Last week my cousin was in town and over dinner, we talked a little business, of course. She used to own a mailing business and most of her clients were real estate agents so she is very familiar with how the real estate business works.
About a year ago she and her husband decided to downsize from the big family home to a townhome. Now that they are empty nesters they wanted more time to enjoy other activities instead of spending their weekends doing yard work and house chores.
When I inquired as to how the transaction went her first comment was “My realtor made $30,000 off us in one month.” That wasn’t what I was asking about but it spoke volumes as to what her primary thoughts were, even a year after they had moved. It is obviously a sore spot with her.
She said that her house sold in 5 days for over asking price, and the same agent helped them find the townhome that they are now enjoying. She is very happy with her new home but . . . $30,000!
This brought to my mind the companies that have been trying to apply an Uber-like concept to the real estate business. Help-U-Sell, Assist-2-Sell, Redfin, and now even Zillow is trying an instant offer concept.
Is the real estate business about to be disrupted like the Taxi business was by Uber, like the Hotel business was by Airbnb?
Uber like Airbnb is a platform business. In a nutshell, a platform business operates as a connector by bringing two sides of a transaction together and taking a cut of the transaction as a service fee. The added competition brings down prices.
For a more in-depth explanation of this business model the book “Platform Revolution” by Geoffrey G. Parker, Marshall W. Can Alstyne and Sangeet Paul Choudary is a great read.
Can it be done in real estate? Can a platform have home sellers on one side and home buyers on the other and basically eliminate the middle person i.e. real estate agent?
And maybe no.
In our current real estate market in San Diego we have an inventory shortage and homes are often sold within a few days. Many buyers are so grateful to have their offer accepted that they are willing to overlook some flaws, sometimes even major issues are not a determent.
Real estate is a local business, no two homes are alike. They may have been built at the same time and be on the same street but still one may have upgrades that the other doesn’t, or one may be in better condition. Factors such as these will always influence price.
I believe that very soon the technology will advance to the point that we will have an Uber-like real estate model. There will be kinks to work out as in all businesses, but it will happen.
According to the National Association of Realtors® (N.A.R.) over 90% of all home buyers begin their search online. It seems like an easy concept to build a platform that directly links the home seller with the home buyer.
This is not going to make me popular with my peers, but I am excited about it.
There are too many unethical agents out there that take advantage of home sellers. This should weed many of them out of the business. But they won’t do away with real estate agents altogether.
There are still taxi cabs doing business.
There are still hotels filling up.
There will still be real estate agents.
Because real estate is not just about price, real estate is about value. Hopefully the ones that remain will use our Value-Driven Approach instead of a Price-Driven Approach.
By using “Value-Driven Approach” we have been able to increase the profit of our clients’ greatest asset – their home.
To get a FREE copy of ‘The Warren Buffett Approach To Sell Real Estate: How to protect yourself against REAL ESTATE GREED & bank an extra $30K by taking a VALUE-DRIVEN APPROACH,’ just visit our website and leave the necessary information. A copy of the book will be shipped to your, free of charge and without obligation. www.YourFreeBook4Charity.com