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Opinion Editorials

Middlemen cut out by internet in most industries, but not real estate

The internet has ushered in the era of dying middlemen, yet the web has given rise to even more middlemen in real estate as startups continue to attempt commoditizing listings.

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Goal of the internet: destroy middlemen

Remember back when the internet was going to destroy the middleman? The New Yorker ran a famous cartoon back in 1997 with seven business people sitting around a conference table, and the caption reads, “On the one hand, eliminating the middleman would result in lower costs, increased sales, and greater consumer satisfaction; on the other hand, we’re the middleman.”

While I doubt the cartoon’s creator had real estate in mind, real estate agents and brokerages have been grappling with how to successfully merge the off-line world of real estate with the on-line world for well over a decade. However, as 2013 begins the internet hasn’t eliminated the middleman in real estate but instead created more!

Zillow and Trulia, for example, are both advertising business that run on the display of real estate information. They are the new middlemen, and they are profiting quite handsomely – primarily by selling ads to real estate agents while providing consumers with information that may or may not be accurate. In fact, one could cynically argue that they have a strong incentive to make the listing agent information difficult for a consumer to discover, because that increases the value of the ads they are running alongside a particular listing.

I’m not here to say that Zillow and Trulia are the enemy or the answer, but to instead ask why most industries have found the internet to be a phenomenal way of reducing middlemen and costs while the internet has created more middlemen in Real Estate. To answer this, I want to compare real estate to two industries – book publishing and travel.

How publishing middlemen were destroyed

Amazon.com, for example, started out to change the publishing industry by making it just as easy to buy a book at home as it was to buy in a store. As the world quickly discovered, amazon.com actually had some advantages by being online. For example, they could stock millions of books, unlike local stores that were limited by their physical space. When amazon.com started, way back in the 1990’s, the kindle had yet to be invented, so it wasn’t even a matter of re-inventing book delivery, this was just about being able to create the world’s biggest inventory of books because they could build warehouses anywhere cheap land was available near a major airport.

But when you buy a book, you always get the same thing: a bunch of words. They may be printed on a page and bound in soft cover or hard cover or they might be digitally displayed on a screen. Regardless, though, you buy a book and you get your words. And you can read those words pretty much anytime and anywhere you want, with very little possibility that things will go wrong. And if things do go wrong? It’s probably not a big deal. Regardless of how much the book cost, it isn’t a financial investment that is a part of your retirement strategy. And no matter how good the book is, you would never invite friends over to just look at your book (you might be a member of a book club, but book clubs get together to discuss the book, not to actually look at each other’s copy of a book).

How travel middlemen were destroyed

The internet has also transformed the travel industry. While we used to go to a travel agent to plan out a complex trip and book tickets, most people do those things online now. And while a plane ticket might be more expensive than a book in the above example, a seat on a plane is, well, a seat on a plane. No one ever sees a really cheap seat and wonders, “Hey, is that seat located inside the pressurized cabin or is it bolted out on the wing?” While there are a variety of seats available within a plane – coach, business or first class – they all essentially do the same thing, and once you have consumed your plane ticket, you move on with your life. Perhaps your plane trip has resulted in the memories of a lifetime, a new client, or a visit to see a long-lost friend. Unlike a home, a plane trip or a book is a consumable item.

How middlemen have thrived in real estate

Real estate is fundamentally different for a variety of reasons, but let’s look at a few. For one thing, brokerages have never possessed a physical inventory of homes for sale. No real estate agent has ever offered to take anyone back to the warehouse to see this year’s available homes, although we have put millions of people in our cars to go visit the homes available in a specific neighborhood. But there is no economy of scale to be gained with a really big warehouse of homes, because homes don’t exist in warehouses, they exist in neighborhoods. Furthermore, while two homes may be very similar, no two homes are identical. Real estate, by its very nature, cannot be commodified.

