I’ve been busy with earnings season, which provides a unique peek under the hood of the five public companies (well, four, since EXPI doesn’t do earnings calls) and what they’re thinking about the future. But I saw something on the Book of Faces that made me think it’s a topic worth considering.
It’s also a topic that seems appropriate in light of the RE/MAX earnings call, which shows that we have a conflict of visions going on as to what the future will look like. So let’s get into it with a question:
In the post-COVID future, does the real estate agent have to be local?
The Brad Inman Post: Real Estate Adapts
This question was triggered by a post that Brad Inman, publisher of Inman News, put on Facebook, which said “Good stuff. Our industry is so adaptive” and featured this image:
The comments to the post generally show that we are seeing more and more materials like this from brokers and agents, and that the technology and the techniques being used are not new.
This is more or less virtual real estate brokerage, and it was always possible. It’s just that consumers were not really into it, and the housing industry overall — including title, mortgage, inspections, etc. — weren’t really seeing the point of doing virtual… until COVID hit.
As you can see from the SELLectrealty ad, it is not only theoretically possible but actually practical to buy a house without ever having set foot in it. Now, most people are not going to do that; we get that. Maybe investors would, or the super-paranoid, or maybe renters who aren’t taking on a 30-year commitment would, but most buyers are going to need to walk through their future home before purchasing.
But everything other than that walkthrough/tour can be done virtually, online, or over email. It’s almost like buying a car. The one thing you cannot do remotely in buying car is test driving the specific vehicle you want to buy. I know, because I bought a truck over Ebay last year, and it was easier than I had expected.
So real estate is adapting. Good!
Question is, where does this adaptation lead?
Conflict of Visions
In my analysis of RE/MAX’s Q1 earnings (VIP post), I wrote:
As I noted in my Zillow analysis, Rich Barton saw the exact same things that Adam Contos and team saw, and concluded:
This is not going – we are not going to bounce back to the way things were done before.
We are seeing all kinds of systems, processes, business models, players change right now.
And there are going to be a bunch of sad stories there, but there are going to be a bunch of happy progress for our consumers and for the industry as a result.
A lot of the technology that I have already been talking about, this kind of Real Estate 2.0, a modern platform for virtual shopping and digital closing. That’s all – it’s just – it’s really rapidly progressing right now and that’s not going to go back either.
Now, Zillow also has experience in navigating the Great Recession. But they came to an entirely different conclusion than did RE/MAX. Maybe it’s because Zillow navigated the Great Recession as a technology company, while RE/MAX navigated it as a real estate company, but we have a real question as to what the future holds.
Broadly speaking, I think there are two visions of what the future holds in the industry.
One says that while we’ll have more tools, more 3D tours, more remote notaries and so on, the fundamentals of real estate will remain the same as it ever was. Agents will work their spheres, work their geographic farms, bang the phones, and hold open houses (with more PPEs and more cleaning), and so on. Technology will make things a bit more efficient for agents, as they can do listing appointments remotely, or not spend weekends driving a buyer around (the buyer can do a 3D walkthrough instead, to hone in on the 2-3 houses he really wants to see), and attend closings virtually, and so on. But the basics of real estate won’t change. This is, roughly speaking, the RE/MAX vision, and I think it is the one shared by most brokers and agents.
The other vision says that everything will change. Nothing we have counted on as basic building blocks of the industry is sacred; it’s all up for grabs. The fact that none of us know what is going to change and how doesn’t mean that things won’t change; it just means we don’t know. This is, roughly speaking, the Zillow vision: “We are not going to bounce back to the way things were done before.”
I’m in the latter camp, mostly because (a) history shows that huge technology changes eventually lead to huge changes in every industry, and (b) within real estate, we have had these trends developing for a while, and COVID accelerated the timeline for existing trends.
So… let’s see if we can’t tease out one possible change.
Why Must the Agent Be Local?
Looking at the SELLect Realty marketing above, I have to ask why the real estate agent has to be local.
- Home search can be done online.
- Showings can be done virtually, and when the buyer narrows houses down to the few he has to see in person, technology can let the buyer in, and the buyer agent (the actual advisor) can be on Facetime or whatever to provide guidance to the buyer.
- All meetings can be done virtually.
- Documents can be signed online, and for those ass-backward jurisdictions that still require a wet signature, remote notaries can do those.
- Inspections, closings, earnest money — all of it can be done remotely.
So why must the agent be local?
Say I’m buying a house in Las Vegas. Why couldn’t the agent be sitting at her computer in Boise, as long as she is licensed in Nevada, and has access to the local MLS, and has access to local data?
I was thinking about my own life, my own business, and realized that I had never physically met my bookkeeper, my accountants (three of them), or my attorney. Before my current graphic designer/webmaster, I had never met those people either. I’m using a business bank that is entirely online; I have never met my “banker”. None of those things influenced my decision to work with these remote professionals, nor has the fact that I work with them remotely impacted the quality of the service.
So why is it different for real estate?
I can only think of two possible reasons.
Local Knowledge & Expertise
The first reason, and the one I think most real estate people will invoke, is that buyer needs local knowledge, local expertise.
There is nothing more local, more dependent on location, than real state. We all know the cliche: local, local, local. Two identical houses, situated across the street, might be completely different in value because one floods and the other one doesn’t.
That would be a very good reason why the agent has to be local. But there are three problems here.
First, what is local? Is a county local? A city? A neighborhood?
