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Why Real Estate is Different From Stocks, Airline Tickets and Hotel Rooms

Disruption seems to be the key word when somebody launches a new internet based service model. Ameritrade, E Trade, Expedia, Priceline, Kayak, etc., etc., certainly have disrupted their respective industries and in some cases virtually eliminated entire categories of workers. Travel agents and stock brokers do still exist, but they tend to be specialists helping people with particular needs and requests that may lie a bit out of the mainstream. Looking to book a flight and a few nights in a hotel in Raleigh on a family visit and you are likely to find everything you need available through any one of a number of similar web sites selling pretty much the same thing for the same price. Planning a month long excursion to Indonesia and want to avoid the resorts, you will probably benefit from the knowledge and experience of a travel agent who knows that part of the world. Likewise, if you want to buy an S & P 500 tracking etf or mutual fund or trade in stocks you pick based on your own research, you can find any number of companies that are happy to process your trades for less than $10. If you need some serious advice in how to structure your portfolio or financial planning, there are professionals available that can help on a fee or commission basis.

To the dismay of many “experts”, real estate has been able to avoid serious disruption far longer than many predicted. Sure, Zillow has changed the way real estate is advertised, but its current business model is based on offering free home listings and selling ad space beside the listings to traditional high commission real estate agents. There are companies that present some disruptive alternatives on the listing side of a real estate transaction – entry only and reduced price flat fee companies have managed to capture a large number of listing and have probably helped bring one size fits all standard listing commissions down some, but disruptive alternatives on the buyer’s side of the transaction have been much slower in gaining traction.

One reason change has been slower to affect real estate is that real estate is fundamentally different from stocks, airline tickets and hotel rooms. These are some of the differences:

1. Each piece of real estate is unique and different from any other piece of real estate.
2. Each owner of real estate has different needs and motivation for selling.
3. Buyers want to physically see a piece of real estate before they consider buying it.
4. Each piece of real estate has different occupants with different schedules to accommodate showings.
5. Real estate purchases are usually the biggest purchase most people will ever make.
6. Real estate purchases generally involve multi page contracts with a number of provisions.
7. Real estate purchases involve sometimes extensive negotiations between the buyer and seller over price and other terms.
8. Real estate purchases typically involve inspections, property surveys and other due diligence items that can necessitate further negotiations or termination of contracts.
9. Many buyers need to borrow money in order to buy real estate.
10. Most consumers only buy or sell real estate a few times during their lives.

The traditional high commission business model that real estate has used for generations is in need of disruption and alternative business models, and we are now starting to see that happen. But the nature of real estate is that it does not nicely fit into the same internet based business models that have earlier brought beneficial disruptive change to other industries and in some cases virtually eliminated the agents or brokers who previously were required to make those industries work. Goddin Real Estate has been offering alternatives to traditional high commission real estate services for over 10 years. To find out more about how you can receive high level service and advice for a reasonable price regarding the biggest transactions you are likely to ever make, contact John Goddin at 919-968-2100 or John@GoddinRealEstate.com.

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