How Technology Replaced The Role of A Realtor

The role of a real estate agent needs to change. Better yet, it has already changed. From the way business is conducted, to the value agents bring to their clients, and the compensation to the real estate agents, everything points to there needs be a major shift in the industry in how everything is done.

With the latest NAR settlement, it signals that the time to change is now.

Technology had made information much more accessible than ever. Whether it’s available housing on the market, or information about the neighborhood, what was considered the biggest value driver of a real estate agent back before the internet is now just table stakes.

Here’s how the real estate market worked before the age of internet.

How the Real Estate Market Worked Before the Internet

Before the internet revolutionized the real estate industry, the process of buying and selling homes was much more dependent on real estate agents for accessing critical information. Here’s a brief overview of how it used to work:

1. Property Listings: Listings were maintained in thick binders or printed catalogs at real estate offices. Buyers had to visit these offices to view available properties.
2. Newspaper Ads: Local newspapers were another primary source for property listings. Prospective buyers would scour the classifieds, often published weekly, to find potential homes.
3. Agent Networking: Real estate agents had extensive networks and insider knowledge about upcoming listings and market trends. They were the gatekeepers of valuable market information.
4. Network of Vendors: Real estate agents maintained a trusted network of vendors, including inspectors, appraisers, and contractors. They relied on these connections to facilitate various aspects of the home buying and selling process, providing clients with reliable referrals.
5. Showings and Open Houses: Agents organized and conducted property showings and open houses, coordinating with sellers and potential buyers to arrange visits.
6. Offer and Negotiation: Agents facilitated the offer and negotiation process, using their expertise to advise clients on pricing and terms.
7. Closing Process: Agents guided clients through the closing process, handling paperwork, coordinating with lenders, and ensuring all legal requirements were met.

In essence, real estate agents were indispensable due to their access to exclusive information and their ability to navigate the complex process of buying or selling a home. The internet has since democratized much of this information, fundamentally changing the role of the agent.

Now let’s take a look at how all of these work with the help of the internet.

How the Real Estate Market Works Today

Today, the real estate market operates in a vastly different landscape, driven by technology and easily accessible information. Here’s how the process looks now:

1. Property Listings: Online platforms like Zillow, Redfin, and Realtor.com have made property listings readily available to everyone. Buyers can search for homes based on various criteria, view photos, and even take virtual tours from the comfort of their homes.
2. Digital Ads: Digital advertising has replaced traditional newspaper ads. Social media, search engines, and real estate websites showcase listings, reaching a broader audience more efficiently.
3. Information Access: The internet provides buyers with extensive information about neighborhoods, schools, crime rates, and market trends. This transparency allows buyers to make more informed decisions without solely relying on an agent’s knowledge. And agents are sometimes restricted by what they can or cannot say due to regulations like “steering”. Buyers will need to do research on this themselves if they want to get the full picture.
4. Network of Vendors: While agents still offer valuable connections to trusted vendors, many buyers and sellers now have access to online reviews and ratings of various service providers. Platforms like Yelp, Angie’s List, and Google Reviews enable consumers to independently vet and select inspectors, appraisers, contractors, and other necessary services. This democratization of vendor information allows clients to make more informed choices, but agents can still play a key role in recommending reliable professionals.
5. Virtual Showings and Open Houses: Technology enables virtual showings and 3D tours, allowing buyers to explore properties remotely. Physical visits are still important, but the initial screening can be done online, saving time and effort.
6. Offer and Negotiation: Buyers can now use online tools and resources to understand market value and comparable sales, empowering them to make informed offers. Some platforms even allow direct communication with sellers, streamlining negotiations.
7. Closing Process: Digital signatures and online document management systems have simplified the closing process. Buyers and sellers can complete much of the paperwork electronically, coordinating with lenders and title companies through secure online portals.

In this new era, the role of the real estate agent has shifted from being the gatekeeper of information to becoming a facilitator and advisor, or as I like to call it, they are the project manager of the home buying process, helping clients navigate the wealth of information available and ensuring a smooth transaction.

One thing that hasn’t changed as much is the compensation structure.

Compensation: Then and Now

The way real estate agents are compensated hasn’t really undergone significant changes from the past to the present, although the recent NAR settlement might change this.

Traditional Model

• Commission-Based: Traditionally, real estate agents earned their pay through a commission, typically 5-6% of the home’s sale price, split between the buyer’s and seller’s agents. This fee was usually incorporated into the selling price and paid by the seller at closing.
• Standardized Fees: This commission structure was standard and widely accepted, given the crucial role agents played in accessing and managing property information.

Modern Adjustments

• Challenged by Technology: With the advent of technology and the democratization of information, the traditional commission model is increasingly questioned. Buyers and sellers now have more tools and data at their fingertips, reducing their dependence on agents.
• Alternative Models: New compensation models have emerged, such as flat-fee services and discount brokerages, which offer varying levels of service for a lower, predictable cost.
• Direct Negotiation: Some buyers are negotiating directly with sellers to minimize or eliminate buyer agent commissions, leveraging their access to online resources.
• Flexible Options: The shift towards more flexible and cost-effective compensation structures reflects the evolving value agents bring in today’s real estate market, focusing more on advisory and facilitative roles rather than gatekeeping information.

Conclusion

The world looks a lot different from 30 years ago when the internet was first introduced. The real estate industry is now finally catching up in terms of its service provided to the consumers. I personally am glad to see these changes. This is part of the reason why I started diyhomebuyer.com, to help guide people navigate the home buying process without a realtor.

I am excited about the change. Remember, you can never stop progress. Learn to embrace it. Thanks for reading.