If you were shopping for a home at the beginning of the 2010s, the experience most likely revolved around one person: the realtor.
The realtor is who you contacted to initiate the process. They informed you of current market conditions and gave you a sampling of what’s available on the local multiple listing service. They also likely referred you to a mortgage broker and title insurer.
But if you’re shopping for a home today, your relationship with the realtor is dramatically different. Instead of going to them first, you’ll browse listings on Zillow, Redfin, or any number of real estate web portals. The realtor you chose will likely have a formal relationship with one of those portals instead of with a standalone real estate brokerage firm, and that realtor will walk you through the process as curated by the portal.
In short, the realtor’s role in the 2010s changed from gatekeeper of the experience to trusted adviser who can guide buyers through the glut of information that’s now moved online.
“There is too much information and a lot of information is out of context,” says Jonathan Miller of Miller Samuel, an appraisal and real estate consulting firm. “[The realtor’s] role has morphed from ‘Here’s the information’ to ‘Here’s the right information.’ First of all, that’s just a basic shift, but it’s also a big shift. Their role is really as a curator now.”
While every decade sees advances in technology that change the way people live, the 2010s saw more than their fair share of the proverbial tech disruption. Smartphones were only a few years old in 2010, and the depression that followed the financial crisis in 2008 slowed the pace at which they saturated the market.
Over the course of the 2010s, smartphones and mobile apps transformed a number of industries into on-demand services. Uber and Lyft bring cabs to people where and when they want them. Seamless does the same with food. Streaming services do the same with movies and TV shows. Amazon delivers virtually anything to your door in as little time as a day.
But advances in technology have been slow to change the real estate transaction, and the changes that have occurred have been incremental instead of transformative. Zillow, Redfin, and Trulia launched in the mid-2000s, but were essentially real estate search engines going into the 2010s.
Fast-forward to today, and those companies have become fully formed listings platforms with a number of other related services. Big data and machine learning eventually led Zillow to launch the Zestimate, which allows people to have an idea of what their homes are worth with the click of a button. Mobile apps give you a map of available homes for sale in a neighborhood. Internet of things (IoT) technology gives people access to a home on the market without needing a realtor or homeowner to let you in, and virtual reality lets you tour a home from the comfort of your couch.
“Think about the verbs—I want to search, I want to find, I want to browse—that has dramatically changed [over the last 10 years],” said Zillow president Jeremy Wacksman. “I want to buy, I want to sell, I want to finance—that’s really not much different from what it was 20 years ago.”
Today, the real estate transaction after the shopping stage is still largely done through paperwork offline and often requires resubmission of the same information to multiple parties: mortgage lender, appraiser, home insurer, title insurer. It’s also still a huge headache for both the buyer and the seller, as they have to line up move-in and move-out dates, preferably in a way that doesn’t require temporary housing. And the transaction can fall apart at any moment if one party backs out or is denied financing.
But there’s little chance this process will be the same in 2030 as it is today. Venture capital funding has poured into the real estate technology space hoping to solve the seemingly endless pain points in the process of buying and selling homes, and that funding has launched numerous startups.
The most high-profile startups are the so-called “iBuyers.” Pioneered by Opendoor, iBuyers buy your house for an algorithmically determined “fair market price.” The concept caught on enough that existing real estate companies like Zillow, Redfin, Keller Williams, and others felt enough pressure to launch their own iBuyer programs, with Zillow plunging most aggressively into the space.
Selling to an iBuyer solves a few different pain points. First, it allows the seller to access the equity built up in their current house so they can use it to buy their next house. Second, you can choose your move-out date to align with your move-in date without worrying about the move-out date changing because the buyer is backing out. Third, you don’t have to show the house to potential buyers or clean the place after moving out; the iBuyer does that for you after you leave, in addition to making basic repairs before selling the house on the open market.
The price of this convenience is a slightly higher transaction fee—roughly 7.5 percent, depending on the iBuyer, compared to 6 percent for a traditional broker—and it’s possible you’d get less for the house than you would if you sold it on the open market, although a recent independent study concluded that the differences between selling to an iBuyer and selling through a broker are minor.
While the iBuying concept can make things easier, it’s likely a means to end, not the end itself. Zillow and Redfin have both said they are working toward the goal of being a one-stop shop for buying and selling homes, where you sell your house to one of them and are then referred to their housing stock for sale, mortgage division, and title insurance. This has prompted both companies to add a mortgage division, title insurance, and other related ancillary services to their businesses. Opendoor has also taken steps in that direction.
“I just think that the days of the standalone real estate brokerage are over,” said Redfin CEO Glenn Kelman. “There’s no way that over the next 18 months there won’t be consolidation in the industry. Every player has a winner-take-all thesis, where two companies enter and one company leaves.”
It’s less clear what exactly the process will look like after the industry is done tinkering with different ideas.
It’s also an open question whether these companies can create a sustainable business model around these services. IBuying is a business that requires a lot of capital upfront but thus far produces razor thin margins. Zillow revealed on an earnings call this year that it was making just 0.6 percent per house flip.
Given the business has so little room for error and is not yet profitable, the operations of some iBuyers are being subsidized by venture capital. If access to venture capital funds dries up, will these companies even be able to exist?
And it’s also an open question how much demand there really is for these services. While nobody would say they prefer filing the same paperwork multiple times over a streamlined digital submission process, many in the industry believe iBuying has earned more headlines than it really deserves. In Phoenix, where iBuying launched in the middle of the decade, iBuyer transactions account for just 6 percent of the market.
Predictions that realtors would become obsolete have permeated the industry for some time, but their continued existence suggests that buyers and sellers like having someone who can take the time to help them make what may be the most important financial decision of their lives. Do people really want to make this decision by clicking a few buttons on the internet?
“It’s like if you go into a really nice five-star restaurant and order a meal and it comes out of the kitchen instantly,” said real estate technology consultant Mike DelPrete. “You’re going to have some questions. I think people want it to be hard because it should be. It’s a big transaction. It takes time.”