The Winds of Change
During the past decade fundamental shifts in the real estate industry have irrevocably changed the way business is conducted and ongoing technological advances are on the brink of completely transforming the local industry, but there are conflicting schools of thought regarding its new direction.
This has been clearly evidenced by the reaction to several recent pronouncements that have caused waves in the industry and provoked strong sentiment, with the latest being the Pam Golding Property Group’s acquisition of Eazi.com, an online fixed-fee agency.
“Technology has undoubtedly revolutionised the industry by ushering in the era of time-saving convenience, enabling agents to reach a much broader market,” says Yael Geffen, CEO of Lew Geffen Sotheby’s International Realty, “but the digital era is also becoming a double-edged sword that threatens the very fabric of the industry.”
“A number of industry players see a future that is almost exclusively digital with the role of estate agents eventually becoming obsolete and they are adapting early on by dramatically altering existing business models.
“We believe that the role of skilled and experienced professionals is indispensable and remains crucial to the seamless navigation of complex property transactions and that the profession will adapt to the changing market by becoming increasingly specialised.
“Despite technical advances, we have seen this happen in many other sectors, from industry to nursing. After all, Siri can’t tell a dying man’s family that he has 10 hours to live. And letting a buyer and seller get together to determine their own price and conditions is like expecting a husband and wife to finalise their divorce without a mediator.”
Her sentiments are supported by Lawrence Zhou, co-founder of RentHop & RealtyHop based in New York, whose research found that over 70% of millennial buyers/renters still prefer to work with real estate professionals. They expect agents and brokers to be their “trusted advisors” and rely on them for strategic thinking and creative insights.
“Our mantra is to see the value in every area, and it can be insulting to a lower segment to treat their property as lesser because of its value. Our brand attracts the best buyers and all sellers deserve the best service.”
Geffen explains that consumer attraction to more cost-effective, online realty services is understandable, but she believes that for the most part, the disadvantages will not only often outweigh any benefits, they can also have serious consequences.
“No one appears to have addressed the matter of safety which puts sellers at considerable risk as there appears to be little or no vetting of the potential buyers who will be viewing their homes. An established agency, however, will vet potential buyers who might want to enter a home for a viewing, as well as do everything possible to pre-qualify buyers for specific property price bands if bonds are necessary.
“It’s also very possible that the low commissions or fixed rates may actually prove more costly at the end of the day, as a disembodied call centre agent juggling multiple transactions is unlikely to be able negotiate as high a sale price as a dedicated skilled professional. They are also not on hand to immediately solve any issues that may arise.”
She adds that it would be interesting to see the statistics of deal cancellations for the low commission agencies.
According to start-ups like Leadhome, technology is key to their success as it enables better communication between sellers, buyers and agents while eliminating the need for multiple branches, but Geffen questions the calibre of agents that fixed rate and low commission agencies would attract.
“Contrary to what many people believe, each concluded deal requires weeks of hard work, many hours of admin, constant liaison with other professionals and, with commission rates already reduced, it wouldn’t make financial sense for a skilled agent to work even harder for far less return. Professional, experienced agents who have absorbed the necessary skills and legal knowledge over time and through their own trial and error, are the ones who are likely to steer both buyers and sellers through the most seamless transaction.”
Geffen says that this belief was confirmed by her personal experience last year when she decided to road test the online model but was soon disheartened after the same agent she had dealt with couldn’t remember her property choice the second time she phoned.
And after she had to cancel a viewing due to traffic congestion and was taken to task by email, she gave up the quest to find a property through this method.
“I spoke to several of our broker principals afterwards and most said that they had recently gained several new clients who had called them with renewed appreciation for the value they offer after failed attempts to buy or sell their homes through new start-ups.”
Lew Geffen, Chairman of the group agrees: “Industry players should remember that for most people, buying property is as much an emotional investment as it is a financial one and they are buying far more than bricks and mortar – they are buying a home. Sellers on the other hand are handing over a home with memories and attachments.
“Agents are therefore not only brokers who negotiate on your behalf, they are ultimately the conduit that balances the emotion between buyer and seller.”
He concludes: “It is inevitable that the industry will continue to change, the traditional model of agency practice will come under enormous pressure from innovative new business models and smaller, less established companies will probably cease to exist.
“However, there will also be exciting new opportunities for those that adapt and it is my firm belief that property professionals with skills and knowledge of finance, investment, strategic planning and networking will withstand the technological disruption.
“The human factor is indispensable as an agent is not only a broker but also a trusted advisor who offers guidance every step of the way and we will continue to wholeheartedly support and promote the vital role of agents in every segment of the market.”
Author: Lew Geffen Sotheby’s International Realty