No More Agents?
Published on 04/12/19 by Michael Moore
There has been some stories going around about certain companies like Zillow coming out with technology that will make regular agents obsolete. I don't think so.
Zillow has grown to monstrous proportions, and sadly, agents created the monster. The Multiple Listing Service was given to Zillow to use for free, and then they turn around and sell leads and advertising space back to agents. Most agents probably cannot afford to buy what Zillow is selling, but those who can, usually do get some return on their investment. This return might not have come if they had not invested in Zillow. So, ZIllow has been good for some agents, but for many, if not most, Zillow is trying to push them out of business.
I have a friend who has been talking for years about how companies like Zillow are going to kill the "human" agency. He believes wholeheartedly that these companies will arrange their business models so that basically their websites are the agents, and they will be the only ones controlling a nationwide MLS service. There could be some truth to this coupe, but there are more things to consider.
The iBuyer movement has gained some traction. Companies like Zillow, OpenDoor, OfferPad, and Redfin have been buying less than marketable homes, then turning them around and selling them directly to end buyers. With this model, prospective buyers can make an appointment themselves to see a property. Basically, they interface with the company's website, and they are given access to the property to preview it, with no buyer's agent involved. Then they can make offers on the property. Seems like a more efficient business model, but is it really?
These companies will be tested in a market where things have slowed down some. Here is a link to a good article about that - http://tinyurl.com/y37hswag
The big companies could take a chunk out of agent's business, but I do not think regular agency is going away. In the end, people need to have direct access to other people, quickly. The more automation takes over, and the more an assigned agent from a website is trying to get business done, from somewhere else in the country, the more frustrations can arise and the more liabilities.
There is a lot involved in selling property. Those not in the industry might not think so, but it is like anything else - if you are not doing the job or involved in the business, you do not really know all it entails. Agents exist for a very good reason. Homes sell as much as they do because agents exist, on the ground, in the area where the homes sell, interfacing with all the people and moving parts involved.
Everyone knows selling and buying a home is one of the most stressful undertakings for people. It needs to go right, and there are plenty of things that can go wrong. Getting a property sold involves a lot of counseling, negotiations, and troubleshooting. This cannot be done with the same care for the principles involved by a company where things are being taken care of virtually, or by minimal interface with an agent who is not from the state.
There is a fiduciary duty between main principles and agents, then agents owe the other side honesty and fair dealings. There are fair housing issues, issues that come up in inspections, issues with lending, and issues with people's personalities. What seems like a straightforward transaction can quickly turn into a nightmare, especially when people do not have a lot of emotional intelligence. Good agents on both sides can reign in the situation, go into damage control mode, troubleshooting mode, and make all things work out for a win-win. This is what everyone wants. It is what the seller wants, what the buyer wants, what the agents want, what the lender wants, what the lawyers want (depending on which state you're in), what the title company wants, even what the state and nation wants. Why? Because everyone wants homes to sell, and everyone wants to get paid. The nation's economy is most healthy when the housing sector is healthy. Hand over home sales to a website and at-a-distance agents who are there to "advise" will inevitably lead to more problems than it is all worth.
When things go wrong, and they always will, the clients want to talk, gripe, and complain to someone in person. They want these issues resolved, or someone is going to pay big-time. Having agents there to make sure time frames are kept and all issues resolved is the most important thing about a transaction. Some sellers can do this on their own and some buyers can pull off buying a property without representation, but it is not advised if one has not already done it a number of times.
With so many issues waiting to blow up, having a seller and buyer work directly together can often be a recipe for disaster. I am sure there are enough stories out there about a seller and buyer coming together, having a lovely meeting of the minds, and everything turned out swell; both sides even saving some money by not using those "bad-'ol-agents". This is not the norm. Most FSBO (for sale by owner) properties linger on the market and are eventually listed by an agent. Most buyers will eventually enlist the help of an agent to find and procure a property. There are just far too many things involved in making real estate move.
One of the biggest issues is integrity in the dealings. Agents are not perfect, but they usually make sure all things are done above board, and part of their service is to hold their clients and the other agent's clients accountable. Part of this has to do with disclosure concerning issues with the property, as well as following through on contractual obligations. They are there to make sure things are done in a lawful way, as well as make sure the contract is honored and the deal gets closed in the shortest time. They take on a lot of liability themselves, which is part of the reason why agents can be compensated well.
Using a website, or an "advisor" agent who is not there in the trenches with the clients will not have the same effect. I believe this will inevitably lead to more deals falling through, and worse, more lawsuits piling up because things were not done properly - because there were no eyes and ears right there in the trenches, on the scene, interacting with all the parties involved. There are a lot of moving parts to a real estate transaction, and the bigger the property, the more the parts, the more particular the clientele, and the more money on the line. This means bigger, more expensive lawsuits when people are not happy. It doesn't take a lot to upset people now adays. Litigation happens too quickly, without going through mediation and arbitration. Everyone thinks they have been taken advantage of or done wrong. Sometimes they are.
Are the big tech real estate companies going to stand by their clients and make sure things go well; make sure everyone is happy and avoids litigation? I don't see how they can. Their model will inevitably have to be written up as it was many many years go - "Buyer Beware".
When they cannot make the agent element more available to protect the deal and the clients, the clients will have to assume more liability and responsibility. In part, I am for this, because sellers and buyers today can have an aversion to their own responsibility, making the agent the bad guy when things don't go their way - even when the agent did their best to put the good of the client first.
Regular agents, and the regular agency relationship is not going away. It can't. There is too much involved in a real estate transaction for the agent on the ground to be taken out of the picture. It is a service oriented arena, which needs service oriented professionals helping those who do not normally know how to navigate the process. Agents know. Keep using them.