Alvin Toffler, a “futurist” at the time, wrote in his 1970 book, Future Shock, that one of the problems of the ages to come would be overchoice. We would have more options than we could handle, more choices that we could adequately explore.
I don’t know if Mr. Toffler had the real estate business in mind at the time, but the current issue of California Real Estate certainly bears him out. The edition (March/April, 2018) contains an article entitled “The Disruptors: Upstarts or Stalwarts?” and it asks the question, “Which new business models should be on your radar in 2018?” The article goes on to provide an analysis of twelve new and relatively-new businesses which “…have the biggest potential to disrupt the status quo and capture market share from Realtors.” There’s a lot to choose from.
The author, Amber Toufen, managing editor of Inman News, discusses twelve. They are, in no particular order: Compass, eXp Realty, GoldenKey, Houwzer, Knock, Offerpad, Opendoor, Open Listings, Purplebricks, Reali, Redfin, and Zillow Instant Offers. In addition to indicating the current and planned geographical markets of each, she provides a brief analysis of each based on four categories: The Pitch; What’s different for clients?; What’s different for Realtors?; and Industry Impact.
The constraints of space prohibit discussing all the analyses provided by Ms. Toufen, but we will offer some samples.
eXp Realty: The author notes “It’s a licensed brokerage with a twist. It’s cloud-based, so no central office. Agents meet in the virtual online office to network, and the brokerage does not charge typical brokerage fees.” Having pointed out that, “Eliminating overhead means eXp agents share less commission with their broker,” she goes on to observe that, “Not having a central office can be detrimental for less-experienced agents who may benefit from training, coaching, or one-on-one agent-broker time.”
What will be the industry impact of eXp Realty? Ms. Taufen writes, “Its industry impact will be measured by the number of agents who agree that a central office has become a luxury and not a necessity.”
Purplebricks is another novel business model discussed in the article. The author writes, “It lists homes for sellers for a flat fee of $3,200. Sellers are responsible for paying the buyer’s agents’ commission. The company gives buyers $1,000 toward closing costs.” “Sellers are assigned a ‘Local Real Estate Expert’ to manage the sale. Buyers who use the experts to represent them pay the traditional buyer’s agent’s commission and receive $1,000 back from Purplebricks for closing costs.” “The company pays agents a portion of the buyer’s agent’s commission on the buy side or a portion of the $3,200 listing fee for listing agents.”
Other models pay agents salaries rather than split commissions. Still others deal directly with buyers or sellers. At the outset, the author suggests that if the new models sound threatening for the traditional models, “…then talk to those REALTORS® who have been in the industry for some time — they’ve seen other ‘next big things’ come and go, and they’re still around to usher transactions to the closing line.”
On the other hand, she observes, “…those REALTORS® (the ones who are still around) can also explain that their longevity is partly due to paying close attention to new and different competitors in the market. Skilled real estate agents and brokers who know what the competition has to offer and are willing to adapt their practices accordingly will be able to differentiate themselves and have a greater chance of outlasting the next big thing.”
California REALTORS® will find this magazine article worth their attention. Readers who are not CAR members might request a reprint from California Real Estate, 525 South Virgil Ave., Los Angeles, CA 90020.
