The traditionally stale real estate industry is starting to evolve faster due to advancements in automation and new technologies such as AI and blockchain. These technologies bring the opportunity to tackle the well-known inefficiencies of the real estate sector. As a result of these changes, real estate agents will need to adapt, or they will risk being left behind by the competition.
Fast advancements in novel business models impact the real estate industry. According to Alex Rampell, a General Partner at Andreessen Horowitz, home-buyers and sellers have grown accustomed to the rapid, on-demand delivery of services and goods brought on by the recent advancements in technology, and they expect no less when they decide to enter the real estate marketplace. Real estate companies are rising to meet these “I-want-it-now” consumer expectations. Despite the promise of increases in labor productivity that the new technologies bring, real estate agents’ jobs are not necessarily under threat; however, they will transform according to the ways that agents can bring the benefits of the new technologies to their clients. These transformations are already apparent in the digital business models pioneered by the likes of Opendoor, Zillow Offers, and RedfinNow. Not to be left behind, a few traditional real estate companies are already changing the role of agents.
One example is real estate brokerage Compass. Compass’ traditional 6% listing fee includes the management of renovations for properties that are for sale. The company’s agents work with homeowners to assess opportunities for improvements to raise home values. Compass finances all upfront costs with zero-interest loans to get more profitable sales; then, it collects payment for the services rendered when the property closes. This innovative business model and recent financing by Softbank made Compass rapidly accelerate and reach a $4.4 billion valuation.
Another example of agent role transformation comes from leading virtual brokerage eXp Realty. eXp Realty is agent-owned, and agents do most of their work from home or a remote office.
eXp Realty’s business approach makes the roles of its agents unique. For instance, as part of the company’s recruitment program, agents receive incentives for attracting other agents to join the brokerage. Proactive agents participate in revenue share, and successful realtors become shareholders in the company.
eXp Realty's unique business model encourages network effects and rapid revenue growth. The market cap of eXp World Holdings Inc. is $605M. Suzy Truax, the Chair of the eXp Agent Advisory Council, stated, “The industry will consolidate into the haves and the have-nots. Those who do not embrace the technology wave will be crushed by it.”
Despite these “back-office” organizational and management changes in large brokerages, the client-facing side of the agent’s role does not change much. Regarding the question of whether the role of a realtor is changing, Glenn Sanford, CEO at eXp World Holdings, stated, “I don’t think the role changes that much. [With technology, there is] still the trusted advisor working with a consumer through the entire transaction given the size and complexity of a real estate transaction.”
In 2018, almost 40% of the homes in the United States were bought by millennials. This group is well-known for its expectations of on-demand fulfillment. Of course, the traditional transaction process of buying a home and getting a mortgage is far from instant. As the new generation dives deeper into real estate, there will be more support for new technologies that increase transactional efficiency.
All signs currently point to blockchain technology as a force that will eventually dominate the real estate industry. Combined with automation, distributed ledgers will bring dramatic change to the roles of all intermediaries in the property buying and selling process.
On the subjects of technology for the real estate community, Richard Teed, the first founding partner at Compass, San Francisco and the principle of Teed & Co, stated, “Real estate is just one area where smart contracts will record just about everything there is to record.”
With smart contracts, all processes will be automated, and key data will be stored on the blockchain. Thus, stored at a secure and unhackable location, the data will no longer need to be copied and passed back and forth multiple times between the buyer, seller, and intermediaries during the closing process. Additionally, with the documents visible and shareable between all relevant parties in the buying and selling process, the chances of document mishandling or falsification are practically eliminated. Besides that, the county recorder’s offices will secure the immutable authenticity of deeds, and the realtors will easily be able to verify a transaction in real time.
With blockchain, it is expected that the role of real estate agents would irreversibly change. Combined with automation processes, blockchain systems will likely expand the job of a realtor so that the real estate professional will act as a “data miner.” Similar to the way that Bitcoin miners support the network by solving math problems on their mining software, future real estate agents and title agents will be able to verify real estate transactions and help to store data on the blockchain network instead of a conventional centralized cloud. Just as miners receive remuneration in the form of cryptocurrency, real estate agents will receive network tokens as compensation for their contributions toward the ecosystem. Such decentralized storages with general purposes are IPFS, Sia, and Storj. If similar systems evolve for brokerages, banks, and title companies, then cryptoeconomic incentives will lead to dramatic changes in the roles of real estate professionals.
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