Over on the Texas Association of REALTORS website, there’s a reprint of an article from the December 2015 issue of REAL Trends entitled “Why technology will never replace REALTORS.” I’ll wait for the cheering to die down a bit. OK. Good? OK, moving on then.
Steve Murray, who is one of my heroes in the industry, basically pooh-poohs the astronomical valuations of Zillow and other tech companies and defends the unique value proposition of REALTORS:
Wall Street and Silicon Valley have been assaulting the residential brokerage industry for nearly 20 years. They cannot figure out why an industry that is so fragmented, so inefficient (from their point of view), and so ripe for their financial alchemy and smarts can’t be conquered. We talk to many investors who represent huge sources of capital, and the conversation inevitably leads to “Why can’t real technology do to brokerage what it has done to so many other businesses?” Why can’t the capital and the smarts of Wall Street and Silicon Valley figure out how to disrupt residential brokerage and drive huge valuations for their efforts? After all, it has worked almost everywhere else.
The answer we tell them is the unique nature of homebuyers and sellers and their relationship with real estate agents and brokers. A transaction that is infrequent, complex, and fraught with downside when things go wrong drives consumers to use someone who knows how to reduce their fears, doubts, and threats and help them get a result they want: the smoothest transaction possible. And, in great part, the industry does deliver that.
Thing is, I know for a fact that Steve Murray knows his last sentence is a great giant hope-filled donut of a hyperbole. I know because I’ve been on stage with the man when he talked about the grave dangers to the industry that comes from the countless legions of “Facilitators” who don’t know what they’re doing, are not experts, and just care about cashing the commission check to the relatively small number of “Counselors” who do all those things Murray just talked about.
Fact of the matter is, in great part the industry does not deliver that. The DANGER Report did not get written in a vacuum, and yours truly, the favorite doomsayer of the industry, did not write it. Happy, sunny, jovial, and optimistic Stefan Swanepoel did the research and wrote it. And that report’s #1 conclusion:
I would like to propose a modified title for Steve Murray’s article: “Why technology will never replace some REALTORS.” Then I’d like to follow that up with this post here:
If technology can’t do it, then somebody has to replace a whole boatload of REALTORS.
Technology Can, In Fact, Replace Quite a Few REALTORS
First of all, let’s be honest here for a moment. Technology can easily replace quite a few REALTORS.
I wasn’t making it up when I said I’ve been on stage with Steve Murray when he talked about the conflict between Counselors and Facilitators. Mainstreet Organization of REALTORS posted a fairly lengthy report on Murray’s talk on this topic. Read it in full.
Murray thinks that Counselors have higher production on average, invest in their skills, training, systems, and work to advance their expertise. They understand the market, the community, and the transaction process as a whole. They bring more value to the transaction and to the client, because they are mentally engaged to work better and to deliver higher quality service.
Facilitators on the other hand, says Murray, “can process a sales transaction well but are not in position to add more value from a consulting standpoint.” He thinks Facilitators are not engaged in the business, don’t invest the time and energy to grow their business, advance their expertise, or to improve their skills. They don’t adopt technology as readily. And this is the killer money quote:
- Because of their lack of expertise, they are not in a position to offer as much in the way of true guidance to their clients and customers.
- They generally lack transaction experience and are not skilled in the details of either the market or the transaction.
Murray thinks, and I sort of agree, that “of the 1.1 million REALTORS®, he expects there are probably 150,00-200,000 counselors in the real estate business.” Roughly 20% of the total.
So the thing is, I agree 100% with Steve Murray when he says technology will never replace a REALTOR, if what he really means is “Counselor”. If he means Facilitator, then sorry, I don’t care if they have the golden R tattooed on their foreheads; they can be replaced by technology, and frankly, should be.
