Disintermediation is often overrated.
Technological advances that seek to eliminate the human element entirely often fail. Instead, we believe that man-machine symbiosis is what typically defines a successful venture.
A popular opinion in the technology community is that real estate agents will soon be replaced by software — whether in the form of direct consumer-to-consumer marketplaces, or programs which automate many of an agent’s basic functions. But the traditional, agent-centric model has staying power. While new technology will accelerate the closing process and empower agents to make more sales per year, it is likely that human agents will remain critical, albeit in augmented capacities.
The massive proliferation of search portals has dramatically increased the amount of information available to consumers, but has not provided them with the context necessary to make final decisions. “Media company” models optimizing for page-views fail to support crucial channels of information exchange between agents and clients. These models only incrementally improve real estate transactions, as evidenced by the fact that the advent of Trulia and Zillow has not dampened demand for agents.
There are several reasons for thinking that real estate professionals will remain essential in the coming years.
First, buying a home is typically the largest transaction in a person’s life — a highly emotional and infrequent event. Consumers want practical, cultural, and emotional guidance as they navigate this consequential decision. Companies like Opendoor have shown it’s possible to reduce reliance on agents in certain home-sellers’ markets, but home buying (and much selling) will remain agent-centric for the foreseeable future.
Second, agents perform many functions which software can only partially eliminate. Certain tasks should and will be automated, such as scheduling and paperwork. But coordinating with other agents, staying up to date on local politics, gauging sentiment, and persuading clients requires a human touch.
Third, agents remain the most cost effective method for sellers to find home buyers. Hyper-geographic expertise allows agents to offer home-buyers smooth access into the semi-private residential real estate marketplace. While automated brokerages seem elegant and low-touch, when you aggregate the various conversion points necessary to convince a person to buy a home (marketing, filtering real buyers from the noise, and mid-escrow negotiations, etc.), these platforms are far less efficient. Although they are not scalable, agents are a fundamentally cheap mode of customer acquisition.
Given these observations, we believe that successful real estate platforms will augment agents with data and tools to accelerate their business and serve their clients better. One example of a company aligned with this view of the future is RealScout, which allows brokers and agents to protect and make use of buyer demand data through proprietary home search platform and listing tools. We made an early investment in this platform because it keeps the agent at the heart of the residential real estate market, equipping consumers and agents with the granular data they need to locate each other, locate potential homes, and close on those properties. Here are a few examples of the kind of man-machine symbiosis RealScout facilitates:
- Targeted marketing: Most real estate marketing takes the form of untargeted spray and pray tactics. RealScout enables intelligent, personalized agent-to-agent marketing by matching a home-buyer’s demand data with precise listing data.
- Property pricing: At present, listing prices are set unscientifically — primarily by consulting local transaction histories. RealScout helps sellers price their home based on actual current home-buyer demand in the local market, increasing efficiency in the real estate sector.
- Market research: Despite the highly personal nature of a real estate transaction, the industry currently lacks the ability to assess home-buyer trends with any quantitative rigor. RealScout augments agents’ expertise by shedding light on consumer preferences by neighborhood, in real time, with unprecedented granularity.
Advances in real estate technology will improve agents’ ability to educate clients by interpreting and telling stories with data. Home-buyers will want someone who can tell narratives about past public works initiatives in a neighborhood, draw attention to unusual features of a property, and help frame the price of a new home in terms of financial and demographic trends. Real estate agents with sophisticated tools will likely perform these functions better than automated brokerages for decades to come.
Technological solutions that enhance natural human talents are often a better way to create value than attempts to remove humans entirely. In real estate and other markets, technology will continue to complement distinctly human facilities, and provide consumers with richer, more meaningful experiences.