Originally posted on Twitter, you can view the full thread on Twitter here
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Real Estate Agents will become obsolete.
Let me tell you why!
To start, let’s think about the time when real estate agents first came about...
1/ There was no internet.
The only source of info was the newspaper. And then to take it a step further, newspapers were local.
So if you lived in a neighboring suburb, you most likely only subscribed to the current town you lived in and not the one you’d be potentially moving to.
2/ Since the access to information was so hard, you could really lose a bunch of money by selling way lower or buying way higher than you should have.
You needed people to constantly be monitoring what was happening in the town.
3/ New constructions, sales activity, what's happening, etc. That’s where the agents came in, and where their value added was easily seen.
They tended to be active residents of the neighborhood they were working in. So they knew the town like the back of their hand.
4/ Now let’s boil down an agent’s value-add to the main points:
Know the neighborhood (where things are)
Understand neighborhood’s market value (pricing)
Market the property to buyers
Showings and open houses
Help clients with contracts
Act as resource during inspections
5/ Nowadays what do those points look like?
There are countless online resources available at your fingertips 24/7, and they deliver more data and info than you could ever imagine.
Far faster and more accurate than a human (RE agent) could.
6/ There's @zillow, @trulia, @Redfin, @realtordotcom, apparently Yahoo Homes even gets 20 million unique monthly visitors.
Just Zillow alone had almost 10 BILLION web visits in 2020!
7/ What do these sites offer?
Estimated sales price
Estimated mortgage
3D tours & pics
Latest home-sale data
Crime data
Link to schedule a showing
Link to lenders
Tax info
Mobility scores
School district info
Pretty much you name it, they have it available.
8/ The tough truth is humans will have an increasingly hard time competing with tech as time goes on
Sure, a real estate agent can get all of the info for you for a few homes & given enough time. But they just can't compete with a constantly improving tech providing info ASAP 24/7.
9/ The lawyers handle all of the contract details.
The lenders handle the financing details.
The home inspectors handle the repairs and structure issues.
At the end of the day, what do the real estate agents really do when you combine the above with everything found on Zillow?
10/ Does this mean real estate agents fully go the way of the Dodo Bird?
No, I doubt it...
But I do think they evolve into a "consultant" role.
Here's how I envision it:
11/ Agents become much more of a office-type role
Meaning remote showing access not seeing in-person, & they can facetime along with the buyers
Agents see it in person only once it's under contract
This saves time & let's them take on more clients, but does it mean more money?
12/ Another tough but realistic truth, is this means less money for agents.
It's hard to justify 2.5% commission for both sides when the majority of their value-add is removed by the technology.
On a $400k house, that's $20k the seller is paying on commission.
13/ In this example, a seller would have to undervalue their house by > $20k for them to lose money.
And honestly all sellers think their house is worth WAY MORE than it actually is, so cases of undervaluing will be few and far between.
14/ I predict the market on average will dictate a real estate consulting fee of about $1000-$2000 for the selling side, and only about $250 on the buying side.
Similar to what staging services charge for sellers, this is why the premium fee would go to selling agents.
15/ Redfin already only charges 1% on listings, and these margins are going to keep getting squeezed & squeezed until the middlemen (aka agents) get reduced to the consultant role.
@JeffBezos says "your take rate is my opportunity."
This situation is no different.
16/ Now before you say I'm crazy, I'm dumb, I don't know what I'm talking about...
For context, I've had my real estate license for the last 4 years.
Both of my parents are full time RE agents
My aunt is an agent
I have tons of friends that are agents
I've seen/heard it all
17/ I don't mean to hate on real estate agents, obviously I love my friends and family, and I respect what they do.
But unfortunately, my love and respect won't protect them from what is inevitably coming in the next 5-10 years. (Possibly sooner!)
18/ So do you continue to pray & hope nothing changes, or should you try and prepare accordingly?
Before answering, I'd ask all of the former travel agents, taxi drivers, and cashiers what they think about if you should be concerned with new tech...
19/ Maybe I'm wrong! Time will tell, but I'd love to hear what you think. Especially hear from some of the best real estate follows on Twitter. Follow them if you don't already!
@Keith_Wasserman
@moseskagan
@jayvasdigital
@sweatystartup
@realEstateTrent
@BiggerPockets
@jrdorkin
20/ Send this thread to an agent you know and let me know what they think. Tell them it's not personal!
Follow for more plain easy analysis.
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