Back in April of last year, my Forbes article, Are Real Estate Brokers Obsolete?, generated a lively discussion. For example, many brokers objected to this statement: I’d like to suggest that 95% of a broker’s role could be handled better by well-designed technology systems. Bidding, for example, could be handled by an automated system that includes legally-binding documents that would be instantly accessible to each party’s attorney. Since then, I’ve had time to consider the many comments and to further refine my views on the future of this industry. For example, last week CNN called to ask what the real estate industry would look like in ten years. Here’s what I told them. Despite the numerous regulations, practices and habits that protect the current broker-driven model, in 2025 I see three distinctly different segments emerging: Super-brokers cover MVC clients in multiple markets – At the highest levels of the market, the broker model will remain intact, with one major difference: the best brokers will no longer be restricted by geography. The most trusted and expert brokers will focus on the highest value clients, rather than on a single market. For example, they will help a CEO buy properties in Deer Valley, Manhattan, Cape Cod and Pacific Palisades. “Building share of customer” is a proven strategy in industry after industry. Since detailed information about specific houses is now fairly easy to find online, super-brokers will add value by screening properties for clients, based on their in-depth knowledge of their clients. In other words, it will be more important to know your customer than a specific market. Automated services will disrupt the price-conscious portions of the market – The sort of disruption that many pundits describe – buy your home online, bid in automated auctions, etc. – will happen mainly in the lower to middle ends of the market, and especially in larger markets.
In big cities, there is enough inventory and demand to make bidding work. But in smaller markets and at the high end of the market, I don’t see automated solutions gaining much traction. Disruption will work at the lower end, where saving $25,000 in commissions might make the difference between buying a house or remaining a renter.
Status quo for the slow-to-change – Just as some people still insist on handing their bank deposits to a human bank teller, some people will remain tied to the existing broker model. But here’s the bad news for brokers: these will be time-intensive clients to serve, as they are the ones who require the most handholding. That is, if you want to serve this market, you better get used to taking longer to sell a house. These clients take forever to make a decision, because they hate risk.
Summing up the implications…
1. There will be fewer brokers in 2025, because super-brokers will move from market to market, pushing out the local brokers who don’t have the time or inclination to travel around the country. Automated services will push out far more from the lower and middle ends of the market.
2. Automation will bring high end “customer service best practices” to a larger audience. If you are designing such a service, you would be wise to spend six months following around top brokers, then design a program that automates their best practices, from making paperwork easier to manage to making it easier to compare properties.
3. There will be more low-paying jobs in real estate. As automated services do more, new roles – such as opening doors for buyers or taking photos/videos of properties – will migrate from brokers and agents to hourly workers. Yes, current regulations prevent some of this from happening, but disruption will force changes in many regulations, especially the ones that protect brokers more than individual consumers.