Yesterday in Part 1, we saw that that more and more real estate websites keep rolling out.
Is that the future, more gadgets? Undoubtedly there will always be more new websites to empower participants with more information. Is information all you need to successfully buy a house?
Let’s break down the home-buying process into two steps:
1. Information-gathering/search for home.
2. Meeting of the minds, and follow-through to close.
It used to be that realtors had a stranglehold on the homes for sale via the private MLS, and you needed an agent to be able to find a home. Now you don’t – and the agents whose skills are limited to house-searching will be helping only those buyers who can’t/won’t search themselves. Have you noticed how much the younger folks are addicted to the internet? Expect that the realtor population will dwindle significantly in the future.
Buyers are able to do their own home-searching, and educate themselves tremendously about market values. They know more than the sellers, and usually more than the agents – because the buyers have more at stake. But is that enough to make the deal?
I say no.
But first let’s note that any home seller can put a sign in their yard and sell their house without a realtor, if they don’t care about selling for the buyer’s price. Have you seen a lot of those sellers lately? Me neither.
Future home buyers will struggle to achieve a meeting of the minds with the seller at an acceptable price, but a third-party can assist. In a down or flat market, the buyers are willing to hold out, it would only be in a rapidly- improving market that buyers might compromise on price, and meet the seller’s demands – unless the house was so unique that the buyers had to have it, regardless of price.
Because the market will probably be choppy for years to come, how will this third-party evolve beyond today’s model?
1. Specialized buyer-agents with exceptional skills/experience (Nordstrom, Four Seasons)
2. Listing agents who push for dual agency (Wal-Mart)
3. Statewide transactional specialist (Internet sales)
All three exist now simultaneously in other industries, and it’s up to the consumer to decide which is the best fit for them.
A. If you want personal attention and assistance all along the way, with assurance that when it comes to crunch-time your agent will be there to properly guide you and the transaction, then #1 is for you.
B. If a buyer is satisfied with their own level of market knowledge gained from the internet, and doesn’t mind getting minimal representation, then going direct will become more popular in the future – primarily because the listing agents will be pushing for it. Leftover agents from today will still have a shot at selling other agent’s listings, but only if the buyers are willing to pay a higher price – which will be less likely in the future.
C. The third option is in the works. The MLS entities are currently bonding together to create a state-wide MLS. This will lead to the possibility of an agent working the entire state of California, and providing expertise over the internet to be the third-party to make the deal anywhere.
The next step, Part 3, will be how agents get paid. I don’t think most people mind paying for assistance, it’s paying for what you need that is hard to identify. There will also be crossover between A, B, and C above that, if the pay scale was clear, would enable clarity and flow.
Signed, Jerry Maguire