When Will Real Estate Innovation Help the Consumer?

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Posted: Mar 15, 2022

Home » When Will Real Estate Innovation Help the Consumer?

Grant Clayton is the co-founder of 1 Percent Lists
 [email protected]

I began my real estate career in the spring of 2011 just as the tech boom was really starting to take hold. Smart phones were popping up everywhere and apps were being developed to make a real estate agent’s life better, and Bluetooth lockboxes were making houses more accessible than ever. Electronic signature programs were becoming the norm and cloud-based storage made administrative work much less painful. As technology continued to evolve the office changed from a place everyone to which everyone went to a place that only admins and brokers went. Brokerages started to realize the amount of money wasted and “virtual” brokerages became the norm.

At every turn innovation and disruption has taken place. The ‘Blockbuster’ real estate brokerages have paved the way to the “Netflix” brokerages of the future. With every new bit of technology, brokerages and agents have found a way to leverage it to make their lives easier, and their work faster, more efficient, and, most importantly, more cost effective.

A funny thing about this age of technological enlightenment is that the shining light never seems to pass down to the consumer. Real estate agents have been charging 6% since the late 1800s. Stop and ponder that for a moment. The light bulb began illuminating homes and was the latest and greatest invention in the late 1800s. Fast forward 140 years and we are literally 3d printing homes and charging 6% to sell them! This tsunami of technological achievements in the past 140 years has led to almost ZERO dollars in commission savings for the client. Thomas Edison would pay the same commission to sell his home that Elon Musk does today! 

How is this possible? The answer is complicated, and it involves greed, protectionism, and a lot of brainwashing. Cost efficiencies and savings are taking place; they are just not being passed along to the consumer. This is where greed comes into play.

When I began my career, brokerages were often keepng 50% of an agent’s check, but now that number has dropped drastically as technology has made everything more efficient. Massive offices are less necessary than they used to be. A huge administrative staff is less necessary as well. The savings created by these efficiencies have created higher broker profit or been used to offer better agent incentives and to do more recruiting. Virtually none of the savings created by technological efficiencies has gone to the consumer.

The next hurdle we have to overcome to achieve real competition in the industry is protectionism. You see, to do business in an area as an agent, you have to be able to access the multiple listing system (MLS). To join that, your broker must be a member in good standing with that MLS board— which takes money and time. In this modern age of efficiency you’d think we would have one nationwide MLS, right? Actually, no, we have a lot. So now you’re thinking we probably have 50 MLS boards right, one for each state? Actually, no, we have a lot more than that, too. Right now, there are roughly 580 MLS boards in the United States. Some of the smallest states in the country both geographically and from a population standpoint have the MOST MLS boards. The only purpose to having many MLS boards is to make it harder to do business on a larger scale. This makes everything purposely inefficient to continue the status quo.

The final issue is the brainwashing of new and existing agents. Agents are immediately trained to think and act like a small business owner, but then are also immediately instructed not to innovate/negotiate on their fees. Imagine any other business operating this way. Is there another industry in the world in which their peers determine what a new person in their space will charge for their new product or service? This is not just a problem for the public, it’s a problem for the agents as well. The issue created is that it is impossible to establish a true value proposition if your fees must match everyone else’s. A brand-new agent with no experience is expected by their broker and peers to charge the same fees as the most experienced agent at their firm with a track record of success. Is it any wonder that so many agents fail?

As a real estate agent and brokerage owner, I love the technological advancements that make my life cheaper, easier, and more efficient. My company—1 Percent Lists— believes in leveraging these new tools to be full service, and high value for our clients due to our remarkably low fees. We are bringing that to the masses with our franchising efforts across the country. It’s time to let the public enjoy the savings that innovation has provided to us. Embrace the changes coming to our industry. You will be happier for it and so will your clients.

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