Reading my morning email an article caught my attention in one of the many industry emails. My linkedin feed had a blog on an article published in Bloomberg News on March 7, 2013. The article's title was eye catching to say the least, "Why Redfin, Zillow, and Trulia Haven't Killed Off Real Estate Brokers."
After reading the article I felt like I should feel sorry for RedFin's founder, David Eraker, who apparently had a bad experience while searching for a condo to buy and came up with the brilliant idea to change the way residential real estate brokerage was done in the United States! I could only imagine what his experience was like to drive him to take on this challenge.
The gist of the article appears to be, at least in my opinion, that Mr. Eraker actually gave the founders of both Zillow and Trulia the idea of starting their own much more successful business models because he spoke about his challenges in getting RedFin funded in its early years in informal settings. If only he had done a Non-Disclosure!
Along with Mr. Eraker apparently their are several other highly educated gentlemen that would like the traditional model to change. Stanford University economics professors B. Douglas Bernheim and Jonathan Meer apparently did a 30 year study that they released in 2008 that showed that sellers would be able to make more money if they did not have an agent involved in the process. They claimed that the use of a broker reduced the price from 5.9 - 7.7 percent!
Of course, this was a small sample group - just the sales in their university campus for the last 30 years. So actually taking that small sample into a broader area will probably change the results. A small niche such as university housing has a totally different criteria than the general market.
There were so many things that were biased on this article and so off kilter that it would take me hours to dissect and discuss. The fact is that there is so much more involved a real estate transaction besides the commission. We are one of the few professions that only gets paid when the transaction is completed. We do more than paperwork, open doors, and drive buyers around. Both sides have to do a lot of hand holding, knowledge transfer, counseling, negotiation, etc.
The sites that consumers go to obtain information on buying a home provide a service to the consumer. It allows them to narrow their choices and feel more comfortable about the process. Buying a house is not like buying a car or any other product. In real estate location plays a major part in the decision and the amenities include school district, neighborhood, transportation, shopping and get more specific when it comes to number of rooms, square footage and of course, price!
With so many variables having a trusted adviser may be a good idea. At least the fact that only 9 percent of homes were sold by owners versus agents says a lot. I don't think traditional agents have to worry that we will be gone as 90% of consumers start their search for a home on the internet and then go through an agent to buy a home.
The article had a lot of misinformation and opinions that have no actual truth in them. Such as forcing sellers to accept the first offer on their home so we can get "paid" quickly. Or when they claim that realtors put pressure on buyer's to buy a place quickly. I have not had that experience with any of my buyers or sellers. They seem to have a mind of their own so I wonder how the writer of this article came up with those conclusions.
My conclusion is that the traditional real estate model has lasted this long because it works for the majority of people. It may not be perfect but it comes close!