Why Disruption Of The Real Estate Industry Has Failed
Ben Caballero, president of Texas-based HomesUSA.com – became the first billion-dollar producer in the world for total home sales last year and has been Real Trends’ America’s number one Realtor® for the last five straight years.
Caballero’s success is the result of a new technology he developed an online homebuilder sales platform that streamlines the MLS listing, management, and marketing process for builders. He shares his views on technology and change in an exclusive interview with The Real Daily:
How has technology changed the residential real estate industry?
Technology has brought about changes to residential real estate but not to the basic business model. Tools available to real estate agents like transaction management software, mobile phones, email, and electronic signatures make transactions more efficient and save a great deal of time, but monetarily, digital technology companies are the ones that have benefited the most by providing services that increase these efficiencies.
Real estate professionals traded money for time, and some are able to use the additional time to earn more income. Consumers have more information which makes them feel more embowed, but they are not saving much (if any) money.
Technology makes it possible for consumers to begin shopping for homes online and they can make decisions about where to live and the kind of home they want without being dependent on an agent. They can see all the inventory that is available before making decisions, which probably leads to a more satisfactory transaction for everyone.
How has technology helped real estate consumers?
The traditional real estate business model has migrated online with only minor changes. As far as how the transaction is handled, how homes are marketed, the business has not really changed.
I do not know anybody who has sold a home and written a check for six percent, say $18,000 on a $300,000 home, who is happy about it. People accept it because they do not know of an alternative.
If [consumers] had alternatives that maintained a high level of quality of service along with lower prices, I think you would see changes in real estate similar to changes in other industries.
Consumers are always looking to get more quality for less price, but that is hard to do. What we have done up to this point is to increase the quality, but we have not been able to do much on real estate commissions.
When somebody finds a way reduce commission cost and maintain a level of quality that is satisfactory, they will have accomplished what no one has yet been able to do, and a lot of people will want to do business with that person or entity. When you come up with a better product, whether Apple or Uber, people will buy it. If you come up with a better product at a competitive price, you are going to be successful. That is just basic, fundamental economics.
Why hasn’t that happened?
The kind of change that will make a difference to most real estate consumers will not come from within the brokerage community. Major franchises and brokerages simply are not going to voluntarily make potentially disruptive changes in the way they do business.
They are too invested in the status quo, and they see any disruption as a financial disaster.
On the other hand, quite a few people have raised substantial amounts of money for concepts to disrupt the real estate industry, but have failed to deliver any disruptive impact because they did not understand the business.
Some disappeared and others succeeded in making only minor refinements to the basic model. None have produced benefits for consumers or brought about a transformation in the basic business model on the scale approaching Uber, Amazon, or Expedia.
Some people would say that if online technology were going to bring about such a basic change, it would have happened by now.
The time is right for changes that take us beyond the traditional way that homes are bought and sold. I am very confident that change will come when someone comes up with a way to harness the power of the Internet to create tools that truly empower consumers.
Real estate consumers, especially the younger buyers who are so critically important to the real estate economy, are much more computer literate today than they were just a few years ago. They understand how to use new technology.
The changes that have taken place over the past 15 years have removed the mystery and made the process of buying and selling more transparent. Consumers have learned a great deal and now is the time for a new concept, not just a rehash of a discount brokerage or FSBO website.
It has got to be something that is all-encompassing and changes the traditional way things are done in the real estate business.
Today’s consumers expect technology to deliver savings as well as efficiency. They are realizing savings in other technology-enhanced transactions, and they are demanding the same from real estate. I think that the time is right for change.
Disruption will be made by someone with a deep knowledge of the business but that is not wedded to it. Someone who understands today’s consumer and has the right combination of hands-on knowledge of the real estate business, technical expertise, courage, and vision.