The rapid advancement of technology has significantly altered various industries, and real estate is no exception. The advent of online platforms and tech giants has reshaped the landscape of property buying and selling. As these colossal tech companies encroached upon the real estate sector, they fundamentally transformed the way properties are marketed, bought, and sold. However, the metamorphosis hasn't been without casualties. In this evolution, the traditional real estate framework has grappled with the overwhelming dominance of Big Tech, leading to the failure of Realtor organizations to effectively support and protect the professionals they are meant to represent.
History of Real Estate Commission Refunds
The real estate industry has been steadfast in dictating rules and regulations regarding the commission associated with a real estate transaction with many realtor associations and state legislatures arguing against a consumer's right to receive a commission refund, or the ability to negotiate a portion of that commission derived from their real estate transaction. Redfin was one of the pioneering real estate brokerages to offer a reduced commission, or a commission rebate to clients purchasing a home, but faced legal hurdles in states that did not want to allow a commission refund. In a few short years, real estate industry organizations that have advocated against a commission refund, may now be facing a situation that prohibits buyer agency commission altogether resulting from Sizter V NAR Class action lawsuit.
In recent years, companies like Zillow have emerged as dominant players in the real estate arena. These tech entities streamlined the property search process, offering users an easily accessible database of listings, alongside valuable insights and data analytics. The convenience they provide to prospective buyers and sellers has undeniably disrupted the conventional methods of real estate transactions. However, this seemingly advantageous disruption has come at a cost.
Zillow is the "Fox in the Henhouse"
The crux of the matter lies in the monopolization of information. Big Tech gained substantial control over real estate data, affecting the dynamics between real estate agents, buyers, and sellers. The once-revered role of a real estate agent, offering expertise, personalized service, and local insights, has been somewhat undermined by the ease of access to data provided by these platforms. The commodification of information has led to a devaluation of the expertise that real estate professionals bring to the table.
What is Zillow?
Zillow is a tech company that monopolizes the real estate industry averaging 20 Million monthly visitors, primarily to search for real estate listings. Zillow has mastered the art of SEO and dominates the search queries of prospective home sellers and home buyers looking for assistance with buying or selling a home in a certain area. Zillow’s SEO dominance will direct a consumer looking to buy or sell real estate in a specific area to a landing page hosted on the Zillow platform, by outranking the website of an actual local real estate professional. The Zillow platform provides the same listings from the local MLS (which is actually funded by local realtors), then charges the local realtors to introduce them to potential buyers. How Zillow is disrupting the real estate industry, increasing the overall transaction costs to the consumer, while not providing any additional value to the consumer:
- Local Real Estate Professionals Create a Multiple Listing Service (MLS)
- Local Real Estate Professionals use the MLS to help their clients find available homes and promote their listings for sale with other local real estate professionals.
- Local Real Estate Professionals Decide to Share the Date from the MLS with Zillow
- Zillow Builds a large National Website that outranks the Local Real estate Professionals
- Zillow Charges the Local Real Estate Professionals to introduce them to potential home buyers or home sellers (buy using the same data from the MLS service they already pay for).
- Zillow has created a “pay to play” model which directs clients to the local real estate professionals that are willing to pay for the introductions, with little accountability for the level of service provided by that specific broker.
Realtor organizations, established to advocate for and protect the interests of real estate professionals, have struggled to navigate this rapidly changing landscape. Instead of proactively preparing their members for this shift in the industry, many of these organizations failed to adapt swiftly enough. Their slow response to the tech revolution in real estate left their members vulnerable to the overwhelming influence of Big Tech. If Zillow is charging local real estate professionals to sell them leads generated from the MLS data (which the local real estate professional pay for), it would only be fair that Zillow contribute to the maintenance of the MLS systems based on a usage fee (or how much data they distribute).
Power to the Local Real Estate Agents and Professionals
Local real estate professionals and brokerages lack the size and domain strength to compete with Zillow for the most common search queries performed by potential home buyers and home sellers, but creating a “moneyball” type niche using analytics to generate real estate leads by not focusing on the most common search terms. Hausmarkt analyzed data of home buyers looking to move or relocate and “school district” was often mentioned as the most important factor in determining the boundaries of their real estate search. Hausmarkt focused on the “parent resource” section by offering education advice and home searches based on specific school district attendance boundaries (also attaching saved searches for those specific school district attendance boundaries).
Future of Real Estate Organizations
These organizations, intended to support their members through education, advocacy, and resources, have faltered in providing the necessary tools and guidance to navigate this new terrain. The lack of timely initiatives and training programs to help agents leverage technology effectively has left many real estate professionals in a state of uncertainty and vulnerability. Moreover, the dominance of these tech platforms has led to an increase of overall transaction costs, since local real estate professionals are forced into a “pay to play” situation in order to access local consumers. This financial strain has further highlighted the inability of Realtor organizations to shield their members from the economic repercussions of Big Tech's dominance.
In essence, the real estate industry has undergone a paradigm shift, largely steered by the overwhelming influence of technology. While these changes have brought a perceived convenience to consumers, the consumer may actually incur a decreased level of service while not receiving any financial benefit, leaving many real estate professionals (and consumers) at a disadvantage.
Realtor organizations face a crucial challenge: to swiftly adapt, provide essential support, and empower their members in this tech-driven landscape. It is imperative for these organizations to recalibrate their strategies, focusing on education, advocacy, and innovation to equip their members with the necessary tools to thrive in this evolving ecosystem.
In conclusion, the overwhelming influence of Big Tech in the real estate industry has not only transformed the way properties are bought and sold but has also exposed the shortcomings of Realtor organizations in adequately safeguarding the interests of their professionals. Adapting to this new era is pivotal for the survival and success of real estate agents. Realtor organizations must realign their priorities and provide comprehensive support to ensure their members can navigate and succeed in this tech-dominated terrain. Failure to do so risks further exploitation by Big Tech and an erosion of the real estate professional's value.