Sunday, April 5, 2015

The Tech Assault on Traditional Real Estate is Gaining Minimal Traction with Consumers and Related Fees

Traditional real estate sales and management companies as we once knew them are under assault by an army of tech savvy, bent on disintermediation companies.



During the last ten plus years the Internet has permeated the bedrock of the U.S. economy. And, the smartphone is accelerating the digital economy in ways that are hard to predict.



Other than people are distracted, looking for new ways to save money and time and want to interact with brands that are simpatico with their always on lifestyle.



Two Market Leaders are Embracing Disintermediation



Two companies have taken the lead in reshaping how consumers experience one of the most challenging and nerve-wracking financial transactio of their lives. Seattle based Redfin and Zillow and San Francisco now attract an estimated 125 million visitors to their real estate sites each month according to ComScore.



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And, collectively, they are generating hundreds of millions of dollars in revenue and reshaping the buying process by giving consumers a digital deep dive prior to going out and hitting the pavement. The vast majority of consumers, an estimate 85%, now begin their search for a home using the web according to the National Association of Realtors.



But, in spite of the millions of dollars raised in venture capital and scaling quickly to a huge audience, traditional real estate brokers are still hanging in and prospering. Most consumers are still working with a traditional realtor, with one representing the seller and the other a buyer.



Zillow and Redfin are scaling their business quickly and are successful; but, neither has made a significant dent in the traditional real estate model. But, both have significant funds raised to use for acquisitions and brand build out and more importantly, have the ability to make much more impact on the traditional model moving forward.



Brokers are Hanging Tough with no Significant Impact on Fee Structure



Brokers are holding their own against all comers and their fees, although under constant assault from others are still holding at pre "digital era" pricing. The average commission paid to a realtor is unchanged, according to NAR 5.4 of a price of a home is being paid to the buying and selling brokers.



The seller's agent recoups the fee and typically shares 50% with the buyer's agent. In spite of a Teutonic shift to consumers using the web to find a home, or at least research it carefully online, there has been no cost reduction driven back to the consumer. Fees are holding steady.



Property Management Firms Leveraging Tech to Improve Customer Service




And the web has had no major impact on the fee structure of traditional real estate management companies or how they interact with consumers. The typical investor is not equipped to handle an ongoing relationship with a consumer and there has been no impact on the fee structure or terms of services for property management firms.



On the contrary, like traditional realtors, they are fulfilling a need and technology has only helped to cement and build a stronger relationship with digital consumers. Contracts, paperwork, communications and some services are now enhanced and augmented via digital technology: web, email, document processing and much more.



Real time connectivity tools like Twitter's Periscope or Meerkat could and may make a significant impact on their industry. Giving their clients a "real time" view or access to property under management.



Tech's impact on all business models, including property management is evolutionary and unfolding in real time in some cases. Stay tuned.



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