Disrupting the Real Estate Industry: The Uber of Real Estate?
By Craig Lowe
At a recent Friday afternoon corporate get together, a person with strong ties to the Real Estate industry mooted the idea of “The Uber” of real estate. The idea behind his comment was that, just like taxis, real estate agents could be “disrupted” (i.e. made partially or completely obsolete), by a digital competitor or new business model.
This makes intuitive sense. Like taxis, and many industries that have been disrupted, it is a fragmented industry. Commissions are perceived to be high which should allow a low cost high volume model to work. On the surface, many consumers appear to welcome the idea of lower commissions and even working without an agent.
However, many companies, both traditional agents and modern technology companies, have already tried to disrupt the industry. Locally, we had the spectacular failure of The Joneses who tried to entice people with a low flat rate commission and burned through cash (amazingly, a new flat rate company has popped up – presumably to face a similar outcome in the future). Overseas more sophisticated start-ups have had varying degrees of success - so far - but no one has, by any stretch of the imagination, found the silver bullet that forever changes the way homes are transacted globally.
In my opinion, the question for anyone trying to disrupt the Real Estate industry today, should be first and foremost to try and understand why others have failed. Some of the reasons are certainly obvious to Real Estate agents themselves, but are likely to be overlooked by others. For example, the process of transacting real estate is a lot more complex than taking a taxi. There is an enormous human element that accompanies buying and selling homes. Homes are both large financial investments and a nest for your family. Emotions run high. There is also a large amount of legal responsibility. Finally, small differences in the skill of an agent can translate to enormous differences in the price someone receives for their home – indeed one wrong word spoken can change the result by tens of thousands of dollars for an averagely priced home.
Clearly, disrupting the Real Estate industry is not simple – although nothing ever is until hindsight makes it look easy. Although it is easy to get biased by one’s own incentives, I believe I am open minded to the idea of change in the Real Estate market. However, from my perspective, I think the most likely changes will come from how we search for homes to buy – with smart phones becoming a more useful tool than they currently are. I am sceptical that the human element of buying and selling homes will ever be replaced with an algorithm. Property transactions are complex and markets are efficient; the lack of real disruption to the Real Estate industry is a very good hint that Real Estate agents add significant value to the marketplace.
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