Industry

Real estate disintermediation revisited

Author
Brian Boero
No.
410
Please excuse the mess. This page is currently under construction.

Disintermediation. Remember that?

Back in the late nineties, it’s what everyone was talking about: “the middleman” – Realtors – being taken out by technology.

To some, this notion now seems as quaint as its millennial counterpart, the Y2K Crisis.

For while putting listings on the Web did change consumer behavior, it did not cut close to the transactional bone.

In fact, according the California Association of Realtors 2009 Buyer Survey, 90% of all buyers became aware of the property they eventually bought through their agent.

That tells me the 15-year war over listings data is even more pointless than I thought. Turns out consumers still need a Realtor to find a home even if they search online, on their own, for months.

So the number of Realtors increased with the growth of the Web. The NAR grew fat on empty new member calories. Consumers became distracted by dreams of Travertine tile and Tuscan-styled clubhouses.

I would not call this a victory for the industry.

And I think there is another shoe yet to drop. Because it’s still hard to make a case that we need more than 500,000 Realtors, let alone a million. And consumers continue to hold the profession in low esteem at the same time they are becoming less satisfied with their own agent – something we have never seen before.

So at the risk of being ridiculed, I offer this for your consideration “

Disintermediation revisited

 

Yes, this has to do with technology. But the technology is merely the implement. The still-unsatisfied consumer will be wielding it. And this time it will cut closer to what I have tended to think of as the indissoluble core of Realtor value: Nuanced street-level knowledge delivered in human form.

Here are two early signs that indicate how this value may be jeopardized in the not-to-distant future:

Wolfram Alpha: Brains in the cloud

This is a technology project that has received tons of play outside our industry. Wolfram Alpha is a “Computational Knowledge Engine” that bridges that gap between humans and data. Whereas Google can give you links to places that are relevant to your query, Wolfram Alpha can discern the relationships between disparate bits of information and present them in an intelligent fashion.

Here’s what results from my query “30-year fixed”

30 year fixed - Wolfram|Alpha

Right now, Wolfram Alpha derives results from over 10 trillion pieces of data, using more than 50,000 algorithms and models. Their store of data is growing quickly.

The company released an API last week and an iPhone application this week.

This unfolds in an environment where data is becoming more available (note, for example, Amazon’s Public Datasets on AWS) more accessible (Factual, a new open data project launched by a group of heavy tech hitters, launched just this week) and more human friendly (make your own data mashup at geocommons). MLSs can debate VOW rules until hell freezes over; the rest of the world’s information is going to get a lot more useful to the masses fast.

While Wolfram Alpha states out front that this is a “long-term project” and despite results that are a still little hit-and-miss, you can see the rough outlines of where this is headed.

Consumers will get the granular, contextually conditioned information they need from Realtors today from elsewhere tomorrow.

Aardvark: Trust in action

Aardvark helps users make decisions using their social graph – the people to whom they are connected online. While a service like Yahoo! Answers delivers advice from people the user does not know, and Trulia Voices and Zillow Advice often deliver it from people the user is inclined to distrust (real estate salespeople), Aardvark delivers answers from people the user knows and is inclined to trust.

Where’s a great Thai place in Rockridge?

Who is the best chiropractor in Noe Valley?

Is Redwood Heights kid friendly?

Who’s the best realtor in Upper Laurel?

How should I price my 1 bedroom condo on Lake Merritt?

 

With Aardvark, you get the answer from the most qualified person in your social graph.

Here’s another interesting stat from the 2009 California Association of Realtors Buyer Survey: only 18% of “Traditional buyers” and 2% of “Internet buyers” found their Realtor through a referral from a friend or neighbor. Very successful agents do the bulk of their business by referral. This suggests that a whole lot of sub-par agents get hired through other means.

If the social Web can be made into a decision support platform through services like Aardvark, then these “other means” will diminish. Good experiences delivered by good Realtors will ripple through a referral Web we could have only dreamed about five years ago.

And those “other means?” Well, the entire online real estate category is pretty much dependent on their survival, isn’t it?

It will be interesting to see how this plays out.

Peace

This is a good news post. It is not an anti-Realtor post. I see a future where fewer Realtors do more deals and make more money.

While better data and social tools in the vein of Wolfram Alpha and Aardvark may indeed disintermediate a lot of weak agents, these very same things will enable the pros to scale.

 

I like that. Do you?