There seems to be this impression that home buying and selling is about to turn into a purely online experience. It’s not there yet, but tech–heads and people excited about “industry disruption” look into their crystal balls and predict such a world. Well, I’ve taken a good, long look into the future too, and see nothing of the sort. Stay with me and I’ll show you how the stats, facts, and simple common sense prove it.
First, we’ll look at what industry observers are so afraid of, then we’ll look at some key facts that dispute all the hype and fear. Ready?
What the Chicken Littles are Saying
About Zillow’s Ability to Rock the Industry
DIY home listing services have made the shopping process easier for buyers on the prowl for properties, and the result has been a more educated, better prepared generation of home buyers. That’s a good thing, and I’m glad for these advances. I think we all are.
That’s all fine and good, but industry commentors seem to think real-life real estate agents will become as irrelevant as brick-and-mortar book stores have become in the wake of Amazon. (Wait – aren’t book stores still around? Didn't Amazon in fact OPEN a brick and mortar store? Hmm…)
Industry Observers Welcome Overdue Change
According to writers at the HoodHomesBlog and Forbes, the advent and increasing databases of DIY listing services like Zillow essentially render real estate agents unnecessary in the house hunting process. “Just fifteen years ago, approaching an agent was practically the only way to get information about what was for sale on the market. Now it is a simple Google search, and Realtors instead offer value by controlling past sales history information, as well as valuable technical training and experience.”
Did you see that? “It’s as simple as a Google search to get information. Realtors, who needs ‘em? Ah, all they’re good for is past sales and a bit of experience. Other than that, my dear buyer, you got this.”
May I just say, “Umm, no.” But we’ll get to why in a sec.
Forbes attempts to take agents down another notch by adding that “One of the biggest benefits of using a real estate agent has long been their access to the Multiple Listing Service (MLS).”
Really? THAT’s the ‘biggest benefit’ of real estate agents? If only I’d known! I could have avoided all the mandatory annual training, the voluntary (but costly) accreditations and specialized certifications I’ve acquired, and all the regulatory legislations that govern our profession and that we’re bound to abide by (and that I’ve personally helped put in place) that make this industry a better, safer place for unaware buyers! Golly gee, this whole time, it was all about the big pile-o-listings on the big ole internet! OH! If only I’d known it was so very, very simple!
Forgive my sarcasm, but honestly. It’s hard to contain when people pretending to know about the industry try to whittle the value of an entire profession down to such an elementary tool. Necessary tool, yes. Transformational to our industry, yes. But, what’s next? Summing up the legal profession as having its main value in its letterhead, which any public person can print on their own at a local Staples? Sorry, no. The ‘biggest benefit’ of real estate agents is a great deal more complicated than access to a web page of listings. (Just read three posts from this blog and you’ll see what I’m talking about.)
Why They (Wrongly) Think Zillow Will Change the Industry as We Know It
Industry watchers say Zillow is attempting to take the online home shopping experience to a whole new level this year, many saying the industry has long been in need of disruption. The big “disrupter” is that Zillow added a new “service” to their listings site and began BUYING houses online this year. From what I can tell, this seems to be what’s got industry watchers quaking in their boots.
According to Market Watch, “… Zillow Group, the behemoth of the listings industry, announced plans to start buying and selling homes directly, a step that analysts believe could finally change the way Americans shop for homes, after years of mere tinkering at the edges.”
“Zillow’s initiative is called the “Instant Offers” marketplace, and it’s been in a test phase since mid-2017. Homeowners who want to sell receive offers from investors and an analysis of their home’s value, if the home were to be listed on the traditional real estate market instead. Zillow says it will aim to buy, renovate, and then re-sell homes in 90 days or less.”
In the same article, Blomquist, vice president at Attom Data, a real-estate data services company, was quoted as saying, “There’s a threat to real-estate agents.”
Personally, I have a few different thoughts. The first thing that comes to mind is that it is conceivable that a company like Zillow with goals to shake up an industry might just try something like this to acquire the public eye. It gets us talking about them, after all, which will result in massive increased traffic. (Heck, I’m a real estate agent talking about this DIY service! It’s a pretty brilliant strategy if you think about it…). And, as Market Watch themselves say of Zillow, “They’ve done a good job of branding themselves as a media company.” I have a hard time believing all the media coverage about some apparent “disrupting the market” is coincidental.
The second thought that comes to mind is that a company offering to buy houses on the cheap from desperate motivated sellers seems more to me like the online version of “We Buy Houses for CASH” signs stapled to hydro poles in poverty stricken neighborhoods than a great and mounting revolution in how people buy and sell.
But everything you’ve read in this blog post so far (regardless of whether or not it was published on almighty Forbes) has all smacked of personal perspective, conjecture, sarcasm, and hype. Which is fine. It sells newspapers, I guess, and that’s what’s out there.