Websites now offer consumers a wealth of information (some accurate, some less-so) about homes online, yet I’m willing to venture that there is nothing – ever – that will replace physically visiting a home you are interested in purchasing. Why? Because no matter how much information you put online, sometimes the most important things about a home are the things that you can’t see in the marketing text or the pictures. For example, is the master bedroom window under a streetlight that shines excessively bright at night? Is the home at the top of a steep hill that would not be easily accessible by a disabled individual? Does the breeze from a landfill usually blow odors towards the house? Is the next door neighbor a lunatic who throws parties until 4am on a regular basis? In other words, what makes a home desirable is not just the presence of some features, but also the absence of certain other features. Making valuation even more complex, home buyers often don’t always agree about the value of particular features.

Homes differ from both other consumer goods and financial instruments because they have an innately physical and fixed presence, and they exist in a context of other homes and people. Regardless of what book you place on either side of War and Peace, the book in the middle will always be War and Peace. But a home with two great neighbors is more valuable than a home with two horrible neighbors. Homes are also not a disposable consumer good. No one ever says, I’m finished with that home lets put it on the shelf and go buy the sequel. And while people might like to brag or worry about how their investment portfolio is doing, no one ever invites you to come over and enjoy the physical presence of their stocks or bonds.

If I had to sum it all up, I’d say the most distinguishing feature of real estate is permanence. Not only are the permanently and innately tied to their environment, people purchase homes for the long-term. Real estate is neither consumable nor disposable, which may explain why rental sites like AirBnB do well – if you get a bum vacation rental, you aren’t stuck there for the next three – five years of your life.

The takeaway

Regardless of the unique traits of real estate, consumers clearly want accurate information about homes online. In 2013, I think the real estate industry owes it to our clients to find a way to deliver that information with fewer middlemen.

Matt Fuller brings decades of experience and industry leadership as co-founder of San Francisco real estate brokerage Jackson Fuller Real Estate. Matt is a Past President of the San Francisco Association of Realtors. He currently serves as a Director for the California Association of Realtors. He currently co-hosts the San Francisco real estate podcast Escrow Out Loud. A recognized SF real estate expert, Matt has made numerous media appearances and published in a variety of media outlets. He’s a father, husband, dog-lover, and crazy exercise enthusiast. When he’s not at work you’re likely to find him at the gym or with his family.

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18 Comments

18 Comments

  1. markbrian

    January 10, 2013 at 2:27 pm

    Ummm…couldn’t it be argued that real estate agents are also middlemen? Not trying to start a $#!+ storm or get attacked. Just saying…

    • Matt Fuller

      January 10, 2013 at 4:39 pm

      Real estate agents make the market by bringing buyers and sellers together. Back in the 1990’s the industry was terrified that the internet would be the end of agents, but here we are in 2013 and not only are agents still in business, we’ve managed to create more middlemen. I think it’s a fascinating contrast to many other industries, I’m sorry if it came across as complaining, I find it puzzling.

      • Mark Brian

        January 10, 2013 at 4:51 pm

        Matt I didn’t really think you were complaining. I was just playing Devil’s Advocate LOL. Excellent article and I look forward to reading more from you!

        • Matt Fuller

          January 13, 2013 at 1:22 pm

          Thanks, I appreciate it! 🙂

  2. Ron Aguilar

    January 10, 2013 at 3:10 pm

    I agree with your takeaway.

    • Matt Fuller

      January 10, 2013 at 4:40 pm

      Thanks!

  3. Chad McBain

    January 10, 2013 at 9:12 pm

    Matt I applaud you lol. Seriously though I have made very similar statements to our team for years now however you articulate it better then I. Spencer Rascoff even stated as much @ the WTIA meeting. The video can be found on youtube and his points about the fact Realtors are not going away start around the 31-33 minute mark. A point that you make that should be heeded is making the consumer experience so much better if you wish to thrive, amen. Very well written, I look forward to more of your posts.

    • Matt Fuller

      January 13, 2013 at 1:22 pm

      Chad, do you happen to have the youtube URL handy? I’m feeling really lazy this morning!