A real estate transaction is complex, yes, but it’s also mechanical. It’s paperwork. Technology absolutely excels at repetitive mechanical tasks; it completely destroys paperwork whenever and wherever it has been implemented. There is absolutely zero reason to hire an agent to fill out an offer form; technology can easily allow the buyer to do that directly. There is no reason to hire an agent to take some photographs and load them into the MLS, then wait for the phone to ring. It’s cheaper to hire a photographer, pay somebody $200 to put the listing into the MLS, and wait for the phone to ring. Under contract? There is no reason to hire a REALTOR to babysit a stack of papers, most of which are handled by the escrow and title companies in any event, and even when a REALTOR does “handle” it, that work is often outsourced to some transaction coordinator in the Philippines making $8/hour.
Truth is, the real estate transaction is paperwork… except when problems occur and negotiation becomes key and the client needs to be reassured and, and, and. In those moments, where the deal might be hanging by a thread, or some unforeseen development is creating havoc and chaos, and the client is stuck wondering if they could move next week as they had planned… then, then technology is useless. Algorithms are no help. Computers cannot empathize, calm you down, and tell you what needs to happen. Software isn’t going to work overtime to figure something out for you. Only a human being can do that.
But as Murray said, the Facilitators suck at all of those things; they do not bring much value in the way of true guidance. They don’t have the skills or the knowledge in the “details of either the market of the transaction.” That they can process a sales transaction is good, but that is exactly the sort of mechanical thing that technology can and should replace.
If Technology Cannot, Then Somebody Has To
The truth is that conflating the Counselor and the Facilitator under the umbrella term REALTOR does a disservice to both the Counselors who are bringing tremendous value into a stress-filled situation, and to the REALTOR brand. (No wonder consumers — and professionals! — think the REALTOR brand is utterly meaningless.)
And if Steve Murray’s own estimates are correct, only about 20% of the REALTOR population is a Counselor. The industry and Associations can hold out shining examples of the Counselor REALTOR in their paeans to how machines can’t replace professionals, and in their marketing and advertising pieces… but consumers are not stupid. They may be misled, but they’re not idiots. The 20% does not uplift the 80% who suck; rather, the 80% who suck drag down the 20% who do not. The bait-and-switch of REALTOR marketing is not working, y’all. “Look at this shiny Counselor! Oh, you want to buy? Roll this here dice; four out of five times, you’ll get yourself a smiling Facilitator to help facilitate the sale of your single most important asset!”
Hence, the DANGER Report.
So if technology cannot replace the Facilitator, well, then somebody has to.
Lost in the midst of all the Zillow-hating, the Upstream-fearing, the Self-promoting, the Internal-politicking, and the Conference-attending is the simple fact that the single greatest threat to the industry, the single biggest challenge that we all face, is that somebody has to replace the Facilitator.
.GOV ain’t gonna do it, because they make license fees from millions upon millions of people taking exams and getting their license. Plus, somebody with a real estate license rarely files for unemployment, which keeps the unemployment rate low.
Brokerages ain’t gonna do it, because they’re in the business of making money, and if having 5,000 Facilitators paying a $100/mo desk fee makes them more money than having 500 Counselors on a 90/10 split, well, by golly, they’ll drag a wide net through an ocean of Facilitators.
I have long hoped that the Association of REALTORS would do it, because the whole ethos of the Association, the whole basis of the Code of Ethics, is that they want to be Counselors and smite down upon the Facilitators with great vengeance and furious anger. A part of me still thinks that could happen, but… to quote Logen Ninefingers, one has to be realistic about these things.
A lot of brokers, REALTORS, and industry insiders are deathly afraid that some tech company, some super-nerd genius out of Big Bang Theory, some amazing breakthrough is going to “disintermediate” the REALTOR. A whole lot of folks in the industry hate on Zillow (and hated on Realtor.com before Zillow) because they think Zillow wants to replace the REALTOR. So we get articles on why technology can never replace a REALTOR, why the sky-high valuations of various real estate tech companies are ridonkulous, and everybody claps each other on the back laughing… yet strangely… without being fully relaxed.
You know why? Because nothing from Wall Street or Silicon Valley can replace the Counselor, the true expert, the real REALTOR, who gives a crap. But technology, even the simplest technology (like online property search) can and does replace the Facilitator.
If it could not, then somebody has to. Are you that somebody? Do you want to be? Because I might.