loading...

Why Real Estate Agents Have Thrived in an Internet World

by Shilpi Paul

Why Real Estate Agents Have Thrived in an Internet World: Figure 1

The internet has made searching for a home much easier. Prospective buyers can now narrow down their preferences, look up comparable sales, find a lender, and educate themselves on topics like adjustable rate mortgages, tasks normally accomplished with the help of a real estate agent, all without leaving their computers.

A few years ago, many wondered if technology might lead to the end of the real estate agent, much as it essentially killed off the travel agent. But these days, it looks like real estate brokers are doing just fine in the new reality.

On Thursday, former Housing Complex reporter Lydia DePillis, currently at the Washington Post, examined why real estate agents are thriving despite the internet and DIY-ers. (Earlier this year, Bloomberg Businessweek also investigated the same topic.) The brokerage RE/MAX is doing so well that they filed an IPO earlier this week. The overall number of agents took a dive after the housing crash, but has been on a steady increase for the past three years. And in 2012, noted DePillis, 89 percent of buyers retained an agent, up from 69 percent in 2001.

DePillis put forth a few theories to explain why. Perhaps acquiring financing and navigating the complicated contracts in the buying process has become more complex and necessitate the advice of an experienced advisor. DePillis also noted that agents are now able to market themselves online and work from home and are less dependent on brokerages, which may reduce overall office-related costs. The fact that the internet has increased productivity may have been good for the agents, as well as buyers.

Why Real Estate Agents Have Thrived in an Internet World: Figure 2
Courtesy of Bloomberg BusinessWeek.

Ultimately, it seems like though the internet has changed the relationship between buyer and agent, it has not obviated the need for a guiding adviser.

Even Redfin has pulled back on its DIY ethos. Initially, the site employed a team of brokers to work with buyers in a minimalist manner. Less experienced agents would meet buyers on the ground to unlock doors for them, while others would take on the task of helping buyers make an offer and navigate the settlement process. A buyer going through Redfin might see one agent on a house tour, communicate with another while writing their offer, and see a third at the closing table. The agents were given a salary, rather than earning a commission.

But last year, Redfin decided to revamp their system. They now operate more like a traditional brokerage, allowing buyers to work with one agent for most of the process. The agent and buyer form more of a relationship, and the agent is able to offer personalized recommendations and to physically be there for more of the process. As a result, Redfin reduced, but did not eliminate, the commission refund given to the buyer.

Additional start-ups are springing up that are working to give credit to the work that a potential buyer does on his/her own. Recently, we wrote about Jason’s House, a website where actively involved, DIY-type home buyers can negotiate with agents to try and receive monetary compensation for their hard work.

See other articles related to: redfin, real estate agents

This article originally published at https://dc.urbanturf.com/articles/blog/why_real_estate_agents_have_thrived_in_an_internet_world/7494

7 Comments

  1. weird said at 1:02 pm on Friday August 23, 2013:
    It is weird. You would think in a place like DC, where houses pretty much sell themselves, people would not bother with a real estate agent. Or at least people would say to realtors, "this whole idea of you getting a percentage of the sale price is for the birds. we'll pay you $500 or some flat fee and that's it."
  1. Caroline said at 1:33 pm on Friday August 23, 2013:
    Lets be clear. Homes do not sell themselves. My home recently sold and my agent worked tirelessly on my behalf and more than earned his commission. The home sold for above our asking price and that was after it spent over a month on the market.
  1. weird said at 2:21 pm on Friday August 23, 2013:
    I'm skeptical. I go to open houses and there are people everywhere (and not because of the realtor -- I mean, we're there and we dont have any idea who the realtor is that's showing the place nor do we care.) We usually dont even bother talking to realtors because half the time they can't even tell you basic facts like how far the nearest subway or grocery is. And everyone knows buyers have to put in a bid asap because houses are selling like hotcakes (and again not because of the realtor, but because that's just how the market is). Yet if you broke down realtors' fees by the hour, my guess is some of them make more than some surgeons. And for what? What is it that they contributed to this transaction? It's hard to figure out. If a house on the market for a month in Washington, D.C., well, you're obviously doing something wrong -- I'm going out on a limb and say the price was too high. Maybe they should look at recent prices of similar homes in their area and respond accordingly. It's not rocket science.
  1. DE said at 2:52 pm on Friday August 23, 2013:
    as a first time buyer, having a realtor was helping with everything expect finding the actual houses. we were looking in a small area, would find the houses ourselves online, then she would set up the viewing times. she also walked us through all of the paperwork and let us know what to expect from the process. like the infographic above says - there is no internet equivalent for that assistance. additionally, as a buyer, having a realtor that is familiar with the area and the market in that area could help increase your chances of getting what you want.
  1. p.a. white said at 7:17 pm on Friday August 23, 2013:
    we still use agents because the system is set up to require them and i'm sure the industry has made sure it stays that way. i bought an investment condo 3 years ago. i found the place on my own but needed a real estate agent to call for the lock box code so i could do a walk through. i still had to do all the research, most of the paperwork, manage the inspection, schedule closing, etc. my agent showed up for closing and then hit me with an extra fee because she felt she had done a lot of extra work. i told her absolutely NO. it's a scam. if some buyers feel more comfortable with an agent, they should have the option to hire one but the rest of us should not be required to pay extra for them.
  1. Internet said at 2:24 am on Saturday August 24, 2013:
    The National Association of Realtors makes sure their "Realtors" hold on to their 5% cut. I went to a couple of viewings this year and granted, one was RedFin, but I found they were not knowledgeable about the building, the structure, etc. When I was a first time home buyer, not only my agent didn't reduce my buying price but they pressured me into transacting faster and told me things about the unit which were not true. I think it's only a matter of time before consumers have more access to the listings databases, and the cut agents make will be reduced. Like stock brokers, transaction fees have to come down, even when the product may be complex.
  1. Maria said at 11:05 am on Saturday August 24, 2013:
    Hi Shilpi, great blog shared above. Ya, internet has become a great help to real estate agents. Its very easy to search for a property through internet. Thanks for sharing this informative post. Awaiting for more blogs like this.

DC Real Estate Guides

Short guides to navigating the DC-area real estate market

We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!