As a real estate broker in St. Louis, Missouri, I’m constantly reminded that my job is going the way of the dodo. That is, extinction. The details aren’t always that clear. For some, Artificial Intelligence is going to know the prices that people will pay for houses in the market real time, making my services unnecessary. Others say that there will be an app that schedules showings of houses to buyers with smart keys and that will prove we’re not needed. Count me in as skeptical. Here’s why:
The forecasted changes to an industry are completely unpredictable and always changing.
Think of it like this: real estate brokers were to be extinct right about the time that major corporations, like Sears were getting into the business. That was 1981! And yet, in 2018, we still have full service real estate brokerages but Sears itself is looking a bit shaky.
Agents and brokers were rightly concerned when Zillow entered the real estate brokerage business with Instant Offers. By the way, Zillow said long ago that they aren’t going to get into the brokerage business. As an independent real estate broker, I don’t fear Zillow. Right now, everyone loves Zillow, but at some point, they will screw up and every day competing organizations work to take away their market share.
Don’t forget about discount brokerages. These lower fee or flat fee brokerages have been around for years. If everyone were looking for the combination of cheapest, fastest, and best, real estate brokerages may be in trouble. The thing is, buyers and sellers are always looking for different things.
Here are some reasons I’m not worried that real estate agents are going to go away any time soon.
- It’s REALLY hard to be a successful agent or run a successful brokerage. The public perception is that we sit around and sip mimosas everyday complaining about paint colors but that isn’t the case. From finding clients, to working on real estate sales that are almost never the same, it’s a struggle. It seems like everyone knows 4 other agents in their circle of friends and family, so each listing or purchase is super competitive.
- The compensation level is not always great. I’ve had some buyer clients take years to decide on a home purchase. Others have been taken out of the market by job loss, family events, etc. Sure, you will get houses that sell in a day, but it’s the exception rather than the rule. There are many, many hours of uncompensated time.
- The market is constantly changing. What tends to happen in residential real estate sales is that, when the market is good, everyone wants to be either an agent or be part of a company involved in real estate sales. If you just look at the number of new agents, I bet you would see the active license count average right in line with the market in general.
- People want to work with someone they trust. As we move further into technology, people are finding out that sometimes it is better to talk to a real person in your community first rather than signing up on some website and getting 40 calls in the first 5 minutes after placing the call.
- The best agents know the market. The professional real estate agent knows the market far better than their clients or for sale by owners. This experience isn’t free; it comes from looking at thousands of homes over time. Oftentimes, going without a Realtor can cost you thousands of dollars in the end.
- The numbers don’t support it. In 2016, I believe, buyers and sellers conducted a transaction with agents involved more than 85% of the time. When you hear about game changers, i.e. open offers, offerpad, etc, you are talking about 15% of the total market. This is also the space of flat fee listings….so many companies fighting over 15% of the market doesn’t make any sense. You could say that they are coming for the full service real estate agents, but companies have been going after us for so long that it’s quite possible that there is a reason we are still around.
- Technology is quickly adopted. In about 2010, the cost of an IDX website build for a Realtor was in the thousands of dollars. Today, there are even free websites with IDX. Any technology that an organization gets that gives them the edge is seemingly overtaken in the space of a few years.
- Real Estate sales involve people. People are hard to predict. Some people look for agents who’ve worked with someone in their family or circle of friends. Others go straight for the internet in spite of what their friends or family council. In this way, an organization can have a huge online presence, but they still will miss out on referrals.
- Real Estate Agents have inside information. There are times when you meet with clients who aren’t actively looking to sell, but would definitely sell if the right offer came along. For whatever reason, they’ve chosen not to market their property on any sort of website that anyone looks at, and therefore only an agent would know if something is actually for sale.
- The vast majority of agents prove their value daily. Let’s be honest. Sellers hate paying a commission to anyone to sell their home. If they could eliminate paying agents, they would. In light of this reality, you have to wonder why anyone pays an agent at all. The truth is that agents can save you time and money.
Sometimes, I wonder if all of the talk of innovation in Real Estate is done to promote companies and their products versus actually having some basis in reality. When there is a bold headline screaming “The end of the line for agents” on a weekly basis, you begin to realize that the people writing the stories oftentimes haven’t ever been an agent, don’t know any real estate agents, and don’t really understand how the real estate marketplace works.
John Schink is a real estate broker in the St. Louis metropolitan area who specializes in full service listings and buyer agency. He is a member of both the Saint Louis and Jefferson County Boards of Real Estate. If you are looking to buy a home for sale in Saint Louis, Missouri or the surrounding metropolitan area or considering selling your home, or for general real estate related inquiries, he can be reached at 314-707-4821 or [email protected]