As the real estate market gradually struggles toward some sort of new normal, it has become apparent that the way real estate is bought and sold is undergoing profound changes. Unlike other traditional commissioned sales businesses such as travel agents and stock brokers, real estate agents were able to fend off the transformational changes brought on by the Internet for many years, but the forces of a market meltdown, the success of deep pocket information providers such as Trulia and Zillow, and the generational turn over among both real estate practitioners and real estate consumers appear to be bringing about the massive changes many of us have been waiting to see.
The real estate industry has been able to maintain its status quo of controlling access to information and maintaining very high compensation rates for a long time largely due to the stranglehold that local and regional MLS’s have had over access to their system of sharing information and commissions only among their members. The local and fragmented nature of real estate and the fact that, unlike a stock or plane ticket, real estate generally requires some sort of human involvement at the very least in the viewing of it, have presented barriers to entry that have limited competition of the scale needed to dramatically change the business. The traditional customer base of the real estate industry has been property sellers who list their property for sale with a real estate company. Buyers then have little choice but to do business in some way with a real estate agent upon terms decided by the agent and the seller, regardless of whether the buyer wants to play in that game or not.
The last few years, however, have brought about substantial changes in the way real estate is bought, with the buyer now being in control in many markets, and that is forcing upon the industry changes in the way real estate is being sold. Traditionally the role of the broker (company owner) has been to supply listing leads for the agents. Listings then become lead generators for buyers, although not necessarily buyers for the listings they inquired about initially. Reliable information about properties for sale was primarily available only through broker and agent channels.
Third party web sites such as Trulia, Zillow and others have changed the game. While suffering initially from a lot of bugs along with inaccurate and outdated information, these sites have worked out the kinks and offer consumer friendly search and information features that can be used without a real estate agent having to be involved. Cautious buyers often spend months educating themselves about the buying process and real estate market using these sites. By selling ads to real estate agents on their sites, these 3rd party sites are becoming the lead generators for agents looking for buyers to represent. Many brokers and agents who have been in the business a long time are having a hard time adjusting to the new ways of doing business, but they are being supplanted by those willing to adapt and change and a whole new generation of agents who are entering the business with a much more consumer friendly mind set. Expect to see major changes in real estate services over the next few years and major shake ups in the players involved, with traditional MLS and brokerage models adapting to better serve the consumer or being replaced.