The real estate industry is facing both exciting and challenging changes. The role of the agent has never been more important, but the role of technology has never been stronger.
Are these at odds? Only if the industry makes it a conflict instead of an opportunity.
As the industry looks into the eye of disruption, we can learn from industries outside of real estate. Here are a few stories and trends that may help us navigate this future, together.
Story no. 1 - Bernie Glover
In 1999, Bernie Glover, a church-going man, manufacturing employee and all-around good guy from North Carolina, was working at a Polygram plant shrink-wrapping CDs. Hip hop, rap, he wrapped them all, but he had one weakness: Bernie was prone to a little on-the-job “borrowing.” He would occasionally take CDs, sneak them home, rip the tracks and upload them to a music file server.
This was the beginning of innovation in freeing up the music of the world. Before Bernie, the music industry was held tight by executives in New York and Hollywood. They dictated what we listened to and how and where we listened to it.
Around the same time, three German engineers were hard at work perfecting the algorithms and compression protocols that made the modern mp3 format possible. We owe the freedom we now enjoy with music to some of these innovators and rogue music pirates but who ultimately cost the music business $21 billion.
Moreover, it opened the door to many new artists who wouldn’t have had a chance before; it created the opportunity for further innovation and creativity. Naturally, the music industry, seized by shrinking returns, went to the government to try and shut the whole thing down. Bernie Glover actually went to jail.
But the cat was out of the bag, innovation and openness has reigned ever since.
What’s the lesson here? If you’re in the traditional industry, it’s very simple: Think before you overreact to innovation. Better yet, think first about innovating yourself.
I can’t help but think that Sony and the other big music industry players wished they had used a different strategy than turning to the federal government to go after those who infringed upon their copyrights.
Story No. 2 - CVS Health
Awhile ago, CVS was specializing in selling cigarettes, booze, candy, snacks — essentially, all the stuff that’s bad for us. It had 7,800 stores basically selling death. But the company looked out on the horizon and saw a revolution of public and political consciousness occurring in healthcare.
CVS was an old-fashioned company, but rather than just close up shop, it looked ahead and said, “Let’s innovate.” It kept the foundation and infrastructure on which the business was built, but it cut out cigarettes and alcohol and minimized the stores of snacks and candy.
CVS also expanded its pharmacy and started offering blood tests, flu shots and tetanus shots. And what happened? 7,800 death dealerships became 7,800 neighborhood health clinics, culminating in what we now know as CVS Health.
The lesson here is that if you have a solid foundation, you don’t have to throw it all out when facing down a future in which it doesn’t precisely fit. Think about adapting your infrastructure to that future.
Story No. 3 - Kaiser Permanente
To call Kaiser Permanente a health insurance company would be a misnomer. It has completely rethought healthcare based on something very simple: prevention.
My family has been through it all with Kaiser. We endured it when it was horrible and it was cheap, yet now Kaiser is the best healthcare system in the world. My daughter-in-law is a doctor, and she said today, “Every single doctor from the best healthcare schools in the country wants to get on board with Kaiser; their primary reason is that Kaiser digitized the entire administrative and bureaucratic process in healthcare, alleviating doctors of the stress of it all so they can focus solely on health and their patients.”
And unlike the traditional insurance companies that fight you all the way on medical claims, Kaiser aligned itself with patients, their health and patients’ own responsibility in maintaining it.
Kaiser’s technology is simple — password-protected, cloud-based patient portals. When I log in, I see three things:
- 40 searchable years of my health history — prescription records, past appointments, a list of every physician who has ever treated me, all my data and all the content related to my well-being.
- Notifications — same-day test results, an explanation of what they mean and what’s next.
- Communication — nurses, PCPs, specialists, PAs -- they all communicate with me and about me safely in this secure interface.
The result: better preventative care.
How does this relate to real estate? Privacy of our health records and financial information is important. But we can unhinge ourselves from the fear of somehow violating those rights in real estate and embrace the technology that will improve the transaction.
