The Future Will Be Online
There is so much money at stake that the traditional players are not going to be the ones to introduce radical changes. Rather, change will have to be imposed on the industry from the outside. It can be done and it is overdue. But I don’t see anyone doing it. The insiders have too much to lose and the outsiders never seem to take the time to truly understand the business. Or they get co-opted by the traditional business. Take the two most prominent as examples. Zillow is, now, primarily an advertising platform for the traditional players. Redfin is, now, a fairly conventional brokerage with a fancy website.
What the Silicon Valley whiz kids need to understand is that there is no part of the process that people will do without. Very few people are going to buy a house without: Seeing it and alternatives, researching an offer price, negotiating the best possible deal, generating an enforceable contract, having it inspected, appraised, and if necessary, re-inspected, etc. So as cumbersome as the process may be, for any new model to be truly successful, the process must be maintained.
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Allow me put an idea in front of you. Start with a company like Zillow, a firm that has a database of all residential properties in the United States. To that, we add a calendaring system for showings and other appointments. And we add a form completion package that works like TurboTax. For those of you who have never seen or used TurboTax, the software simply asks you a series of questions, and using your input, at the end produces the complicated tax forms. No training required; the system walks you through it.
Then we add an online valuation service. Using the property and sales database that the firm maintains, this system could produce an estimate of value for any property. But unlike Zillow’s famous, or infamous, Zestimate figures, this system would have an Advanced Customization option. Here, users could (optionally) make changes to the subject and comparable properties, and make adjustments – Until they themselves are satisfied with the veracity of the result. Again, like TurboTax, the system walks the user through the process. No specialized training required. In other words, an online Comparable Market Analysis (CMA) that, with user input and adjustments, actually works.
So a seller, using this integrated valuation feature, could price their own property, list it for sale, and specify showing times that they are available to show the property themselves. Buyers can search and schedule showings directly with the seller. Then the buyer can do a bit of research also using the valuation feature (again with his or her own optional input), produce an offer using the integrated form completion feature, and submit it directly to the seller. The website could then offer a nifty back-and-forth negotiation tool. Once an agreement is reached, any monies due are transferred from buyer to seller using a PayPal-like feature. If money needs to be escrowed, this feature can transfer funds to local recommended attorneys or title companies.
Finally the two parties return to the integrated scheduling system for all due diligence related requirements and of course to schedule the closing. If repairs need to be negotiated, the forms and negotiation tools remain ready to be of assistance. Recommended attorneys, inspectors, and contractors are also available in the scheduling system.
Sure it could be some variation of this, but you get the idea. What I find most interesting about this Zillow-plus model is that there is no science fiction involved. Not even future tech. Everything discussed above could be done today. With the right vision and a lot of money.
But I don’t think it will be Zillow that does this. While they are best positioned to put this together, they have proven time after time that they do not have the necessary vision. They seem to have no vision beyond providing an admittedly lucrative platform for brokers to advertise, and have no interest in alienating their golden goose.11
Zillow reminds me of Xerox PARC with their GUI/mouse combo. They did not know what they had. Then along comes Steve Jobs. That’s where we are, I think; waiting for our Jobs. But someone will put this together. Here’s a prediction: Whoever does this and gets it right will be the next Steve Jobs.12
Finally, I don’t think the future will be broker-less. Perhaps it could be for some savvy players. But while TurboTax works for some, CPAs are still quite busy. And a system like the one described above could easily integrate real estate brokers. For instance: Are you stuck? Need some advice? We have local brokers on call. You see the point.
We all need to prepare for this now; it’s coming.
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11. It should be noted that Zillow owns a company called DotLoop, which operates a forms and transaction management platform, very popular with brokers. The question is, does Zillow have any plans to open that platform directly to buyers and sellers? It would not make sense to do so without everything else we discussed here. But assuming they are not complete idiots, one does wonder if they can envision this sort of future. Again perhaps they simply do not want to alienate their current broker advertising clientele. But maybe they have a secret room in the basement where they are working on this. I certainly like to think so.
12. The researchers at Xerox PARC (Palo Alto Research Center) knew exactly what they had. It was the Xerox executives who failed to see the GUI/mouse potential. It is interesting to point out that as of this writing Apple is the most valuable company in the United States and Xerox is a shell of its former self.