Remember the term “Disintermediation,” popularized in the 1990s?
Brokers in every industry match buyers with sellers. Their value has been based on relationships with their clients, the ability to provide better information than that which is readily available to the public, and mastering the complexity of the transaction process.
Digitization reduces complexity, allows information to move to consumers, and makes markets more transparent. Housing began the journey toward end-to-end digitization 30 years ago. That destination is now in plain sight, and Brokers are at risk.
Aside from legal uncertainty and reduced transaction volume, our fragmented industry is facing more years of negative financial results because of its inability to define a viable strategy for generating digital returns. REALTOR organizations at all levels remain unaware of the growing threat and perishable opportunities. Digital networks will benefit consumers, collapse costs, open markets and redraw industry boundaries. New entrants have the capability to connect the ecosystem and create data driven AI powered profits in every real estate related category that today’s Brokers could dominate.
The digital writing has been on the wall for decades and lower interest rates won’t change the trajectory of the major players. Lenders will consolidate, cross sell and move upstream to consumers. Portals will go downstream to offer financial services to homeowners and buyers. Government monopolies (Fannie and Freddie) will compete to gain share and reach the Primary Market. And Brokers will continue to be squeezed.
What won’t change is that buyers and sellers will require trusted advisory services to protect their interests.
Real Estate Brokers capture the original data that fuels a complex, infrequently recurring, multi-party transaction that signals shifts in consumer buying patterns and a series of downstream financial transactions. Unfortunately, Brokers and MLSs still think that data is for advertising, so they give it away. The broker, and the MLS of the future must think differently.
The pervasive distribution of listings and local property related information has devalued the “event” data that Brokers source, the sale of homes. Real estate data has become a commodity, to be exploited by media and software companies with no consideration for the content creators, the brokers and their sales agents. That could change if Brokers think differently about their role in a digital system. Brokers can start by:
- Encapsulating their data: create a shared context based on a tradable set of real estate submarkets – not zip codes or neighborhoods.
- Extending their metrics: compare products and submarkets – past, present and …future.
- Exploiting their position: capture the listing data, showing data, and the buyer’s loan qualification data.
- Exporting their content: enforce an industry rights model that pays brokers for their contribution to the entire digital value chain.
Digital initiatives require collective action that has typically been the role of trade associations. The organization that demonstrates an ability to protect the digital rights of its members will make a vital contribution to improving the fragile future of real estate brokerage.
Brokers created the associations and the MLSs – it is time to recreate them. The paradigm is shifting, and when a paradigm shifts, everyone goes back to zero. Your past success guarantees nothing when a paradigm shifts. Brokers and the MLSs have in their power the ability to take back the future they gave away 30 years ago.
It is now or never.