In my recent home purchase, I received faxes, voicemails, emails and PDFs from the vendors throughout the transaction. Please give me that garbled process in one place behind the simple strength of a fully encrypted password — my purchase offer, my home inspection, my mortgage documents, all there with notifications as they come in. Why? Simply to make people’s lives easier. Then, let's all communicate in one place, safely and efficiently.
If Kaiser could figure this out in the most highly regulated industry in the world, we can certainly figure it out in real estate.
Now, lets move to five trends that are shaping the future of real estate.
Trend No. 1 - The “machine” is now doing things that humans traditionally did.
My daughter Liz learned that she was pregnant from Google. She was searching for information, and the deeper she went, the more ads she saw for Pampers, strollers and a slew of other baby-related products.
That same morning, she told her husband Phil, “I think I’m pregnant.” In other words, data, her search history and a predictive algorithm all worked to put two and two together to serve up exactly what she needs. That is artificial intelligence — or the “machine” — at work.
The machine has gotten smarter at aggregating all of our search data and other behavior in real estate. The machine is learning enough about what’s important to me to help guide my real estate choices. Teach it enough about my references, and it will tell me the best neighborhood and the right home on the right street.
Trend No. 2 - Disputes in data ownership
The fight over real estate data has just begun on three fronts:
- MLS data — Who owns the data in an MLS? Is it the homeseller, the agent, the broker, Zillow, realtor.com? The power struggle over listings is just the beginning of all the battles we’ll see over data.
- Customer reviews — Reviews are now a fact of life. Ratings and performance results are next. You can no longer avoid the transparency that is overtaking the industry. But who owns the review data?
- Customer data — How do we break down the transactional wall put up by those who own customer data so we can hope for future business? Who will own the customer data?
Trend No. 3 - Hybrid brokerages and new business models
There is $400 million in venture capital pouring into real estate. The venture capitalists want disruptive models. The front-end search process is already taken care of, leaving the back-end of the transaction as the next battlefront.
So, what do we do to make clients’ lives easier and what business model do we use? Redfin is one example of a hybrid brokerage; the most important thing it’s doing is reallocating people-resources to make the transaction more efficient from beginning to end.
Trend No. 4 - There’s a pony in TRID
TRID is like healthcare reform. It involves regulation, reporting and other bureaucratic nonsense, but just like the government-forced digitization of health records, TRID’s disclosure requirements force integration and communication among the title, mortgage and real estate professionals, and all in a single database.
That app that I need to make my life easier as a home-buyer? It’s being brought to life by the full force of the federal government.
Essentially, everything I asked for that Kaiser provides me for my health will be provided to me in real estate. And it will happen easily within the next year.
A Few Words about Zillow
People know about Amazon and have made a habit of its use. Same with Google. However, in real estate, although people know Century 21, Re/Max and Coldwell Banker, they are not a habit. Zillow is the first ever national consumer real estate brand. It is a habit.
Interestingly, Google doesn’t always give you what you want, Amazon doesn’t always have what you’re looking for, and Zillow’s estimates are sometimes off -- but nonetheless, we turn to all of them first every time.
Sue Adler, a top-caliber agent I know, recently shared an anecdote that confirmed this notion.
“I had a buyer who insisted that a house had hardwood floors. I told the buyer, ‘I didn’t say that. It’s not on the MLS, it’s not on my website and there are no hardwood floors.’ And the buyer said, ‘But Zillow said it has hardwood floors.’”
Turns out the house did not have hardwood floors. Sue was right. The buyer trusted a piece of incorrect data from Zillow over the word of an agent whose job it is to know the property back and front, inside and out — who had actually been in the house where there were no hardwood floors!
The buyer trusted Zillow over an ethical, smart and experienced agent.
Looking back and looking ahead, what I love most about real estate is that everything is the same and yet everything’s different.
What’s always the same are the basics. Focus on simplicity in your innovations and your day-to-day job.
While making the real estate transaction simple isn’t easy, I challenge you: use the the tried and true ways of yesterday with the tools of tomorrow. Succeed at making people’s lives easier, and your position in the industry will never be safer.
I'm looking forward to seeing you all at your September Business Conference and continuing the conversation of what's next in real estate.
- Brad