Wikipedia has us real estate folks on the "short list" soon to fall by the wayside of disintermediation. Jonathan Washburn's post focuses on what would happen to prices if 90% of the real estate agents retired in the next 6 months.
First of all if 90% retired that would be good news. Because real estate adheres to the 80/20 rule. 20% of the agents do 80% of the business. So the 10% left would double their business. No problem here!
The real question focuses on pricing. If the middleman were taken away, what would happen to real estate prices and services?
There would be a lot of problems brewing in the market. Real estate unlike many commodities that have lost the middleman is much more complex. The job of the Realtor is one that guides and imparts market knowledge as needed. Real estate is local and always will be. Just because a consumer can look at pictures online and determine if they like a place, isn't an entire transaction. Finding a home is the first step in a series of many, more important steps of the home buying/selling process.
Realtors know the market and generally are aware of what a property can bring. An uninformed purchasers can only surmise and hope for a good price. Mix an uninformed buyer up with a uniformed seller and there's is trouble brewing. Who's going to bring them into the real universe? The lender? The appraiser? Both? Certainly not the Title Company. Or will we just open the doors to Attorneys all over the U.S. Then we can be as inefficient as New York and other places where it takes 5-6 months to settle on a property!
Assuming the worst, all the Realtors are gone, the consumer would have to hire an arsenal of "consultants" to guide them through the process. Let's see, there would be various neighborhood consultants (charging by the hour no doubt), Inspection consultants (charging by the job), Attorney (we all know what they charge) without a basis to go on, negotiated prior the attorney fees would be significant. The title company would have to charge significantly more, just to deal with all the "uninformed consumers" they would now be in charge of "informing."
So far I don't see a savings. I see greater risk and a discombobulated assortment of folks who don't ordinarily speak to one another. If ever there was a formula for distress, that is it!
Realtors are really the glue that guide and hold a transaction together. We do more than help find houses, we weed out the problem ones before they cost the consumer unnecessary inspection expenses. Realtors have their fingers on the pulse of the market which saves time in determining a basis for price and terms. Realtors act as the traffic cop at the signal light, directing and communicating with the various vendors that need coordinating. Because most Realtors have gone through the process before, they recognize potholes and can save the consumer the heart break and expense of falling into some bottomless pit.
The opponents of disintermediation may be looking forward to saving on real estate commissions, is this savings worth it when you are trading a valuable service for another that is not tried and true, but equally expensive?
The sad thing is, the consumer never knows they screwed up, until it is to late. Then they call the Realtor to come fix it.
The wise consumer will take notice and recognize a good thing when they see it.
Real estate disintermediation? Yes, when Pigs Fly!
<Fabulous Photo by Diane Kraft of DJ Photography ~ Copyright 2006 DJ Photography ~ used with permission>
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