An agent might know a particular subdivision like the back of his hand. That doesn’t mean he knows the subdivision across the street. An agent might be an expert in one neighborhood, but not know anything about a neighborhood across town. Maybe in rural areas, one can be an expert across two or three counties, but in dense urban areas, I find it difficult to believe that an agent could be an expert in even one county. Harris County, which contains Houston, is 1,777 sq. miles in size, with over 4.7 million residents. That’s larger than Rhode Island. There is no conceivable way that any human can claim to be a local expert in all of Harris County.
Second, how many real estate agents in an area are actual local experts? What does it even mean to be a local expert?
Just living somewhere doesn’t make one a local expert, at least not to the degree that one should be paid for that expertise. Knowing which restaurants are good nearby is fine, but Yelp exists. Eater.com exists. Knowing that there are a couple of parks nearby is great, but Google Maps shows 3D street views of said parks.
Third, most of what is truly valuable about local expertise cannot be shared by real estate professionals thanks to the Fair Housing Act and its various implications. You see this if you log on to someplace like city-data.com’s forums, where local residents who are not constrained by Fair Housing laws freely talk about gang activity, which parks are dangerous after dark, which streets are safe and which are not, the ethnic makeup of various neighborhoods, where the Asian groceries are, which schools are good and which ones have metal detectors at the doors, and so on and so forth. No real estate professional can discuss most of those things and not get in big trouble.
Lead Generation and Sales
The other big reason why an agent must be local is lead generation and sales.
Real estate is a relationship business, or so we have believed for as long as real estate has been around. People list with agents whose yard signs they see around the neighborhood, who do community events, who come to soccer practice, who attend local churches and community organizations and so on. People refer friends and family to agents they already know. That is the bedrock of the business of real estate, and has been for decades.
This is why brokerages went to the recruit & retain model, and why every coach everywhere keeps talking about maintaining relationships with your clients and your sphere through this COVID crisis. Everything is relationships in real estate.
Thing is… that’s also how lawyers and accountants and insurance salespeople also worked for decades. Until they didn’t, because the Worldwide Web made it possible for me in Las Vegas to find and work with an accountant in Texas, or a lawyer in New York, or a graphic designer in California.
Are we so certain that lead generation fundamentally remains, and will fundamentally remain, about local outreach, local relationships, and local community involvement after COVID?
The Rise of Telemedicine
In this context, note that one of the biggest changes with COVID is the catapulting of telemedicine to the forefront:
In fact, a study showed that in the U.S. alone, 82 percent of consumers do not use such services. This sad reality can be attributed to the lack of improper infrastructure to support it and to the lack of awareness. Another factor is that cultural aspects haven’t been taken into consideration, like it’s usually the case in digital health.
Just a couple of months ago, no one could have predicted the extent of the COVID-19’s effect on society. Entire countries are under lockdown in a bid to limit the spread of the virus. Digital health fares as an adequate solution in these circumstances. Robots help in monitoring infected patients to limit contact with medical personnel, deliver medical supplies and disinfect wards.
As companies and even schools adopt the work-from-home solution, remote consultation is also becoming an increasingly attractive option in healthcare. The COVID-19 pandemic brought telemedicine into a new light. As medical professionals need to stay healthy and disease-free, the need for remote technologies skyrocketed. Both the CDC and WHO are advocating for telemedicine to monitor patients and reduce risks of them spreading the virus by traveling to hospitals.
Following this lead, The Academy of Family Physicians and the American Medical Association (AMA) released related guidelines. The US Government also took significant steps in order to expand telemedicine services. We’ve also seen practical examples like the Bergen New Bridge Medical Center dedicating a COVID-19 telemedicine service. “These are the moments that we were built for,” said Dr. Jason Tibbels, an executive with telemedicine provider Teladoc Health.
Is there anything more local than your doctor? I have to bring my body, which is the thing at issue, to my doctor so he can see if that cough is something serious requiring hospitalization or something I can cure with a prescription. If I break my arm, I have to physically go somewhere to get it fixed.
And yet, COVID is changing the rules of medicine, and changing the culture around telemedicine.
Are we so certain that real estate will remain so intensely local post-COVID?
Change Is Not Inevitable
Here’s the thing: I tend towards the “things are going to change” camp when it comes to real estate, but in other areas, I’m in the “nothing will really change” camp.
For example, I do not believe that plumbers will go virtual after COVID. If my sink is backed up, I don’t need tele-plumbing; I need a plumber to show up at my house with his tools and clear the problem.
I don’t believe that restaurants will become takeout-only after COVID. There is something really deep in our human psyche that makes the experience of going out, having someone else cook the food, and having someone bring you food, drinks, silverware, and so on fun and interesting and worthwhile.
I don’t believe that dating will be fundamentally transformed after COVID. You can swipe all you want, do Zoom all you want, but for obvious reasons, at some point, you are going to have to occupy the same physical space as the other person… if you know what I’m sayin’. It’s not dating otherwise. It’s digital pen-pals.
So I don’t think that COVID necessarily means that everything will change.
I lean towards real estate changing, because while houses are physical and local, real estate services are not physical and not necessarily local. But I could be wrong.
So, let’s turn it over to you. What do you think?
Are you more in the RE/MAX camp of “nothing really changes” or in the Rich Barton camp of “everything changes, and we’ll never go back to the way things were done before”?
Whichever vision you have of the future, do you think real estate agents will be local because they must be? Or do you see a possible future where the real estate agent herself might be remote, providing services remotely, using technology that all of us are adapting every single day?
Inquiring minds want to know.