Kevin is the Founder of Marker Real Estate, an innovative firm with a transparent, inclusive, client-focused strategy.
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Will there be a future without real estate agents?
The short answer is no. Real estate agents are highly unlikely to go the way of the Caspian tiger or Guam flying fox anytime soon. Still, it seems likely that the demand for real estate agents will decline over the next decade. In fact, the writing is already on the wall.
Why The Need for Real Estate Agents Will Decline
Over the past decade, a number of large real estate companies, including real estate portals, have started to approach homeowners with cash-only offers. In some cases, the companies approach owners who have listed a property. In other cases, they approach owners who haven’t even yet put their property on the market.
To be clear, this practice isn’t new. There is a long history of investors offering cash-only deals to property owners, but the conditions were very different in the past. First, the practice wasn’t widespread. Second, most of these cash-only deals were made on distressed properties and those in pre-foreclosure or foreclosure. Finally, nearly all the deals that closed were under market value. In the current market, this is no longer the case.
While some cash-only offers from investors still target the owners of distressed properties or properties in pre-foreclosure or foreclosure, these types of deals are no longer the only cash-only deals. Increasingly, investors are targeting owners who have put quality properties on the market. In some cases, they are even going after property owners who haven’t yet put their property on the market but who happen to live in a high-demand region with a low surplus of homes. Most importantly, investors are now often paying market value or higher for cash-only deals.
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For most homeowners, a cash-only offer at or above market value is a win-win scenario. Beyond getting market value or above for their home, they don’t have to invest the time and money required to stage their home. Better yet, since sellers traditionally pay agent fees, they also save up to 6% in the process. And this is why the demand for agents may be in decline.
Every time an investor offers a cash-only deal on a property and a homeowner accepts the offer, at least one agent loses the opportunity to close a deal (if the home was never listed in the first place, two agents have potentially lost income on the transaction).
Where Agents Will Remain Valued And In Demand
While the above scenario isn’t good news for agents, even if the trend continues — and I suspect it will — it seems unlikely to spell the end of agents for two reasons.
First, some sellers are always going to stage their homes. This seems especially likely to persist in the luxury market. While the average suburban family may find it more convenient to accept a cash-only offer and skip the hassle of staging their home and scheduling multiple open houses, this is rarely a major concern for property owners on the luxury side of the market who often are no longer living in their homes by the time they are listed.
Second, there is the question of trust. For well over a century, Americans have been relying on real estate agents to help them buy and sell properties. Changing consumer habits takes time (e.g., some consumers still feel uncomfortable with digital commerce). Given the high stakes of buying and selling real estate (it’s the biggest purchase most consumers will ever make), it seems highly likely that many consumers will continue to feel more comfortable working with an agent than closing a deal directly with an investment company.
How To Stay Competitive As An Agent
If you are an agent, thriving in the future will be all about having a clear value proposition. We know that the very best agents bring increased trust and expertise to any transaction. As an agent, be prepared to show consumers how much this trust and expertise is actually worth (e.g., how it can help them sell their home at a higher rate and buy at a lower one).
In the future, agents will also need to remain highly agile. With a declining need for agents, the competition will be fierce and remaining highly agile will be the key to one’s success.
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