The advent of the internet has contributed to the upheaval of multiple industries with an efficiency and expediency unlike any creation before it. That is, unless you consider the real estate business.
Real estate agents and their brokerages have weathered the storm of technological innovation that’s come in the form of websites such as Zillow and Redfin fairly well. What’s setting these industries apart is the significance of a well-rounded agent and, more importantly, having a trained hand helping guide the most expensive purchase in a person’s their life.
“I don’t see the internet as any threat at all,” Shaun Murphy, an agent from RE/MAX in Alexandria said. “Obviously, the internet has had a tremendous impact on real estate…everyone goes online to search for homes, but someone can’t just click a button to buy a house. There’s a lot more to it, and that’s why you need a professional involved.”
Good health as a business and compensation for agents has persisted despite predictions from a decade ago that foretold otherwise.
As the internet became more sophisticated early in the 21st century, experts believed the real estate business would eventually succumb to the pressures of innovation. Similar to how travel agents became less important with websites like Expedia, the taxi business has butted heads with mobile apps like Uber and Lyft and Amazon has thwarted not only bookstores but traditional retail as a whole, home-buying was next on the list. And the sacred cow of a six-percent commission that agents received from facilitating a transaction would shrink to the point of unsustainability and ultimately make them irrelevant.
Fast forward to the present, and most agents are sitting pretty with their commissions intact.
“We’re talking about so much money when people buy a house and it’s such a personal decision,” Louise Moulton of Falls Church’s RE/MAX West End said, who believes the internet’s presence has actually caused real estate agents to up their game. “It’s not a ride to the [Capital One Center] or a trip to Mexico, it’s much more personal and requires personal service.”
Even direct for-sale-by-owner transactions, known as FSBO (pronounced “fizz-bo”) by those in the industry, have decreased as the internet has become more entrenched in society.
A 2012 study titled, “Do Real Estate Brokers Add Value When Listing Services Are Unbundled?” found that using a broker reduces a sale price by six to eight percent. However, according to Will Rodgers from Keller Williams Realty, that percentage may be true, but going it alone typically costs sellers 10 percent off their transaction since they lack the savvy that most brokerages provide. That correlates with National Association of Realtors finding in 2013 that twenty years ago, about 20 percent of home sales were FSBO, but that has reduced to eight percent today.
While Rodgers may agree that FSBO transactions are better suited with the help of an agent, he’s not sold that agent commissions are untouchable.
“They’re going down. It used to be gold standard of six to seven percent, and that’s not the case anymore,” Rodgers said. “It’s usually four and a half to five and a half percent now.”
But Rodgers attributed that more to the lower cost of marketing than to a perceived lack of need in the real estate agents. Online advertising is far cheaper than using print, and as realtors have favored getting the word out over the internet more and more, it’s only fair to charge less considering they’re spending less of their money to make it happen.
Redfin and Zillow’s presence in the real estate industry have provided realtors a challenge, though not in the manner intended. The sites used to list information from irregularly updated public records rather than the multiple listing services (MLS) that most realtors pay dues toward. They also promote “premier agents” on their website, though the agents themselves aren’t necessarily the most qualified since they are the most willing to pay for that title.
It’s bred an extra sliver of distrust between prospective buyers and sellers, but the websites are doing their part to untangle that notion. Zillow and Redfin now receive all their information from MLS, just as realtors do, ensuring that customers won’t be blindsided by misinformation that used to be more prevalent. And even though top bidders do receive more promotion on the sites, they aim to include as many options as possible for their visitors.
“Zillow’s entire goal is to empower people with information and make the real estate process more transparent. There are hundreds of thousands of agents who have a free Zillow profile that don’t spend any money with us,” Amanda Woolley, a Zillow spokeswoman, said via e-mail. “They can still garner reviews and use Zillow as part of their marketing efforts and connect with buyers and sellers for free. Additionally, listing agents are featured for free on all their listings. Our goal is to help people find a home, and then connect with a real estate professional to help them with the transaction, whether they are a Premier Agent or not.”
The real estate landscape is evolving rapidly with websites. How effective it will be at its highest point remains to be seen, but with the modifications made to websites already, the human touch could face some stiff competition in the years to come.