Internet Killed the Real Estate Star

News.com is playing on this sensationalist theme; but I think it’s grossly inaccurate.

The basic argument is applied to all sectors of commerce; and news.com does a good job listing the other industries that have been altered by the Internet.  In summary, buyers can connect directly with sellers now, so the middleman is no longer necessary.  Think eBay.

But this argument can be taken too far.  As my friend Mark always said; “the person who represents himself in court has a fool for a client”.  We’ve heard for years that Doctors and Lawyers would be disintermediated, but I see very little evidence of that.  When my health or freedom are at risk; I want professional help.

So, does this apply to real estate agents?  About 6 months ago, I studied for my Washington state real estate license.  I won’t be working as an agent, and have no broker to sign for me; so I can’t get the official license — but I passed the final exam with 94%.  So, what did I learn?  First, it was a lot harder than I expected.  I learned that there are a LOT of factors to take into account when transacting a real estate sale or purchase.  Lots of tradeoffs; lots of government regulations; and all sorts of risks and opportunities.

And licensing just qualifies you to do the paperwork, and handle your business without screwing up.  It doesn’t make you an expert in the local market.  It doesn’t establish you as being the best at a particular type of transaction.

And people don’t go to a real-estate agent because they need help with the paperwork.  When most people buy a home, they’re making a purchase worth more money than they’ll ever have.  It’s the biggest transaction most people ever make.  And most people intend to spend a huge amount of time in their purchase.  This isn’t the kind of transaction you want to screw up; you want the advice and assistance of someone who’s really good at it.  For-sale-by-owner works for some people (probably more than representation-by-client), but will never be the lion’s share of transactions.  Real estate is different from travel.

I recently sat on a series of panels at some real estate industry conferences in California.  There were reps from Yahoo, Google, and others; and Richard Barton of Zillow was a keynote speaker.  It was great, because I got to spend a lot of time with many of the top real estate agents in California, and see things from their perspective.  The demise of the real estate profession is highly exaggerated.

One of the key myths perpetuated by the chicken littles is that sites like zillow.com are going to put agents out of business, because agents (presumably) live on being able to assess value of property.  This is like saying the printing press would put doctors out of business, because anyone can buy a book with medical information in it.  The truth is, when a customer comes in having done some basic research first, it gives the doctor more time to provide the high-value services.  Statistics show that people who have done their homework are more likely to make a qualified purchase of real estate, and waste far less of the agent’s time looking at properties that are not relevant.  As Scoble’s story shows, information from Zillow is just one data point, and a smart real estate agent knows that a better-informed customer is a more satisfied customer.

It’s true that agents had stories of sales that were initially more challenging because of Zillow estimates, and agents are still adjusting to the fact that listings are available everywhere.  Across the board, there is some anxiety about the changes in communications, the power of search engines, and so on.  But agents who embrace the technology changes are finding that they are able to get better-qualified leads, and do far more transactions in less time.  Since the standard commission structure hasn’t changed, that means more money for the agent.  As automation does more and more of the routine busy-work of an agent, the agent can focus on the area where she really adds value, and scale that better.

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