Even as the best year ever for home sales draws to a close, residential real estate agents are gripped by an identity crisis, wondering whether their role will be virtually wiped out by technology.
As the detailed information on homes, sales prices and neighborhoods that was once the backbone of their business becomes increasingly available to all over the Internet, they are pondering what they can contribute to sales transactions in the future that will keep people paying them.
The National Association of Realtors is fighting to preserve its members’ place “at the center of every transaction” by spending more than $14 million this year and next on a TV-centered advertising blitz.
But what the Realtors call their “public awareness campaign” isn’t keeping the chill from the hearts of individual agents who fear they may lose their value in the marketing process as buyers point and click on the Web to search for homes and mortgages on their own.
“A lot of Realtors in five years won’t be in business,” said Mike Levine, an agent in Kissimmee, Fla., questioning speakers at a panel on technology at the Realtors’ annual convention last month in Anaheim, Calif.
“People will buy real estate over the Internet without our assistance. It seems overwhelming,” he added.
The anxiety isn’t new. Three years ago, when the Realtors announced at their 1995 annual convention they were launching a site that would put property listings on the Internet, some in the business predicted that such a move would decimate the ranks of sales agents.
That hasn’t happened yet. While the national membership of the Realtor group has, indeed, declined from more than 800,000 in the late 1980s to 730,000 this year, the number is actually about the same as in 1995.
And in a record year, many of those still in business are raking in money. Austin, Texas, Realtor Tom Polk said his local association has the same number of members this year as three years ago but sales are up 50 percent.
“They’re making more money than ever before,” he declared.
Yet the Realtors still see the writing on the wall or, more precisely, the hyperlinks on the screen.
“The (Realtors) leadership feels that we’re in the midst of the most transforming moment since we started,” said Sharon Millett of Auburn, Maine, the new president of the Realtor group.
Millett said a recent survey by the organization found that the top services sellers want from a real estate agent are finding a buyer and pricing a home competitively. Both of these things can now be done over the Internet, she acknowledged.
“What does that mean to the future of the industry?” she asked. “How do we position our business to make sure we are valuable to the transaction?”
A siege mentality is evident throughout the organization.
“Our future in the (sales) process is . . . compromised by outside influences, disintermediation and technology,” says material explaining the Realtor ad campaign.
Staten Island, N.Y., Realtor Vince Barri complained about a TV ad running in his area that features a high-profile actor pushing an Internet home-selling site, saying people are getting “ripped off” by real estate agents to the tune of thousands of dollars.
“We’re not ripping anybody off. We get the market,” he said. But he conceded that in many cases, his services haven’t been all that essential this year even though the vast majority of home sellers still call on him and his Realtor colleagues.
“In a market that’s so hot, if (the home) is in a good neighborhood, they don’t really need you,” he said.
Barrin’s comment cuts to the heart of the matter: Sellers may need Realtors less and less. But as he also points out, they still want them.
“Most sellers just don’t have the wherewithal to market or deal with the buyers,” he said. “I don’t think information, as much as they are throwing at you, is going to eliminate brokers.”
If real estate agents aren’t eliminated, what will their value be? It depends on what services they provide and how they provide them, said Craig Rief, vice president of transaction services for RealSelect Inc., which is based in Westlake Village, Calif., and operates the Realtors’ home listing Web site, Realtor.com.
Among the valuable services he cited were providing information, the right sales tools, help of various kinds, and a feeling of trust and security in the process.
While a flood of information is available on the Internet, real estate agents point out they have the knowledge and experience to evaluate its accuracy and interpret it to best advantage.
They also still have the listings, even though they are publicly accessible, and thus the listing broker is generally guaranteed payment no matter how the home sells. (The Realtor.com Web site has about 1.3 million homes listed, many times that of the best for-sale-by-owner Web sites.)
As for sales tools, agents mention such things as marketing in general and, specifically, home showings, which most sellers don’t want to do themselves.
Other kinds of help can involve navigating the legal and technical requirements of the sales process–in particular, disclosure of defects, negotiating a price with buyers and taking care of paperwork.
(Real estate agents typically have also helped out by making sure prospects can qualify for a mortgage on a home, helping them find a mortgage company and tracking the application.
(But indications are that function may be increasingly taken over by the Internet. Experts in the field say about 3 percent of mortgages are now handled primarily over the Internet and in three to five years 15 percent of all purchase mortgages and half of refinancings will be done in cyberspace.)
Providing trust in the process may be the most crucial–if possibly the most nebulous–service. Many agents describe their giving of trust and reassurance as the hand-holding relationship.
“You need a Realtor because you want to go to somebody you have confidence in, so you feel you are making the right decisions,” said Polk.
(Unfortunately, trust may also be a problematic issue. A 1997 Gallup poll said 80 percent of Americans view real estate agents as “average” or “low” in integrity, putting them well in the bottom half of the occupations list–even below journalists. The Realtors are trying to beef up their ethics rules to help improve that standing.)
The Realtors are trying to aggregate and conceptualize all these services in their ad campaign, whose theme is: “Real estate is our life. You’ve got a life. We let you live it.”
Implicit in the idea of hand-holding, however, is that for some, it won’t be necessary, and for others only a limited amount will be needed.
That brings up the question of how much consumers should pay for these services, a very touchy issue for Realtors.
“Real estate commissions have always been set by the Realtor and the consumer,” said Millett. “Realtors need to be able to do business, and have a reasonable return on their time. If it’s worth doing, our business will find a way to adjust the fee structure to the marketplace.”
RealSelect’s Rief pointed out that Realtors will increasingly have to compete on price and that compensation “has to be perceived as fair.”
In practice, what savvier, more do-it-yourself-oriented consumers and competitive pricing mean is lower commissions and set fees for services.
(That’s a trend that has been slowly building in the Chicago area, where once-standard 6 percent commissions are eroding, though the reasons may be more the hot market, high sales prices and fierce competition than the effect of technology.)
A companion trend is what might be called a flight to quality by consumers looking for a real estate agent. Their expectations of an agent’s services have been raised by their own increased real estate knowledge–often gained through Web browsing–and a general awareness of how technology can help them.
“What technology has done is raise the bar of service,” said John Tuccillo, the Realtors’ consulting economist. “It has taught the consumer to expect higher levels of service in every service occupation, including real estate.”
What that all boils down to, for instance, is a real estate agent who can use computerized databases to whip up a pinpointed marketing plan for a given house that will sell it “in the shortest period of time at the best possible price,” Tuccillo added.
And it may soon mean an agent who can get a contract on a home simply by giving a buyer an electronic “virtual walk-through,” conditional on an actual inspection later in the process, according to Realtor President Millett.
The demand for greater service and technological sophistication has already given domination of the business to larger and larger firms with more ample resources, so that 4 percent of Realtor companies have 68 percent of the agents, according to Millett.
Most leaders in the industry say boutique firms will still remain, but even so the shift to bigness likely also means a shift away from part-time sales agents and toward greater professionalism.
“Basically, right now the majority of folks with real estate licenses would be literally better off financially working at McDonald’s,” said Tuccillo. “Technology (will) expose the walking dead.”
