In a separate thread (Open MLS for the Public but still No Complete MLS for Brokers) over on Mitchell Hall's AR blog, I saw a couple of comments that led to a comment that led to this post. Make sure you read the entire post and comments - it got me thinking.
"Selling a home is not an easy task. Most people prefer to have a broker do it for them." -- Mitchell Hall
This, I agree with. It's likely to be much harder than it looks. I'm just an ordinary consumer when it comes to real estate buying and selling. But I'm also aware that there are aspects of transactions that are foreign to me, and there are potential pitfalls. As such, I'm not likely to "go it alone" when it comes to selling my home. However, I am likely to do some of the tasks associated with buying my next home. It doesn't matter what those tasks are for this conversation - suffice it to say that there are slivers of activity that I might be more qualified to do than a real estate agent, and at less cost. Hold that thought...
Transparency and Disintermediation
There are other market parallels that have survived in the face of rampant transparency and [some] disintermediation. Many people still have stock brokers, some people still pay slightly more to have a travel professional. But in these cases [where transparency has reshaped entire industries], one thing is abundantly clear - historical transaction costs have fallen. It doesn't mean stocks or travels costs less - it just means market topologies have been reshaped; certain aspects of industries that were once very relevant, are now irrelevant.
But it's important to note that the Internet's ability to rapidly dis-intermediate entire business sectors is really just a capability that may or may not be a good idea for any given market. The outcome (or forecast outcome) - i.e., what may happen because of this capability and why transparency leads to irrelevance - is the more important aspect that the real estate industry should pay attention to.
Transparency is no Guarantee of Disintermediation
Transparency *may* lead to disintermediation, but it may not; it depends on how consumers react to the pervasive availability of information in markets where the information has traditionally been inaccessible. My view is that the degree with which disintermediation actually impacts any business segment has little to do with how transparent the information becomes, and mostly to do with how irrelevant business providers become under the new light cast through increased transparency.
Disclaimer - I'm certainly not qualified to predict what will happen in real estate, but I have a hunch that there are two dimensions of transparency that may each create irrelevance independently and to different degrees.
- The pervasive access to information relating to the selling of a home;
- The pervasive access to information relating to the buying of a home;
Unlike say the travel industry, we consume airline seats for a specific period of time. However, we rarely sell an airline seat -- save the occasional bump in exchange for some economic advantage. Stocks, on the other hand, are more like real estate - we buy them and sell them. And even in this multi-dimensional market of activity, the stock buying and selling industry has been significantly reshaped.
"New Yorkers are not looking to dis-intermediate." - Mitchell Hall
I agree with this comment as well - no consumer wants to dis-intermediate. But all consumers want to optimize wealth which is synonymous with controlling costs. Regardless of how Mitchell shapes this statement, transaction costs will probably fall - the only question remaining - who will benefit?
The real estate industry should not confuse the threat of disintermediation with the risk of becoming irrelevant to it's customers. While your industry may seem like it's under attack by companies like Google, Trulia, and Zillow, these are simply artifacts of market forces that are attempting to seek lower transaction costs. Some of these ideas will fail, and some will succeed. But as I said earlier, transaction costs will most certainly fall - not because consumers believe you are overcharging them - but because they can be achieved at lower cost. The businesses that manifest ways to lower transaction costs will be the likely benefactors, just as the businesses that create (or sustain) relevance given the new market topology will also emerge as highly competitive leaders.
I believe that real estate's challenge is to identify it's own future relevance given the likelihood that greater information transparency will reshape some (perhaps many) of the present transaction inefficiencies. Could the answer be that simple? ;-)