The real estate industry is changing.
Between iBuyer, new technology, and the instant gratification economy, traditional real estate won’t survive mechanical inefficiencies and idleness unless something changes – and it does so quickly.
We’re already seeing companies like Carvana forego the need to go to a dealership or dealership to buy a vehicle. Why couldn’t Zillow or another big player do that to real estate agents?
More importantly, how could these changes affect the labor market for 1.3 million real estate agents in the United States?
How could their roles change over the next 20 years?
Let’s talk about it.
Centralized real estate agents could not be centralized
It’s not a common belief, but it’s certainly an interesting idea.
When companies within an industry, or even giant empires, face adversity and conflict throughout history, one of their first instincts is to centralize and consolidate their power.
You have to determine your destiny, and the only way to do it is to take the initiative and guide your people and resources in such a way that they overtake the competition.
As we know, real estate agents work as 1,099 independent contractors. They simply “hang their license” on the brokerage company. Ultimately, this is an individual activity.
They have special values, live a unique culture, and run their businesses on their terms.
Big brokers have little control over their agents. Therefore, for the time being, they don’t have the power to compete with Zillow or iBuyers to shape the future of real estate agents.
However, if centralized brokers, as has been done before, break the 1099 contractor status and hire their agents on an hourly or salary basis (with perks and anything), they can potentially withstand the big dogs with oversight systems and effective use of a structured budget.
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Centralization can reduce the total number of active real estate agents
One of the charms of becoming a real estate agent is the idea that you can run your business, schedule your work hours, and make a profit relatively quickly, with a very low barrier to entry.
All you have to do to become a real estate agent is taking a course, take some tests, and get yourself up to speed. You are licensed.
If brokers were centralized, all of this would go away.
The licensing procedure can of course remain the same. But the incentive is gone. They are just looking for another 9-to-5 job with no freedom.
This would drastically reduce the number of real estate agents in the market.
The less important real estate agents to “find a home”
Over 90% of all buyers start looking online. If we dig deeper, we find that 99% of Millennials start their apartment hunt online.
What does that mean?
This means that real estate agents are less important than ever when looking for a home for their clients. Only 28 percent of all buyers get their homes through a referral from a real estate agent. Only that number is declining.
Gone are the days of the real estate agent as a housekeeper. The MLS books are gone, the information is everywhere, and people know what they want.
I advise my customers to find a home here. They were already looking for Zillow. You can see everything I see except cell phone directories. Aside from pocket ads, how can I help them find an apartment more effectively than they do?
If I see something that matches their criteria, I’ll send it to them to make sure they saw it. But I’m no longer actively looking for apartments on behalf of clients unless otherwise stated.
And what happens to the agents then?
Real estate agents are consultants. Technically we are already consultants, but our roles become less active over time.
We are your point of contact when you gather all the information you need to buy, sell or invest in a home.
Today, when a person needs a lawyer, he is the last person a lawyer goes to. They scour the Internet for any information they can gather, sleep on it, and then make the disturbing phone call to a legal expert.
At this point, the lawyer simply clarifies and explains what the person knows in simpler terms.
It’s not the same as real estate agents.
Customers seek information before contacting us. Things are different now. Young people don’t want to use the phone. You don’t want to interact with professionals until necessary.
So, the real estate agent needs to be the best way to explain things the easiest way and guide clients through the sales process rather than just telling them what it’s going to be like.
This can make hiring a real estate agent cheaper. Instead of the average business commission of 3%, more and more agents can claim 2% or less.
Specialties are becoming more and more important
You will often see many real estate agents claiming to specialize in assisting first-time homebuyers, luxury home investments, VA loan sales, foreclosures, and literally, every other field imagined.
Of course, there may be agents who have been around for so long that they have seen it all. But for those who aren’t, there is no way to specialize in so many areas.
It’s not a specialty at this point either.
Specializing in something means you do pretty much everything and excel at it.
In this alternative real estate universe, specialties will be much more important 20 years from now than they are today.
Especially when the brokerage houses are centralized. You will see various salary ranges for professional consultants, just like lawyers.
Luxury brokers are better paid due to the complexity of marketing campaigns and higher commissions. First-time buyers are said to be plentiful as nearly a third of the market is made up of such buyers.
This increased focus on specialization is truly exceptional for the industry because clients receive the best possible service, thereby increasing the perceived value for a real estate agent.
While it’s impossible to predict the future of anything, let alone real estate, it’s important to at least anticipate something.
I think the idea of a centralized broker system is very interesting and I find it strange to see if it is already in place in some companies.