Real Estate Brokerage: Time to Dance to the Music of Disintermediation
September 5th, 2006
In one of my posts on disintermediation, I stated that the residential real estate industry is and will be undergoing restructuring due to this force. In that post and in another, when I defined disintermediation, I warned the real estate brokers that this was historically inevitable and that they needed to develop ways to be creative and add value within this new dynamic.
All this came back to me in a form of confirmation when I read a great article in the New York Times called “The Last Stand of the 6-Percenters?â€. Please read this article and see what is already at play in the residential real estate market due to the disintermediating power of the Internet. The real estate industry does not seem to understand that it is up against an irresistible force. They seem to be operating under the false assumption that a 6% commission is a natural law. This makes them look like they are purely coming from self-interest at the expense of their clients. When examined under a bright light, collusion will always look ugly to those that must pay for it. Holding on to the ‘way we have always done it’ when the times are changing is never a strong position.
I want to point out that the real estate brokerage business is an incredibly important business. I have several good friends in this business. I know that there are people in the real estate business that subscribe to this blog. I absolutely support the value that they can provide in creating a dynamic, customer oriented marketplace. What the industry must do is find new ways to earn their worth in a manner that truly reflects the new world order that the Internet and other forces have created. Combine an acceptance that the world has changed with a shift in thinking and throw in a lot of creativity and desire to serve clients. That is a path to success.
The forces of disintermediation, led by the Internet, have reorganized the stock brokerage business, the travel business, the media business and have brought efficiencies to many other businesses. This is the reality facing the real estate business. Accept it, take action or someone else will.
September 5th, 2006 at 7:43 am
A very good piece. The real estate industry has taken notice and the big players are scrambling to partner with interactive media companies to respond to this change. We also see the rise of new players in the market to answers the need for a more open system.
Two recent examples of this partnership are:
Prudential real estate and Yahoo teaming up to provide listing and housevalues.com
The middle man as we know it today may disappear soon but industry giants such as Prudential will find other more creative ways to continue to dictate how we interface with the real estate market. A change similar to the airline industry where the final consumer has complete freedom will take much longer time to take hold in the real estate industry.
September 6th, 2006 at 5:31 am
Very well put, David.
The forces of disintermediation are upon us, and those not willing to accept this will be left behind.
Change is a tough thing, and forcing real estate agents to drop their commissions after they’ve been 6% “for all those years” is something most will not befriend.
The problem I see with this disintermediation phase is the organization and usefulness of the end product. The internet is makinng it easier for people to sell their homes themselves, but there are so many FSBO listing sites out there that, unless there is a major collaboration between the sites, the marketing capability of the FSBO trend is fairly small. As I’ve said many times, it makes a case for a nationwide real estate database.
Along the same lines, I have started a FSBO vs Realtor test on my blog. So far, the realtors have sold many houses in my neighborhood, yet the FSBO’s signs are in need of replacing, they’ve been on the “market” for so long.
-Grant
TheCornerOfficeBlog.com
October 8th, 2006 at 6:18 pm
[…] There are some who feel the real estate industry is ripe for disintermediation. Steven Levitt and Stephen Dubner, the authors of the bestselling “Freakonomics” are strong believers that the real estate industry is in the middle of disintermediation (see Endangered Species: Why Real Estate Agents are on the Way Out). Countless “real estate bubble bursting” blogs either believe, or sincerely hope that disintermediation of real estate is here. David Houle argues the time is upon us. I can’t figure out of Declan McCullagh is saying disintermediation has arrived or is just around the corner, but either way it’s inevitable to him […]
August 3rd, 2008 at 8:36 pm
[…] It is a force that is affecting numerous industries. Residential real estate, as I have written here, is one of those businesses. Any business that has historically inserted itself between buyer and […]