Wither The Realtor?

The News Tribune reported this week on a meeting in Bellevue hosted by the MIT Enterprise Forum that brought together realtors, brokers, and high tech real estate company leaders.  As one reads the News Tribune story it appears as though there’s just a simple misunderstanding out there.  These new websites may be a slight competitor to realtors, but realtors and brokers will still be needed.  Brokers have nothing to fear as long as they work with these web companies and embrace technology.  Too bad this is all too optimistic. 

Who wants to be the person that tells an industry that there is about to be a purge of their ranks? 

As the New York Times Magazine stated two weeks ago, real estate agents are “about to join the endangered-species list.”  Why?  The Internet is about information and the added value of a real estate agent was in providing information to buyers and sellers to help guide them through the most important financial transactions of their lives.  Zillow and similar services, online tax assessor sites, and fully interactive realtor websites allow people to find comps and determine prices without talking to a person.  Sites like Craigslist bring buyers and sellers together without needing the formal MLS systems.  There will always be a need for some realtors and brokers, but many will disappear.

Think back for a moment to 1999.  Travel agents stil roamed the earth in vast numbers.  So did stockbrokers.  But their business models were being blown apart, largely by the Internet.  The new market for do-it-yourself online securities trading lowered fees so drastically that a full-price stockbroker could simply no longer earn a living.  Travel agents were shoved aside once the Internet gave customers the ability to book their own trips – and when, perhaps more damagingly, the airlines decided to stop paying the travel agents’ commissions.

The first natural progression we will see is a definite cut in the real estate commissions.  But, then, it won’t be possible for everybody’s significant other and mother to be a realtor and still make a living.  Fee for service and low cost brokers will arise.  Hmmm… Let’s see.  List my house on MLS for $550.  Show it to prospective buyers for $50 per hour.  Negotiate contracts for $75 per hour.  If we think about realtor services as an hourly rate, they make a lot of money on our house transactions today.  This will change. 

Some travel agents and stockbrokers are still working.  Similarly, there will still be realtors and brokers.  There will be a generational split for a while.  Older generations will simply want a full service real estate company to back them up.  Younger generations will be more likely to take things into their own hands.  The rock star brokers whose names are all over Tacoma will continue to evolve and survive.  Who here hasn’t met somebody that recently became a realtor?  Everybody seems to be getting into the game and the industry can only support so many folks – I’m sorry to say.  The chaff will be blown out and will find a new way to make a living. 

Evolve or fade away?  What does evolution look like?