For many years the process of buying and selling real estate has been the same. Real estate agents have been an integral part of the finding, negotiating, and preparing documents of a home sale and purchase. Back in the day, the Multi Listing Service (MLS) wasn’t online, but instead it was a book, published weekly with basic property details and a single photo of the listed home. The public’s access to the MLS was through an agent.
The changes from a weekly printed book to today’s online MLS system have been dramatic. The ability for the consumer to access the MLS has put the power of search into the buyer’s control. In fact, according to the National Association of Realtors, 50% of buyers found the home they wanted to purchase online, and 95% of buyers used the Internet to search for homes.
Looking vs Buying
The process of looking for a home, and the actual purchase, are two different things. While buyers may do an extensive amount of research online, when it comes to the actual purchase, they enlist the assistance of a real estate agent. Even millennials, the young, computer savvy, demographic under 35 years old, statistically turn to a real estate agent when it’s time to view and negotiate on the purchase of a home.
But change is in the air.
So far in 2019, more than $31.5 Billion of residential real estate has been sold in the Denver area, with the vast amount of the transactions being handled by a real estate agent. This much money changing hands, not only locally but also on a national level, has gained the attention of big corporations and high dollar investors. Real estate information compiler Zillow, investor backed Open Door, and now mega-retailer Amazon have launched programs that essentially cut the real estate agent out of the transaction.
Making Real Estate Convenient
Focused on the “convenience” of selling through the Internet, these programs offer a quick purchase transaction, eliminating the need for showings, open houses and contract negotiations. It also eliminates the agent and their commission. However, the sale doesn’t go without a cost. The purchase price of the property is significantly discounted, as the purchasing company intends to immediately re-list the home for a profit.
Any needed repairs are paid for by the seller, further reducing the seller’s net gain. While there is no “commission”, the purchasing company charges additional fees for the sale and processing. All in, the cost to the seller, more often than not, significantly exceeds the original commission amount that would have been paid to the agent.
Protecting the Consumer
What should be disconcerting to the consumer and to consumer protection groups is that the absence of a licensed agent removes the representation, expertise and protections the agent brings to the deal. The homeowner, selling their most valuable asset, is no longer represented by an agent with fiduciary duties. The online purchasing company controls the entire transaction and does not have the seller’s best interest in mind. They are in the deal to make a profit and can easily take advantage of the consumer.
Change in life is a constant, and with continual advances in technology the real estate industry will face new ways of doing business. Much of the technology we have seen in the past several years has been to the consumer’s advantage. More information at their fingertips puts buyers and sellers in a stronger position.
While the latest online trend may sound good, there is potential harm to the consumer. Removing the agent from the transaction takes out the individual who has the expertise, fiduciary duty, and ability to guide and protect their client.