You can go anywhere in the world and buy the same cup of coffee at Starbucks for $4 or the same Big Mac from McDonald’s for $5, but you cannot use the same real estate agency twice in two years and have the same experience with a $300,000 home sale or purchase. Why? Because real estate agents are independent contractors doing their job, well, independently. The franchises with which they are affiliated have little control over how agents do their job or their customers’ experience. And with a median annual salary of $45,990 , agents simply don’t have the capital, technology or other resources needed to make the transaction predictable, convenient and transparent.
We are in the early stages of “Real Estate Web 3.0.” In internet terms, Web 1.0 was mostly about putting listings online, and Web 2.0 was about empowering buyers with information and context about those home listings. Web 3.0 is about completely transforming the transaction, giving consumers certainty, convenience and transparency while selling their largest asset.
The innovative companies powering Web 3.0 have raised billions of dollars in just a few years to build technology platforms that simplify the complex and laborious process performed by agents. To understand how this wave of innovation and its impact on real estate agents is different from previous waves, let’s take a quick history lesson.
Catching Up On Real Estate Web 1.0 And 2.0
The first wave of real estate innovation began in the 1990s when home listings moved from newspapers to online. The National Association of Realtors (NAR) licensed the domain Realtor.com, which quickly became the largest consumer real estate site. But as the name implies, NAR’s primary customer is the real estate agent, not the homebuyer or seller, so there was very little incentive to share information that would make consumers less dependent on real estate agents.
Enter Web 2.0 in 2005, when tech startups started attacking the information thiefdoms plaguing the homebuying and selling experience. I was a founding team member of Trulia, which launched as the first independent home search engine with contextual data and maps. The following year, Zillow (which acquired Trulia in 2014) launched the Zestimate, giving consumers their home price estimate without needing to contact a real estate agent. Both websites took off, and today, homebuyers visit Trulia and Zillow a combined 200 million-plus times a month.
While Web 2.0 democratized the information buyers need to make the biggest purchase of their lives, home sellers still did not benefit. The process of selling a home is every bit as opaque, uncertain, stressful and expensive now as it was then, and sellers still pay the same 6% commission. Ironically, the very companies that empowered buyers with information they need to make their biggest purchase without agents became increasingly dependent on those very real estate agents for revenue and, therefore, survival.
Enter Real Estate Web 3.0
By aggregating hundreds of millions of homebuyers, Web 2.0 innovators enabled the next wave of innovators to focus on transforming the home selling transaction. Here are three key areas where I believe we’re making this possible:
Data science: Web 2.0 companies used data to estimate home values, but Web 3.0 companies are inspecting the inside of homes to more accurately price them by including renovations, upgrades and premium features. This enables our company, Knock, and others like it to more accurately determine how much we can sell a customer’s existing house for on the open market and, therefore, how much house we can buy the customer. It also makes it possible for modern day home flippers, such as iBuyers, to make instant offers on houses so homeowners can focus on their new home search.
Technology: Since this wave of innovators are licensed brokers, they’re automating as much of the process as possible with technology. Sellers can finally have transparency into the pricing of their homes; they can monitor and provide feedback on the home prep and listing process, review and sign documents online, and connect instantly with experts to guide them through the process, all from the convenience of their phone.
Liquidity: Sixty-one percent of home sellers are also buying their next home at the same time. Most need to sell their existing house to get the down payment and mortgage on their new home. And so begins the proverbial chicken and egg game: “Do I sell my old house first and move in with the in-laws, or do I make an offer on a new home and pray that my old house sells in time?” And during the months it takes to sell a home, homeowners must hire, manage and pay contractors, keep the house immaculate, and leave on a moment’s notice when agents brings buyer to the house. But innovations enabled by Web 3.0 allow sellers to skip some or all of this stress and uncertainty.
So what role does a real estate agent play, if any, in a world where tech-driven solutions can offer a certain, convenient and stress-free consumer experience? The reason Starbucks and McDonald’s can provide a predictable, repeatable experience and quality product worldwide is that they own every part of their value chain.
The good news for agents is that a license is still required to perform some parts of the transaction, like making and negotiating offers on homes. So agents do have the opportunity to be part of the next wave by becoming expert negotiators. However, this opportunity will likely only be available to a small percent of the estimated two million licensed agents in the U.S., so it’s the most skilled who will win out — to the benefit of the consumer, which is really what it’s all about, right?