Real Estate Market Disruptors

The technology revolution has impacted every aspect of our lives. Technology has changed everything, from how we buy products to how information is obtained to what it means to be “social” today.

Selling your home can easily cost more than $10,000 due to closing costs, staging fees, agent fees and other expenses. The largest expense for many home sellers when selling their home is the Realtor’s Commission.

A seller may hire a real agent to help him sell his home. The seller’s agent gets a commission when the house closes. The average commission for a house is 6%, with 3% going towards the buyer’s agent. The remaining 3% goes to the seller’s agency.

This large sum is deducted from the home’s price. The seller could theoretically keep the money if there weren’t any real estate agents involved in this process. However, even though this seems to be true in theory it is not. Hiring a Realtor can add a lot of value.

Technology is changing the real estate industry

We are now in a new era for real estate. The internet has opened up new avenues for house sales and marketing. Consider how Airbnb has changed the hospitality industry. According to a report from the National Association of Realtors, 74% of potential buyers will search the internet for homes to purchase. Even Facebook is a major player in home-buying.

Even with the advent of digital platforms, traditional methods of selling and listing a property are still the best. The role of the agent in real estate is changing as homebuyers use the internet to find the information and data they need.

Real Estate Disruptors

This is called a “market disruption” and Technology is a major disruptor in real-estate. The following companies are predicted to be major real estate market disruptors, according to Realtor Magazine:

• Amarki – is an automated, seamless marketing platform that allows real estate professionals to integrate all their systems into one place.
• Curbio: is a way to help agents achieve results for home-sellers through ROI-focused and pay-at-close remodeling
• Evocalize is a platform that simplifies digital marketing tasks and helps agents and brokerages deliver highly customized social media advertising.
• Kleard is a safety-and productivity app that verifies open houses and shows in real time
• RateMyAgent is a digital marketing tool that allows agents to easily collect, share and promote verified client feedback
• ReConsortia – An open, crowdsourced referral network that aims to increase transparency, professionalism, and improve customer experience
• Design Network: The first ever online shared rental pool of home furnishings for real estate and home staging groups

“The future [of the real estate industry is dependent upon rapid, seamless adoption technology that benefits home sellers, buyers, and investors at each step of a real-estate transaction.”

Mark Birschbach is the senior vice president of strategic, innovation, and technology at the National Association of Realtors.

“[These companies] have the potential for rapid growth in the real estate, finance and home services space, which will allow them to expand into other verticals, and help the overall real estate sector.”

Alternative Real Estate Brokerage Models

Other real estate broker models have also been disrupting the market. Agents who offer discounts on real estate are growing in popularity. There are many types of discount real-estate brokers and models:

Low commission (percentage).
This broker, also known as the 1% Listing Broker, works for a 1-2% Commission. This is a much lower commission than the average 3%. These brokers provide the same or very similar services to traditional agents. Their commission rate is also set upfront, so there are no surprises. It may seem too good to be true but it isn’t. This great deal is possible because One-Percent Listing Brokers can offer it thanks to technology that makes it easier to sell homes quicker and with less work. So the broker has to do less.

Flat rate (low commission)
Low commission real estate brokers offer flat rates fees instead of commissions when you sell your home. The fee is usually fixed at $3,000-$6,000. You may need to pay a portion upfront. This amount will cover administrative and marketing expenses. If the full amount is not paid in advance, the rest of the flat rate will be due at closing. Remember that you are still responsible for paying buyer’s agent fees. These can range from a percentage to a large amount.

Hybrid
Hybrid is the Hybrid Model that was created in the 1970s. It has evolved over the years. This model allows brokers and agents to offer a combination of a low percentage commission rate and a flat rate for low commission. To ensure fair pricing, you should carefully review the details of any hybrid model.

2-for-1
This model allows a real estate agent to offer to sell your house free of charge if you are willing to purchase a home through them. There may be a variation in the amount of the discount that is applied to the listing side. The seller will usually need to sign a buyer representative agreement with their listing agent.

No commission (Flat Fee MLS)
Multiple listing service is also known as MLS. This is a great option for sellers who want their house to be listed on the MLS and other sites, without the need for additional services from a real agent.

This deal is also known as a “no-commission” deal. This allows sellers to list their house as a “For sale by owner” listing. This model is the best for sellers as it saves them money. This will list your home in the MLS. However, the homeowner must still handle all aspects of the real-estate transaction.

As of now, there is no nationwide MLS and very few statewide MLSs. There are currently over 600 MLSs in the US and very few of them share data.

Buyer Rebates
Also known as commission rebates, buyer rebates can also be called commission rebates. This model allows the seller to receive a portion of their agent’s commission back to them, to be used typically towards the down payment, closing cost, mortgage points or cash, if permitted by their bank. Buyer rebates are not legal in all 40 states. Please check your state’s regulations for more information.

Although these options sound too good to true, discount broker services are legitimate and becoming more common in the real estate industry. These services are not frauds. They are a way technology has been integrated into real-estate.

Other disruptive factors

margin compression is another market disruptor. Margin compression is when the cost of making a product or delivering a service rises faster that the sale price. This can put pressure on profit margins.

Technology is increasing the competition in real estate to sell better products at lower prices. Sellers are embracing social media marketing like Facebook Advertising, and abandoning traditional methods to sell their homes.

This is something that younger agents are realizing and applying to their real estate strategies. Many tech-savvy agents are using digital marketing techniques like search engine optimization.

Market disruptions such as these are changing how people buy and sell homes. Real estate agents are not becoming obsolete, but technology and innovation have made it possible for real estate to catch up.