Power Shift Technology puts the client
in the driver’s seat
Colleen Barry, GSIR Director of Productivity
Technology has
revolutionized our world. Each of us has instant access to
unfathomable amounts of information, art, and music, right in the
palms our hands. While we mourn the loss of the local book stores,
record stores, and travel agencies, we rejoice in the ability to
communicate with someone across the globe. We revel in our ability
to research nearly any topic.
Likewise, there have been many positive developments that have
shifted the balance of power away from service providers and into
the hands of their clients. Real estate is one industry that has
seen some of the more dramatic changes. From how people search for
homes, to how homeowners think about selling, real estate has been
revolutionized.
Fifteen to twenty years ago, a home buyer would need to contact
a real estate agent in order to find out which homes were
available. The agent would tell them about the properties available
in nearby neighborhoods and would gather a list of open houses.
Now, third-party aggregators like Zillow, Trulia, and Realtor.com
gather information from public record, MLS services, and other
sources to give home buyers the ability to search on their own.
They can see what the neighborhood looks like, assess key
characteristics of nearby schools, survey the options for grocery
stores, and map how far the location is from their workplaces or
loved ones. Buyers can see where and when the public open houses
are occurring and can attend on their own.
This unfettered access to information has uncovered a
fascinating contradiction: You might think that the power shift
away from real estate agencies as “gatekeepers of information”
would have reduced the need for them; just as the ability to search
for and book hotels and airfare eliminated the need for most travel
agents. But, just the opposite has occurred. While third-party
aggregators placed more power in the hands of each buyer, they
created an unexpected need for professional help.
Because buyers are doing more of the legwork themselves, the
process has increased in duration from seven weeks to twelve weeks
from 2001 to 2013. (source: NAR Study of Home Buyers and Sellers,
2014) The percentage of home buyers using an agent grew 27.5% from
2001 to 2013. (source: NAR Study of Home Buyers and Sellers,
2014)
This apparent contradiction highlights what an agent’s job has
been all along: To be a home buyers or seller’s trusted advisor and
guide. I argue that ours is a service industry much more than a
sales industry. It simply took a technological revolution to make
that clear. Annual studies by the National Association of Realtors
(source: NAR Study of Home Buyers and Sellers, 2014) have found
that what buyers and sellers want from their real estate agents
hasn’t changed much:
In short, clients want service, just as they always have.
Agents also help clients find the most accurate information. Not
all the data on third-party websites is accurate; a predictable
result of gathering complicated data from many sources. One example
of this is the typical inaccuracy of a value estimate. Third-party
websites typically use Automated Valuation Models (AVM) to generate
values. While AVMs are easy to find, they can be wildly inaccurate.
A 2015 study done by Gibson Sotheby’s International Realty found
that AVMs were over the actual sale prices by an average of only
6%. But, within that group, some properties were over or under the
actual sale price by 25% and 41%. Property valuation is an art. It
requires skill and nuanced understanding of a home’s location, curb
appeal, architectural style, condition, and other variables. As of
now, AVMs are not able to create an accurate assessment of most
properties.
Within the real estate industry, there also have been
improvements to how we, as agents, share available properties, make
offers, and complete transactions. Fifteen to twenty years ago an
agent would take one picture of a property to market it. The
marketing would typically consist of a one-page brochure, a window
display, and a newspaper ad. The reach was extremely limited and
the advertising lacked user engagement. Now our agents use our
professional photographers to take dozens of beautiful photos. A
study by VHT Studios in Chicago showed that professional
photography sold homes 32% faster (source: VHT Studios, 9/14). Then
the listing is shared in an online MLS (or several) and sent to
third-party aggregators. Each viewer can zoom in on photos in each
room to get a true feel for the property.
These enhancements have also opened up the international buyer
market. As members of the Sotheby’s International Realty network,
our listings appear on more than fifty websites and a cascading
platform of dozens of affiliated companies websites. Many of our
third-party websites have international audiences or are based in
foreign countries, allowing a buyer in Beijing, London, or Dubai to
virtually tour our homes. This has increased exposure for each
property, thereby quickening the pace of the market and increasing
final sale prices for our clients. International buyers tend to
make cash offers due to the difficulty in securing financing as a
non-citizen, eliminating the need for financing contingencies. In
fact, Boston is #7 in the ranking of US cities for real estate
investment, underscoring the importance of reaching a worldwide
audience. (AFIRE Foreign Investment Survey, 2015)
A lot of the paperwork involved in the transaction has also gone
digital. Programs like Dot Loop and Docusign allow agents to create
digital contracts and send them to their clients via email. Then
clients can sign them quickly and easily from their computers,
tablets, or smart phones. Recently, one of our clients submitted
and won a competing bid by while waiting in the airport for his
plane to board. That could never have been accomplished in the
past. No longer do our clients need to wait by a fax machine or
sign for a package delivered by bike courier. They can carry on
their normal lives during the process of purchasing a home. The
ability to act quickly has become even more critical since in 2014,
35% of properties in Boston sold for more than the asking price.
(source: MLSpin)
Is the industry done changing? Definitely not. There is a battle
being fought between several third-party aggregators. Zillow
acquired the rental property website, Rent Juice, and then acquired
Trulia. This created a giant in the industry. However, Rupert
Mudoch’s News Corp, acquired the Realtor.com website in 2014, after
buying List Hub, a data distributor that had been feeding Zillow
and Trulia. Predictably, List Hub ceased its distribution to give
Realtor.com the edge in the market. This forced Zillow to scramble
to create relationships with individual MLS services throughout the
country. This battle will continue for the foreseeable future.
No one knows who the key players will be a few years from now.
But, we can predict that change will continue to affect agencies
and their clients. Real estate will become even more of an
international business. And, if the competition continues, we can
expect imroved features and services to benefit all of us.