?" will probably always have clients who want someone to do that tedious work. Also, because listing agents don't like showing properties to unqualified buyers, there will always be room for agents who can find qualified buyers and bring them to the proper listings.
So, I think being a real estate agent as a career will not become obsolete in 10 years. However, much like travel agents had to evolve and get smarter, real estate agents will as well. Here are a few examples of how:
- They will have to continue investing in training and continuing education to become truly specialized -- not just say they're specialized because they once set foot in a neighborhood where a potential buyer is looking for properties.
- They will need to constantly be refreshing their knowledge of digital and social marketing innovations -- and paying professionals to support their marketing efforts.
- They will need to become a lot more familiar with the entire property-buying process -- for example, how the property type listed on the deed actually affects a client's potential ability to get a loan. Real estate agents who let the lenders explain all the vitally important property details are really wasting buyers' time.
- They will need to truly seek out and form alliances with knowledgeable, trustworthy professionals in related fields. It's not enough to "know a guy" when Google (NASDAQ: GOOGL), HomeAdvisor (ANGI), and Appraisers Forum, not to mention major banking institutions, also "know guys" -- and qualify them and get their contact information out to the world.
What's working in the agent's favor?
Speaking of trust, people still put trust in relationships, and if they don't have that relationship, they'll ask trusted friends. Consumers aren't yet in the mindset of "I need to make a hugely expensive purchase that will affect the next 10 years of my life…better go find a Random Internet Stranger to broker the deal."
But we're getting there. If we can shop for movers and doctors and vacation rentals that way, real estate isn't far down the road. So buyer's agents need to up their game way beyond pulling MLS lists together -- or risk becoming obsolete when buyers themselves say "Bye."