As the co-founder of a software company that is taking on traditional real estate brokerages, I get asked all the time why real estate brokerages have not built better technology. The short answer is: they can’t. The longer answer is why they can’t:
1. Difficult to Recruit
Standard brokerages would find it very difficult to recruit top-notch developers. Brokerage offices are about as un-Google as it gets and lack the sex appeal of the latest social art sharing app. You won’t find catered barbeque lunches and free massages anywhere close to a real estate sales office. Many brokerages also lack a sense of purpose with which to attract developers as the primary goal is making money, not saving the world.
2. Can’t Pay Top Dollar
A brokerage isn’t financially set up to support innovation. Within a brokerage, all of the real estate agents are independent contractors who are paid a fixed percentage of the commission that they bring in to the firm. With the average agent doing only about 5 deals per year (extremely low productivity), brokerage margins can be very low in “off” months or down markets. This seasonality leaves very little cash on hard for fixed cost salaries like a development team. Brokerages are not set up to make long term investments in technological innovation.
3. Adoption Would be Low
Brokerages can’t make their agents use their own technology. Agents are independent contractors, so the brokerage cannot force them to adopt any specific technology or adhere to efficiency-maximizing best practices. Even for the rare brokerage that has a development team, many of the consumers will never actually see the benefits.
4. Scared of Technology
There is a prevailing mentality in real estate brokerages that technology is much less important than humans. The traditional real estate brokerage is grounded in human service and the individual touch of each agent. Most agents see technology as a threat to their jobs as startups try to automate the various functions of real estate brokers. In fact, most brokers try to enforce the stereotype that online or “tech” brokerages provide lower service. Traditional brokers like to equate price with quality to combat the inevitable tendency of technology to lower costs for consumers.
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In response, the tech world has been serving up ad hoc solutions to help the real estate industry. There are some amazing companies right now building the software that real estate brokerages haven’t been able to build internally. Zillow,Trulia and Estately make it easier to search for a home. Open Home Pro has made open houses easier. CRMs like Top Producer and, to some extent, ZipRealty’s Zap help agents remember to follow up with clients. Reesio andDocusign have been working to make the brokerage paperless. And software-powered brokerages Redfin and Suitey combine all of the above on the residential side of things (and TheSquareFoot for commercial).
At every step of the way, tech companies are working to make the process easier. Unfortunately, very few of these tech companies can actually help you buy a home. Here’s to hoping the big brokerage will change their DNA to incorporate customer friendly technology. If they don’t, they will quickly feel pressure from a new breed of software-powered brokerages waiting in the wings armed with innovative technology to gain market share.
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