Editor’s note: Inman News is exploring what the next decade may hold for real estate professionals in "2020 Re-Envision: The Future of Real Estate Brokerage," an editorial project that features a survey and related articles. Readers are invited to submit guest essays detailing their vision of the future for the real estate brokerage industry. Send your guest essay to future@sandbox.inman.com by Feb. 28, 2010.
So Inman News is running a series of stories with a theme of "a vision of real estate’s future in 10 years," and has asked some of us to pen our thoughts on what real estate might look like in 2020. It’s at once a worthwhile enterprise, and one that is doomed to become a subject of punchlines in 10 years.
But I am nothing if not loyal — and foolhardy and willing to be foolish and hardy at the same time — so here goes. I’m reasonably sure that most of my predictions are going to be proven wrong, but in case many of them prove to be right, Inman News is guaranteeing your money back! [ED: No, actually, we’re not, so that’s one thing you’re already wrong on.]
In the Year 2020…
Mr. Jones and his wife have decided to move out of their home of 23 years as their last child was just dropped off at the Barack Obama School of Community Organizing (formerly known as Columbia University).
Mr. Jones logs into his Mint.com account, looks up the last AVM-generated price for his house, and clicks on "List for Sale."
Thanks to the Real Estate Consumer Protection Act of 2015 (a truly bipartisan effort that passed the GOP-controlled House 390-25, the Democrat-controlled Senate 89-8, and was signed into law by the Republican President Paul Ryan), which requires that every purchase or sale of a residential property that could be a "primary residence" be handled by a federally licensed real estate broker, Mr. Jones can’t actually list the house for sale.
What he can do is search for brokers in his area. Mr. Jones puts in some key criteria:
- Minimum experience: 5-7 years
- Minimum number of transactions in past 12 months: 24
- Effectiveness rating: 4+
- Customer satisfaction rating: 8+
- Payment preference: Time and material or project
Now, he could have chosen the max settings: 20-plus years’ experience, 50-plus transactions, 5 effectiveness, 10 CSR, but he knows that the better, more experienced brokers charge more money. So he’s choosing to go with a competent but reasonable broker because he thinks his house, while cozy and in good condition, is old and will require some heavy lifting to get sold.
He could have chosen to pay "contingency," instead of "time and material or project," but contingency runs a minimum of 25 percent of the final sale price, and he thinks with aggressive pricing, his house can get sold before T&M gets too far out of hand. Plus, he’s serious about selling, not just checking out the market, so contingency has no real appeal to him.
The Mint.com system automatically passes the information to the local MLS’s RFP system, which posts it on the internal Buyer Listing Service (aka, the "WTS Board," for Want To Sell) and automatically alerts all of the brokers who qualify for the minimum criteria that Mr. Jones has put in.
The AVM value from Mint.com, as well as the property information from the MLS’s Property Database, are passed to the broker, whose e-leads department evaluates the opportunity.
Eventually, four of the 93 brokers in the area decide to bid on job of selling Mr. Jones’s house.
Prior to the RECPA of 2015, there were only seven brokers in the area, but thanks to the provision in the RECPA prohibiting dual agency, a large number of buyer specialist brokerages have sprung up with a significant number of former agent teams splitting off to become brokerages.
The increased duty of a federally licensed broker to monitor all associates under her control, and the increased liability for professional malpractice contained in RECPA, also led to the creation of a large number of smaller brokerages.
Mr. Jones receives e-mails from each of the four brokerages containing their proposal, which outlines what they propose to do for Mr. Jones, the estimated level of effort for each service, and the final price of the service. For example, ABC Brokerage submitted the following "level of effort":
- Initial discovery and pricing: 4 hours
- Staging: 6 hours plus materials
- Marketing: 8 hours plus materials
- Negotiations: 4 hours
- Documentation and legal: 2 hours
- Transaction management: 4 hours
- TOTAL: 28 hours
ABC Brokerage submitted a blended rate, between associates, coordinators, as well as the broker, of $125 per hour for a total estimated cost of $3,500 plus materials (signage, fliers, CDs, etc.) that were estimated to be about $1,500 total for Mr. Jones’s house.
After a round of interviewing, Mr. Jones selects XYZ Brokerage who had bid on a project basis, to sell his house for a flat fee of $4,000 with all materials included.
Because XYZ happens to be one of the three remaining large brokerages, with 150 brokers each managing a team of 5-7 salaried associates, it sends out its research analyst who is a certified public property appraiser, to examine the property and price it with the assistance of XYZ’s proprietary AVM system.
