A successful real estate agent I know privately showed me a meme that was circulating after Zillow announced the demise of its iBuying business and subsequent layoffs. The meme showed a well-known Hollywood character with a smirk and a doctored caption suggesting, “I told you so.” Everyone knows Zillow as the original at attempting real estate disruption.
This particular person felt bad — no one should rejoice when people lose their jobs — but also acknowledged that she was sick-and-tired of the common conception that real estate agents are pampered folks who don’t deserve the money they earn. The gist of her (and others’) complaints is the implication that agents are superfluous, unnecessary, and overpaid; that in fact the job is easy. These sentiments are encapsulated in Silicon Valley patois — “Real Estate agents need to be disrupted.”
Such conceptions of real estate disruption are indeed curious. We’ve been drenched with PropTechs for many years but thousands of agents are having a banner year. Certainly, external factors have helped create this bow-wave of success. But the existence of these factors doesn’t diminish the important role of agents in the transaction process.
Agents have value
The numbers and emotions involved are both staggering. Six million houses will sell this year, in transactions worth well over $2 trillion. For most families, the house is their single most important asset and constitutes the bulk of their net worth. Even more importantly, so many life variables radiate from which house they own — schools, neighbors, safety, air quality, livability, ease of transportation, even job opportunities. As such, most people want dedicated help from experts in the process of buying and selling a home.
This mimics much of the rest of the world. We rely on experts and professionally trained people for so many aspects of life, and we pay for their services and expertise. Ask a doctor or lawyer, marketer or plumber, and you’ll see that real estate agents are no different.
This does not mean the entire ecosystem is perfect. Nor does it mean that all agents are equal. It is also not a call of Luddism in real estate. Technology, automation, artificial intelligence, computer vision and data analysis are key tools in the housing Industry. especially when combined with the wisdom, experience, and desire to help of humans. Tools like AVMs and desktop appraisals are arrows in the quiver of agents who are looking to maximize a host of elements of the process and deliver fair deals to their clients. Technology can also help with mitigating bias. All said and done, technologies in toto are handmaidens to agents who remain the core of the housing consumer transaction process.
Why the focus on disruption?
Given this, it is unfortunate that so many PropTechs are birthed on the notion of real estate disruption, disintermediation, dismissal or depreciation of the real estate agent.
The “original” PropTech, Zillow, first alienated the 1.4 million agents that could have been allies, subsequently befriended them as their “leads” friend, and then turning on them with iBuying. Impressive and well-run Redfin set the tone of undercutting agents (despite having agents) by discounting transactions. Numerous companies, like Homerun, at first alienated agents and then adopted them. The list goes on and on.
In my experience, 90% of conversations with PropTech entrepreneurs are focused on “winning” the elusive “6%.” They all want a piece of that action and in doing so want to “cut out” or “disrupt” the agent. This is not surprising given the Silicon Valley force-field and the hyperbole emanating from tech startups in general.
But is it wise to do so? And is it fair?
On both counts, I think not.
Let’s first examine the wisdom or lack thereof. There are approximately 1.4 million real estate agents in the U.S. As with many professions, they follow a 90-10 rule: About 10% of these agents do about 90% of the dollar volume in real estate. That doesn’t diminish the others. It just suggests that there are “tiers” in this space.
Too many laypeople and entrepreneurs suggest that the lowest performing agents are the “archetype” and then extrapolate from there. This is a classic feint in the world of business. To make a point, one picks the worst example of any set and then freezes that perception as the truth. It would be like meeting a particularly daft employee at, say, Google or Microsoft and then suggesting that all employees of these successful companies are “idiots.”
Further, it would seem particularly valiant to alienate 1.4 million people (or even the 140,000 super performers) by real estate disruption versus adopting them as, perhaps, a channel or a set of advocates. Such valor can be rewarded at times but for the most part is simply pointless.
As for the fairness angle, the point should be clear. We don’t suggest that doctors or lawyers should be “disrupted” just because one or two of them isn’t particularly useful. Nay, we rely on them for their expertise. To dismiss agents as a class as useless or in need of “disruption” is insulting and unfair.
It will be argued that the idea of real estate disruption is powerful and helps topple ossified monopolies. People point to companies like Uber or Lyft when making this point. Even if we dismiss questionable labor practices and perils of gig labor (and so many other factors), we have to ask an important question: Which is more important, a ride home from the airport or the buying and selling of a house?
When we realize how important the latter transaction is — how fundamental it is to the happiness and success of a family — we should also realize that pitting homeowners against agents is not a good idea.