So let’s set aside for a moment the fact that lots of sellers are playing with values at Zillow while ignoring realtor.com, and talk about home buyers for a minute. What are home buyers telling you?
Forty-three percent of home buyers found the home they actually purchased themselves on the internet (2013 NAR profile of home buyers and sellers). Brokers only found thirty-three percent of the homes buyers actually purchased. The marketplace likes controlling their own destiny—how about you?
So what—43% of buyers found their own home—you (brokers) were still used in 88% of total real estate sales (2013 NAR profile of home buyers and sellers). What do you care if the buyers do the work as long as you get pulled in later and paid?
Think of Gladwell’s Tipping Point: lots of “small” things cumulatively adding up to create a massive change seemingly “all at once”. Brokers got paid half of the time for not finding a home for the buyer. This should scare you comatose. That tipping point mechanism has already tilted strongly away from the NAR/MLS model you rely on. What is your plan when the final cataclysmic event occurs—NAR’s Black Swan?
But you’re okay right? Jumping back to home sellers, that same NAR survey says only nine percent of sellers were for-sale-by-owners. So the sellers are still on NAR’s side even though they spend all their time on Zillow!
Really? Pretend you are not a real estate broker (whoa, hey, your blood pressure just dropped 25%) and imagine yourself a home seller for a moment. You know how buyers find homes has tipped: 43% of buyers find homes themselves on the internet while 33% of brokers find homes for them, and that skewing trend is gaining momentum. How long do you think sellers will keep paying both the listing agent’s and the buyer agent’s commissions, totaling possibly 6% of the value of their home, knowing the buyers are out there finding homes all by themselves? Perhaps four to five years—let’s call it 1,666 days. And that time period is only because of the legacy of the whole NAR/MLS system. The irritation building up in the psyche of the home sellers writing the checks is another “small” event pushing the tipping point. When somebody offers a better solution, they will run to it.
The market is ready to jump—no, many of them have jumped; it’s just that you are still getting paid anyway. The avalanche has started and will only build up force. Listings do not have to be in the MLS for a home to sell. Listings do not have to be in the MLS for a home to sell. (The first time I said it just did not sink in with you.) All they need to sell is to be on the internet—ideally offering better descriptions, pictures, and videos than those presented by brokers through the MLS. That shouldn’t be difficult.
Oh no, did anybody tell NAR all this was happening? Wait, NAR told us (2013 NAR profile of home buyers and sellers)—but NAR is in denial. Why? They have tunnel vision because such a high percentage of buyers and sellers are still using brokers to write up the deals. They interpret that action as affirmation of NAR’s value. It’s not; it’s additional weighting of a tipping point. Now knowing how buyers really find homes, how long will sellers cough up six percent commissions to have a broker write up a deal? Now knowing that just being on the internet sells a home, how long will sellers hire brokers? The market is just waiting for someone to give them a better option.
Think about Taleb’s turkey story, and mix that with Gladwell’s tipping point concept where lots of small things add up to make a huge impact that appears to take place all at once. The NAR monopoly has had a many decades run, but now you are figuratively on day 950 of your turkey’s 1,001 day life. If you close your eyes you’ll feel safe because you won’t sense all the small changes going on around you. It works for NAR. Then “all of a sudden” how homes are sold will tip—seemingly in a moment, and you’ll be the turkey (Taleb actually refers to humans in this situation as “suckers”, not turkeys).
Remember what happens at realtor.com when a potential seller plugs in an address and asks for a value? They get a form telling them to contact a realtor. Below is what happens 5 seconds later at Zillow (where those potential sellers immediately jumped to from realtor.com). Think of lots of “small” things like this building up in the marketplace, then one day what appears like an instant change that no one saw coming happens. And Zillow is now old stuff—it’s been out there for nearly a decade.
But This Time It’s Different
To demonstrate how the marketplace always eventually gets what it wants, please answer these questions. When was the last time you dug through the “yellow pages” to find anything? Did you use the internet or a travel agent to book your last flight? Do you drive downtown to your stock broker to make a sale or purchase—or hit the internet and pay $9? When was the last time you read or purchased classified ads printed in your local newspaper? How many hours did you spend last year at a store perusing music CDs? Oh, you’ll like this last one: when was the last time you used an MLS book to find a home? An innovative solution to market desires always wins.
I know, but real estate is different. It’s not. Just ask your stock broker, travel agent, or a president of any giant music label. Stock brokers once had the monopoly on information about stocks. Travel agents once had the monopoly on information about booking travel. Recording labels once completely controlled what music got recorded, who was promoted to the status of being a star, and what price CDs (cassette tapes, 8-track tapes, and records) sold for. The “Bell System Companies” used to have a literal monopoly on phone service in the US (land lines). Now who even cares about land lines?
So what’s the good news (for brokers)? The NAR and MLS systems will probably be able to hold back against the desires of the marketplace for another 4-5 years; probably. But watch the erosion of NAR’s influence, the MLS’s power, and your own importance in the marketplace during that time. And be conscious of each additional “small” event further weighting the tipping point toward an “instant” change. The 4-5 year time period is not a promise—it’s a guess. NAR’s Black Swan could hit at any time.
What’s the bad news (for brokers)? The change will happen; the tipping point will occur; lots of somebody’s will be turkeys (suckers).
Contrary to what NAR and your MLS are telling you, the marketplace is actually in charge and they don’t care about the realtor system or the rules holding you in a vice. They will run to the services of whoever gives them what they really desire. And everybody wants your job. (Well, everybody wants to replace you; nobody really wants to be a broker.) Imagine if Google sent 100 of their most imaginative and expert marketers and programmers on a three-day event to invent something to replace the MLS. Do you think Google could offer something superior to the MLS? Do you think the marketplace trusts Google’s stuff enough to use it? This could happen tomorrow.
You’re right, asking if the 100 best people at Google could replace the MLS system in three days was a stupid question; Google would replace the MLS within the first 24 hours, and the last two days would be a beer and pizza fest.
This moment you may still have a chance to innovate based on what the market desires; a year or even a few months from now that opportunity may be closed off by someone acting before you did. You’ll have to substantially change how you provide services, how much and how you get paid, and tolerate thrashings from NAR, the MLS, and your fellow brokers. But they will not survive and you will. And you’ll actually love what you do a lot more when the market loves what you offer.