Can Real Estate Save Itself?
When I was eleven years old, my parents sold our house. It was the first real estate transaction I remember, and because I was too young to understand the sales process, I could only make sense of the emotional toll it took on my two biggest role models. As much as they tried to shelter me from their concern, my parents were noticeably worried and frustrated before, during, and even after the sale itself. It took me another ten years to comprehend that the industry is crafted to invoke these reactions.
Anyone who has bought or sold a home understands that it sucks. The process is tedious, stressful, and frustrating. Zillow’s CEO Spencer Rascoff said, “the transaction is so infrequent and so highly emotional and expensive — and consumers are so prone to error — that they turn to a professional.” But are the negative emotions and appreciable expense necessary?
The real estate industry survives entirely on this fear, which seems to justify the massive 5–6% commission. The transaction process is designed to be opaque to home buyers and sellers, who then must turn to the only people who know what happens inside the “black box.” Industry professionals market themselves as the only people who can protect you from yourself.
At this point, I believe that most people just accept the real estate transaction process to be a painful part of life, one that must be endured to fulfil the American Dream of home ownership.
But it doesn’t have to be this way.
Many companies have tried to reshape the real estate process with marginal success. Redfin, Zillow, and now Compass are examples of “disruptors,” but these changes have yet to significantly improve the transaction process itself.
A team leader at Trulia once told me that one of the biggest differentiators for their service was the green color used on their site. That doesn’t sound like disruption to me.
Notably, Zillow, Trulia, and Redfin have managed to capitalize off the low-hanging fruit of displaying digital property listings, but nobody has been able to mitigate the discomfort that my parents and millions of Americans experience every year by simplifying the transaction process itself. These companies have drastically improved consumers’ ability to access property information, giving buyers more control, but it’s merely a Band-Aid on a festering wound.
Just because something is the way it is today does not mean that it has to be done that way forever. The industry has been too resilient against real change for decades, but the foundation may soon start to crack.
Someone will eventually solve the puzzle that streamlines the transaction process and removes pain points. Our memory of the 2008 collapse and fear surrounding property purchase is a significant reason why a large portion of millennials shy away from home ownership and other strategic investment opportunities. The industry is struggling to understand why millennials aren’t buying homes and many refuse to acknowledge that it may be the lack of transaction transparency and inherent trust between buyers and professionals.
When I talk to real estate agents and brokers, they tend to listen raptly to my opinions as a millennial. Many have explained that their tactic for attracting the younger generation is more internet and social media marketing, leading to mixed results. Maybe the problem isn’t the millennials who aren’t buying, but the industry itself.
There is an enormous opportunity to appeal to millennials who are currently misunderstood and underserved. The incumbents must be prepared to embrace change or be phased out of the market. Defensive strategies do not work forever.
While I believe that real estate professionals will always have a place in the transaction, it’s time for a wakeup call. The companies trying to pull the rug out from under the industry will fail. Software can only provide so much comfort and reassurance to concerned buyers and sellers. The only way to bring real change to the most antiquated industry in the country is to convince those who currently control the process, the brokers and agents themselves, that it’s time to forge a new path.
It’s an exciting time to be an entrepreneur in real estate.
