There’s a lot of talk going on about ‘disrupting’ the real estate industry, with two distinct schools of thought:
1) The industry is ripe for disruption.
I predominantly sit in this camp for three reasons, although I’d personally change the heading to read: The industry is ripe for evolution.
The first being it’s negative reputation. Real estate is one of the least respected professions in the world with less than 15% of consumers rating it as trustworthy & ethical.
Secondly, it is bloated and inefficient – leading to excessively high fees that consumers struggle to see as good value.
Finally, the entire industry is built upon the same ‘Commission-Only’ business model and ‘Sales Culture’. Each agency and brand is essentially a clone of the next, giving agents no differentiation and consumers no choice.
However, where I differ significantly from others in this camp – is the ‘form’ disruption / evolution will take. Everybody else seems to be looking for a ‘tech’ solution. Some App, Website or Platform that will remove the “middle man” (real estate agents) and forever change the industry. My belief is that ‘tech’ will not in itself disrupt the industry. ‘Tech’ is however enabling our evolution, by changing our ‘value proposition’ to clients.
2) The industry will not be disrupted.
This thinking is based upon two key arguments:
a) “Many have already tried to disrupt the industry and failed”.
In New Zealand the case often cited is the spectacular demise of ‘The Jones’ who tried to introduce a low flat rate commission. Yes, there are numerous examples around the world of other attempts to ‘discount’, that have simply not been sustainable.
But following this line of thinking is like saying to Ed Hillary… “ Don’t bother trying to climb Everest – nobody has ever done it before”. Or telling Steve Jobs that “the Newton didn’t work – so developing a handheld computing device is a waste of time”… With this thinking you are likely to wake up one day and find yourself obsolete. While somebody else is learning from past failures, slowly but surely perfecting their offering (often using new ‘tech’ enabling them to ‘crack the code’), you stuck your head in the sand and didn’t see it coming.
b) “Real estate is a lot more complex than other industries.”
To quote directly from an article I recently read by an agent in this camp…
“There is an enormous human element that accompanies buying and selling homes. Homes are both large financial investments and a nest for your family. Emotions run high. There is also a large amount of legal responsibility. Finally, small differences in the skill of an agent can translate to enormous differences in the price someone receives for their home – indeed one wrong word spoken can change the result by tens of thousands of dollars for an averagely priced home…
I am sceptical that the human element of buying and selling homes will ever be replaced with an algorithm.”
On this point I totally agree, the human element in real estate is where, as agents, our value is and will continue to be. Embedded in this truth is the answer to ensuring our continued existence.
However he went on to say …
“The lack of real disruption to the Real Estate industry [to date] is a very good hint that Real Estate agents add significant value to the marketplace”.
Really? Try asking consumers if they think the real estate industry adds “significant value” to them. The reality is they see us as “middle men” – taking value. Therein lies another clue.
As we talked about in these two articles … “Airbnb, Urber meets Real Estate”, and “Urber, Las Vegas, Real estate (Pt.2)”… any disruption must work for both sides of the equation (the two sided market place). It must solve significant issues for the consumer (sellers) and at the same time work for the service provider (agents). It must have a proven formula, a documented approach that consistently achieves superior results for both.
Previous attempts to ‘disrupt’ real estate have failed to achieve this. They also didn’t address all three core issues: Low Consumer Trust, High Fees and No Difference. They only focussed on one of those issues – “fees” – by simply “discounting” the existing business model, while ignoring the fact that the existing model itself, is the root cause of all three core issues in the first place.
What if somebody in the real estate industry addressed all three?
What if an agency:
1) Was held in higher regard by it’s clients. Was trusted and seen as a ‘value adding’ service provider. What if they created such a good experience that the agencies client satisfaction rate was 90% instead of 15%. Thus creating the viral effect of positive word of mouth and referrals?
2) Was more efficient – increasing the production per agent and significantly reducing the fees to clients (thereby increasing their clients profit from the sale) and at the same time was better financially for the agents?
3) Was fundamentally different – giving consumers a real alternative and it’s agents a competitive advantage over the “we’ve always done it this way” traditional competition.
Could such a real estate service disrupt the traditional way of doing things?
“Impossible” you may say.
Think again. It’s already happening and the simple solution, the one thing that makes it possible, is hidden in plain sight. Can you see it?
If you are an agent and would like to dig deeper into this subject … have a listen to: Blue Ocean Strategy Applied To Real Estate