I wanted to pose the question: Are we seeing the end of the real estate agent? More importantly, was this perpetuated by the real estate agents themselves? So we have 2 very large internet companies, tech companies that have been involved in real estate now for awhile, I’m talking about Zillow and Redfin. Both of them are getting involved in real estate in different ways. This has had a huge impact on the reality of the home market , the appearance of companies like this has started to interrogate the very same existence of realtors, if machines can help anybody sell a property, why would you need a middle man?
And who perpetuated this? Who has caused this to happen? Who has given them the resources, the income to achieve this level, to be able to step in the game? The answer, regrettably, is not that simple...
Since 2015, Zillow's revenues have skyrocketed. Over 400% now of what it was back then. And in this last year, if you look at the chart you see 2019 it's just really gone up more than ever. How is this happening? Well, what's ironic is that their revenue increase is coming from realtors.
Zillow group delivered premier agent revenues of $217.7 million! 47.9% of their total revenues are coming from premier agents, coming from realtors who are advertising on Zillow! Their revenues have increased 51% this year in 2019. Now they're taking that revenue, they're reinvesting in a technology and listings, being able to offer buyers and property owners to list their properties on Zillow, bypassing the “evil” real estate agent who collects a commission. Zillow will buy the property, they will list it, and guess what? So far into 2019 they have 35,000 offers. In the beginning of 2020 they are expanding to over 20 more markets. And this is because real estate agents are paying them for leads. Creating revenue so they can create this type of business. Which is supposed to be better than what realtors can offer. This is gonna hurt realtors!
Redfin, from its own trench, is looking to disrupt real estate agents with a new program where home buyers make direct offers online without an agent. While Zillow was kind of removing what listing agents can do, Redfin is now going to step in and hurt what buyers agents can do. Now you can skip this middleman and just go straight in, they have this 55 question questionnaire that you just fill out to help them negotiate that offer for you. I don't know, to me it's always better dealing with a living person that you have direct contact with, that knows your market, but this is gonna hurt realtors.
This article is talking about Refin’s CEO and it's a tech powered brokerage, this was a plan of theirs all along. Redfin, like Zillow, admits their income comes from real estate agents who are in their advertising and buying leads.
“It's something we've always wanted to do… But we had to get listings here, a buyer audience to really build a marketplace where we can put these together” the CEO of Redfin says.
They needed the realtors to generate this revenue, to generate this market share to then be able to turn on the realtors. I don't think it's going to be the end of realtors. I was arguing this was someone at dinner last week in DC who's a real estate investor himself, and he says “You don't need the realtors anymore you can bypass them”. I completely disagree. I think that a lot of people are going to get hurt by this, they're going to get bad deals, they're not gonna have the right representation.
Cutting realtors out is gonna hurt the whole industry. And there's nothing like a personal touch, I think a realtor is always going to be here, but I do pose a question: Is this the end of the realtor as we know it? Is it going to change and evolve? Will the financial advisors change and evolve like when online trading started? Have we as mortgage professionals evolved when had mortgage apps appeared? These apps don’t really remove the mortgage professional, people think they do, but when you use that app you’ll still end up having to talk to a mortgage professional.