- It’s All About the Data:
Imagine as a sales agent if you could scroll through your database of 2000 contacts and pick the 100 people that you knew were going to sell over the next 6-8 months. Imagine if you could predict how many people would be bidding at your next auction, and what price the property would sell for, prior to listing it.
Both of these situations are becoming a reality now, thanks to “predictive analytics”, which uses a range of techniques including data mining, statistics, machine learning and artificial intelligence to make accurate predictions about future events based on large amounts of data. Real Estate Agencies around Australia have millions of data points and many more are available publicly. Agents that use this data to their advantage will be able to outperform those that don’t. It’s already happening in the US, it’s only a matter of time until it takes hold in Australia.
- Sales and Property Management Commissions Will Decline:
According to Macquarie Bank’s latest Real Estate benchmarking report, sales and property management commissions are on the decline. A large part of this is because of new technologies that allow agencies to operate more efficiently. As they become more efficient, in order to win more business they reduce their price. Additionally, technology enabled business models like Purple Bricks, and others that will soon be in Australia, will further drive down commission rates across the industry. To combat this agencies will need to introduce new technology to drive efficiencies and start generating revenue from places other than traditional commissions.
- Personal Relationships Will Not Be Necessary to Sell or Manage Property:
Before you crucify me for saying that relationships don’t count. Let’s get the facts straight. People already rely on computers to diagnose and recommend treatments for cancer. Australian’s have more friends on Facebook than they do in the real world. Just look at the way children use products like Amazon Alexa and Google Home.
Alexa (not yet available in Australia) and Google Home know the answer to everything. When those kids want to buy or sell a house who are they going to ask to find out which agent they should use? Like it or not they won’t be calling 3 local agents to do the comparison themselves when Google has already done it for them. The agent of the future needs to stop asking how I meet more people and start asking how I get Google to recommend me!
- Unforeseen New Entrants Will Challenge the Traditional Agency Model in Highly Unlikely Ways.
There’s a property management company in the US that with some advanced software and a team of 30 people manage a little over 200,000 properties. That’s 7 times larger than the biggest property management company in Australia. Amazon has invited real estate agents to sell their services on their website. Just last month Facebook announced that globally they were getting into the real estate advertising market. Opendoor which is worth more than $1billion facilitated the sale of 400 properties last month in the US. Not one of those sales required a traditional real estate agent, and no commission changed hands!
The traditional model of agency practice is going to come under enormous pressure from innovative new business models. Many incumbents will cease to exist, but those that adapt and change have an enormous opportunity to expand their market share. A key trend will be for existing agencies to collaborate to reduce costs and improve efficiencies. Agency offices will downsize and move from prime retail locations to cheaper office space, and small businesses will be consolidated into larger organisations who have better economies of scale.
- The Machines Are Coming:
The traditional open home for an hour on a Saturday morning will be gone, as will the personal assistant, the office administrator and the trust accountant. All will be replaced with machines.
Sounds ridiculous! It’s already happening in other industries. The artificially intelligent lawyer “Ross” has already been hired by law firms to provide legal advice on contracts.
There are places in the US where you can visit an open home 24 hours a day 7 days a week gaining access with an app which unlocks a smart lock, which then triggers all the lights to turn on and cameras to record your every move.
Ten years ago at Rental Express when I started sending backend administrative tasks to be done with cheaper labour in the Philippines people thought I was mad or even “Un-Australian”. Now it’s one of the biggest trends in the real estate industry. The next step is to completely automate these processes so that they are done by computers without any human interaction at all.
The need to change is not new. The theme of Charles Darwin’s “Origin of Species” is
It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.
Never has this been more relevant in the business world than right now.