The Internet Didn’t Take Down Real Estate

The internet may have entered more aspects of a real estate transaction over the past decade, but consumers haven’t abandoned their desire for a real estate professional’s assistance, according to Steve Murray, president of the consulting firm Real Trends, who has been tracking for 40 years how real estate agents conduct their jobs. In fact, consumers are willing to pay even more for real estate agents’ services. The average real estate commission paid to real estate agents has risen slightly since 2005, according to Murray.

Real estate agent jobs have stayed firm, while the internet has disrupted other industries, like travel agents and stock brokers.

“There’s not a shred of evidence that the internet is having an impact,” Murray says.

The internet may have changed how agents work—like in automating several tasks–but it hasn’t taken their jobs, he adds. The number of real estate professionals has increased 60 percent in the past two decades, Murray notes.

It’s the opposite of what so many predicted.

“The industry was fearful of the internet,” says Leonard Zumpano, a retired finance professor at the University of Alabama’s Real Estate Research Center. “They didn’t think they’d have jobs.”

Interestingly enough, real estate agents nowadays stand to earn more in commissions than in the pre-internet era—adjusted for inflation too—due to stable commission rates and surging home values, The Washington Post reports. In 1997, the standard commission on a median-priced U.S. home was $16,600, adjusted for inflation. The commission today averages $20,131.

Experts speculate the reason why real estate professionals have survived against the internet is that a home sale can be a complicated financial transaction that happens only every decade or so for consumers. It can be intimidating so consumers seek the human-to-human help of an agent to guide them through it.

Associations and companies are promoting the value of a REALTOR® in messaging. For example, Century 21 is running ads with the line: “Good luck, robots” … “there’s no robot for insight or hustle or a handshake.” Also, the National Association of REALTORS® has taken on some unconventional advertising recently. Last year, NAR made a deal with the ABC sitcom “Modern Family” to have an episode where the character Phil Dunphy highlights his role as a licensed REALTOR®.

Eighty-nine percent of home sellers used a real estate professional in 2016, which follows the last five years of data. For-sale-by-owner transactions have fallen to the lowest rate since the association began tracking in 1981—at 8 percent.

“Who is going to write a contract? Fill out a disclosure statement? Anticipate what’s coming on the market?” asked NAR President Bill Brown. “There’s a human element to buying and selling a home that can’t be replaced.”

Source: “The Real Estate Industry Has Something the Internet Can’t Offer: The Human Element,” The Washington Post (March 17, 2017)