But what I really want to discuss is FACTS.
Industry observers seem to think that these online companies are going to replace the need for real estate agents, and THAT’S what I’m going to show you is inaccurate, unrealistic, and maybe even plays at the edges of dangerous advice.
The Truth About Home Buying Trends
So, the hype and online chatter would have us believe the sky is falling, and the internet really is our great supplier of all we need to buying and selling homes online. That same (mis)information would also have us believe that this has been a growing trend that is ready at any moment to topple the industry as we know it, making real estate agents extinct, and online service providers the new real estate professionals.
According to a 2017 NAR study, only 8% of homes sold in 2016 were by homeowners. 89% of sellers were assisted by a real estate agent when selling their home, and 87% of buyers purchased through an agent or broker. By the way, this percentage has been GROWING steadily from the 69% figure of 2001.
That’s right, despite the increasing numbers of online service representatives, the awareness among buyers of their need to be protected in this complicated transaction is growing. GROWING. Not shrinking.
(Just as a fun aside, the study also shows FSBOs (For Sale By Owners) also get dramatically LESS for their sale price than those who sell with agent help. We’re talking about an average or $190,000 FSBO sell prices verses $249,000 with agent-assisted sales. Just sayin’.)
More Truth About Home Buying
If you’ve read my blog at all, you know I’m ferociously protective of not only my own buyers and sellers, but of all homeowners; it’s why I hyperactively serve on committees and taskforces that govern our industry, it’s why I write all these blog posts… because I care about homeowners and don’t want to see them get hurt.
And people do get hurt who are unprotected by a skilled, knowledgeable agent walking them through the minefield that is real estate transactions.
Quick Facts: What Agents Offer That Zillow Can’t
ACCURACY of Information
The average citizen is not legally obligated to conduct themselves or even disclose the same things a registered, licensed real estate agent is. Citizens are not regulated by codes of conduct, codes of ethics, or the many other rules that bind us professionally in order to safeguard both buyers and sellers during a transaction.
That means the accuracy of information provided by the sellers is not something one can assume is correct. Even the most well-intentioned sellers may accidentally give misinformation or omit things that the buyer needs to know.
As Forbes puts it, “Unlike Realtor.com and Redfin.com—which use only MLS listings posted by those with a valid real estate license—sites like Zillow, Trulia, and Homes.com are open to the public. Anyone can create an account and list a property, leaving the door open for inaccurate or unreliable information.”
The result? The buyer could run into all kinds of problems, finding out that there were liens on the property, past and even current non-compliant rental agreements in place for which they’re on the hook, asbestos in the attic, or that the zoning won’t actually allow the new buyers to use the property the way they’d intended.
With agents, accuracy of information is reliable, thanks to the codes and laws that govern us all equally.
Real, Live, and In Person
There’s the shiny, happy online version of ourselves that we post about on Facebook, and then there’s reality. We type LOL when we’re not even cracking a smile, we take smiling family photos right after Mom yells, ‘Smile now, or die!’, and we happily announce the spinach salad we’re eating and conveniently hide the empty bag of chips that happened two hours later.
Houses can have the same dual personality too, appearing one way online, and quite another in reality.
That’s one thing online-buying will never be able to overcome. It might play matchmaker, connecting buyers and sellers, but eventually they’ll have to meet in person, and that’s where the real work – and risk – begins.
Special Micro-Market Knowledge
Market affects pricing. We all know that. And while online listing services can provide an “estimate” based on the number of bathrooms, bedrooms, and the average pricing in a particular area, such mechanical calculations completely miss numerous factors that can have a massive impact on local market prices.
The real estate agent who’s lived in the city, even the neighborhood in which he’s representing clients, will know things an online company just can’t. Un-Google-able things. (Yes, there is such) and it’s far more than the sales history of a property (which, at the moment, is information only agents have access to).
They’ll know that the doctor at 342 Somewhere Street has been waiting for years for city council to allow him to subdivide his lot. And whaddayaknow, the new city council just voted out the two men who stood in his way.
Agents will know that 7 years ago there was a murder in that one house, and people have said for years that it’s been haunted ever since. But you won’t find that in any newspapers, websites, or even property disclosure statements.
Real Estate agents bring an intimate, personal knowledge to bear when it’s time to examine neighborhoods and properties. And they bring it in a way that online services just can’t.
The Bottom Line
However much the human race continues to try to automate absolutely everything, there are some things that simply won’t fit that notion. From my perspective, buying and selling homes online and unrepresented by agents is one of those things.
The industry has been tightening up regulations to protect buyers and sellers from each other and from themselves, and it’s improved the experience for many. As I showed earlier, the trend toward represented buyers is growth, not shrinkage.
What do you think? Will real estate agents become a thing of the past? Is online buying our future?
Or is this one of those services that needs that personal, present, professional support?