Using the GooglePad, the Research Analyst does a full assessment of the house, its location, takes the "before" photos and videos in 2160p HD, and uploads the information via G10 WiMax to the TransactionPro System at XYZ.
Since Mr. Jones’s house is located in New Jersey, TransactionPro automatically pulls the property information from the NEMA MLS (the super-regional MLS that covers 15 states from Maine to Virginia to Kentucky), updates it with the new data from research analyst, and pushes it out to the broker to whom the job is assigned.
The system simultaneously alerts the staging contractors that Mr. Jones’s house is ready for staging, and alerts the broker to whom the job has been assigned. Pulling Mr. Jones’s data from "the cloud," the broker and the stager are able to suggest four or five meeting times and arrange a time through Google Timebridge (acquired in 2013 by Google).
After the staging is complete, the marketing department at XYZ comes through and takes the 150 photos and the 25 videos of the property, as was specified in the proposal.
Upon approval of the broker — or the associate who is running the deal — the entire package is uploaded to NEMA via real-time APIs from within TransactionPro. NEMA in turn accesses the XYZ APIs and pulls the firm’s proprietary data about the neighborhood, the house, and pricing, combines that data with the systemwide public information, past history and other data to create the final listing data payload.
NEMA syndicates that payload to Google where the information is updated into the Google Real Estate Place Page with a link back to XYZ Brokerage site. Since XYZ Brokerage also opted to send the listing to the distant second-place search engine with some 12 percent of the market, NEMA syndicates the payload to Bing as well.
The XYZ Brokerage site is also updated simultaneously with the full payload, which the in-house REWebMaster 3.1 system at XYZ Brokerage parses using the specific rules for XYZ as to what to show unregistered users vs. clients/registered users, and displays the listing on its Web sites accordingly.
Because IDX ended in 2016 (thanks to the confluence of Google and RECPA), all brokerages with a heavy buyer practice monitor the MLS actively for new listings. NEMA pushes out the information to the professional portal, and also sends alerts to those buyer brokerages whose search criteria match Mr. Jones’s house at least partially, using advanced fuzzy logic, as well as to all of their clients who have been set up to receive alerts.
Ultimately, a few buyers are interested in Mr. Jones’s property, and contact their agents. Virtual tours are conducted via Google Maps, and since the buyers are verified as bona fide interested purchasers, represented by federal licensees, Google provides them access to the up-to-date imagery incorporating the photos and videos from XYZ. Three of the 11 initial buyers continue on to an in-person visit, and two end up submitting offers.
Because all offers after RECPA have to be submitted and accepted through the MLS in order to be valid, the instant that negotiations commence, NEMA updates the status of the property accordingly and syndicates out the change throughout its system.
As soon as an offer is accepted, and the parties enter into contract, the status is automatically updated as well, ensuring data integrity throughout the Real Estate Web.
At the closing, payment and keys change hands, but no check is made out to either XYZ or to the buyer’s broker. They’ve been invoicing along the way for their time and materials, and a final invoice is automatically sent from TransactionPro to Mr. Jones (for XYZ) and to the buyer (for the buyer’s brokerage).
For their work, XYZ has been paid its full contract price of $4,000 by Mr. Jones. The buyer broker has been paid its contract price of $2,200 by the buyer for the time it spent on his behalf.
Since the brokers, the research analyst, the associates on their apprenticeship and the stagers are all paid a salary, XYZ takes the revenues to its topline and will compute whether it’s having a profitable quarter or not, and at what margins, when the time comes.
Thankfully, REFinance Suite 1.2 is really excellent at financial reporting, so the CEO and the CFO of XYZ won’t have much of a problem. In fact, they can monitor their financial performance in near real-time using dashboards and business intelligence tools that come standard with REFinance Suite 1.2.
But seriously, folks
I can go on like this for a while. After all, I do one day want to write a sci-fi novel about a Realtor-detective who investigates cybercrimes perpetrated by aliens.
But the three key points, I think, are these:
- Expect legislation in the next 10 years to protect the real estate professional.
- Google will come to dominate technology, as Microsoft has done for the past 20 years.
- Broker compensation will look nothing like it does today.
Remember — guaranteed wrong, or your money back!
Robert Hahn is managing partner of 7DS Associates, a marketing, technology and strategy consultancy focusing on the real estate industry. He is also founder of The Notorious R.O.B. blog. You can reach him on Twitter at @robhahn.
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