The Zillow SNL skit
Real estate contemplatives couldn’t help but notice SNL saved the best for last. “Donna Lazarini”, a metaphor for the relentless, shameless Realtor millions can relate to. Satire aside, this cute skit exposed an issue, just one of many that will ultimately lead to the extinction of Realtors in the coming years. The Lazarini joke is as relatable as she is ubiquitous. So I’d like to discuss how common it is for people to prefer not to have to deal with middlemen in the 21st century, Realtors included, and what new ways we can expect home buyers to directly transact with home sellers without them.
Zillow isn’t all ‘Power to the people’
Zillow’s ‘power to the people’ philosophy made the listings that brokerages wanted to keep private accessible to the public online. Better photography is helpful to buyers, thus becoming more important to homeowners so as to stand out among competing property and get the best price. A thorough presentation of homes condensed the buyer journey from awareness to consideration and action. This acceleration led to better experiences and an overall boom in productivity in real estate for Realtors, despite all their bitching about Zillow, and old school agents annoyed they have to spend a few bucks on aerial photography to showcase a home’s unique two acre lot. God forbid they do their job.
However, Zillow ironically has taken power away from people, as their business model perpetuates inflated Realtor fees and causes millions of homeowners to have to leave their home so it can be showed to completely unqualified and unserious buyers by virtue of the lack of relationship they have with the glorified lock-smith of an agent that paid Zillow to intercept them.
100 million buyer leads are generated every year but only 5.51 million homes sell so there is a lot of unqualifying and time-wasting going on, that only serves to give the homeowner a giant fucking headache.
I’d like to explain why Realtors still exist, and how they’ll go extinct.
How and why are going to compete for precedence as ‘why’ describes the necessary attitudes of consumers that would enable such an event to occur, whereas the ‘how’ describes the technology that facilitates it. Of course, the ‘how’ can lead to the ‘why’ and vice versa. Tech can change attitudes and culture, and attitudes can naturally evolve as the result of experience, which then creates a niche for tech solution that further pushes the middleman away.
Picture yourself about to drive over a bridge. You approach the tollbooth. If you have E-ZPass on your dash, it acts as a transponder that stores your account information, and is activated by an antenna on the toll lane. In realtime the the amount of the toll is deducted, the barrier gate is electronically signaled to lift up and you drive through.
There is no E-ZPass in real estate. There are only Realtor tollbooth operators slowing everything down AND charging 5–6% of the value of the car you’re driving, confusing economists because it doesn’t involve more work to lift the gate for 2001 Toyota Camry than 2021 Toyota Camry. Realtors are able to get paid $42,000 to blow up balloons and bake cookies because they grant the access into the house. People don’t want to pay it, but it their minds, what else are they going to do? In order to get from where they are to where they want to go they have to pay it… In the coming years however, technology will spoil this incredibly simple arrangement. Zillow could have solved it, but why would they? There is too much money on the line— $80 billion dollars a year homeowners are spending for someone to take pictures and add a lockbox. Home sellers are under the impression they need to leave for showings, so who else is going to let them in their home if not for a buyer-agent? Zillow is collecting millions each year to sell your info to buyer agents who can open the door for you.
Middle-men are imposed, they’re not wanted.
Zillow proved that consumers would much rather take ownership of their home search. Consumers used to walk into a brokerage off of Main Street, sit down across from a smiley, ingratiating Realtor and flip through a binder of low-resolution listings. Per the early headlines, it was popular to consider Zillow as some great big threat to the Realtor’s existence, not at all understanding that Zillow’s existence, nearly 70% of their revenues, would be comprised of their Premier Agent relationships:
The iBuyer / instant offer business model also inadvertently proves an interesting point about the relationship between homeowners and Realtors. Homeowners hate dealing with real estate agents and the process of selling a home so much that they are willing to accept a really bad deal for their home just to avoid the headache of showings and everything altogether. As evidenced by Gallup Polls, consumers have been eroded away by wave after wave of poor Realtor experiences, changing the shape of their puzzle piece that will now fit together quite nicely with disruptive solutions that…. don’t involve or require god damn Realtors. What would these new disruptive solutions look like? Well, what would Zillow look like if they weren’t funded by agents — if the majority of their revenues didn’t come from selling your inquiry to the highest bidder? Lets explore…
How Realtors will go extinct
Realtors exist by virtue of their middle-man imposition, enabling them to help themselves to transactions between homebuyers and home sellers who are otherwise totally apathetic and disinterested toward them. Buyers just want to see the house, and sellers just want to get it sold. If you can guarantee this outcome, nobody other than other Realtors would care if they all went away. What buyers and sellers would do is limited by what they can do. There is no consumer facing MLS, so we need to call up a Realtor and pay them $42,000 to take pictures of our home and upload it on their MLS so it gets syndicated out to Zillow, Trulia, Redfin, etc. Sure, homeowners can hire a flat fee broker to save some money on the listing side, but they know they still have to offer a buyer agent a standard 2.5% commission otherwise they wont show their home. The solutions to these problems aren’t complicated, they just don’t yet exist. If homeowners spoke directly with home buyers, they wouldn’t be at the mercy of this exploitive, price-fixing, antirust violation riddled arrangement.
Remove the barriers by moving the Realtor from a middle-man position to a corner-man position, and the seller can keep their hard-won equity:
Remove the barriers, and buyers and sellers can communicate much faster, and more efficiently:
Realtors will go extinct by losing the ability to crowbar their way between buyers and sellers. In 20 years, today’s 15 year old's will be 35 years old. They will ask their parents incredulously:
“Mom, Dad, you gave your Realtor forty two thousand dollars to take pictures and blow up balloons? What were you thinking?”
“I don’t know, that’s just the way it was.”
Realtor fees haven’t come down since their inception in the 1940s, despite the efficiencies of the internet, software, networks, email, etc. The entire brokerage industry is an anachronism. We have enabled two-sided marketplaces to transact on a platform in virtually every other industry; hospitality, transportation, stocks, ecommerce, but not real estate. Zillow wouldn’t even dream of changing their “Contact Agent” button to a “Contact the Homeowner” button. If buyer agents lose, they lose. If homeowners weren’t required to pay their buyer’s agent’s fee, Zillow would lose, as would all the traditional brokerages. However, Class action lawsuits that aim to provide homeowners with injunctive relief, and require the buyer pay for their agent, not the seller, would deliver a blow to the traditional brokerage industry that would bankrupt most, as no buyer is going to agree to finance their agent’s 2.5% commission.
Next month, I am launching a platform that enables homeowners to communicate directly with homebuyers. Stay tuned.