  4. J Philip Faranda

    January 12, 2013 at 8:33 am

    I am no middle man. I reject the term. I am a trusted adviser and advocate in a transaction which was, is and never will be point and click.

    • Matt Fuller

      January 13, 2013 at 1:24 pm

      J Phillip,

      Middleman has always (IMHO) had a negative connotation – an extra layer that isn’t necessary. I agree with you that we don’t just stand in the middle doing nothing, I very much think we make the market happen in a lot of different ways, many of which you point out!

  5. DavidPylyp

    January 12, 2013 at 11:17 am

    I love the article topic and perspective. Our industry is indeed under assault by everyone with a computer that thinks Selling a house is merely posting the advertisement online. They don’t realise that having the data has nothing to do without a way to measure the validity of the data and examining what’s a priority in someone’s life.

    Being a REALTOR provides a barometer of value relative to the market and a better understanding of the market conditions that govern that price. We are truly in the people’s needs filling business.

    David Pylyp
    Etobicoke Real Estate Agent

    • Matt Fuller

      January 13, 2013 at 1:25 pm

      I agree with you with a qualified asterisk. I think your definition of Being a Realtor applies to great agents, but there are plenty of agents that aren’t great and think real estate is just an easy dollar to be made. But that’s a whole different can of worms!

  6. Todd Carpenter

    January 14, 2013 at 9:02 am

    I work for Trulia, but this is my own opinion. The role that Trulia and Zillow play in real estate has been around long before the Internet. Real estate agents and brokers used to spend their marketing dollars on newspaper adds, real estate magazines, and direct mail. Now they spend more and more of their marketing budget on the Internet.

    Amazon and Expedia are seen as the disinter-mediators of book store owners and travel agents. Often, real estate professionals look at Zillow and Trulia and worry we are trying to do the same thing. It’s just not going to happen. As Matt wrote, a house is not a seat on a plane. We’re not trying to compete with the agent. We are trying to compete with all those other companies that provide marketing services to agents and brokers.

  7. JoeLoomer

    January 14, 2013 at 12:36 pm

    I completely object to this post – my parties are usually over WELL before 4 a.m.!!
    Navy Chief, Navy Pride

  8. James

    January 15, 2013 at 11:03 am

    How viable is it for a consumer to write down 10 listings they like, then schedule appointments to see the houses without involving a buyers agent?

  9. Andrew Mooers

    January 23, 2013 at 6:47 pm

    Videos of the area first for outside new buyers, then one after another full motion, with natural sound deliver the information so well. At one stop individual sites, blogs, video platforms linked to social media. There is not reason to have to keep the herd habit, knee jerk along with forking over beaucoup dollars for better “seating” for eyeballs. On sites populated by your own covered dish, invited to the real estate buffet tid bits for the dog and pony.

  10. Pingback: Artificial Intelligence (AI) in real estate: Negating or monetizing an agent's experience? - The Real Daily

  11. Pingback: New real estate search engine reveals "the truth" about properties

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Opinion Editorials

Shady salary transparency is running rampant: What to look out for

(EDITORIAL) Employees currently have the upper hand in the market. Employers, you must be upfront about salary and approach it correctly.

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Man holding money in the dark representing false salary transparency.

It’s the wild wild west out there when it comes to job applications. Job descriptions often misrepresent remote work opportunities. Applicants have a difficult time telling job scams from real jobs. Job applicants get ghosted by employers, even after a long application process. Following the Great Resignation, many employers are scrambling for workers. Employees have the upper hand in the hiring process, and they’re no longer settling for interviews with employers that aren’t transparent, especially about salary.

Don’t be this employer

User ninetytwoturtles shared a post on Reddit in r/recruitinghell in which the employer listed the salary as $0 to $1,000,000 per year. Go through many listings on most job boards and you’ll find the same kind of tactics – no salary listed or too large of a wide range. In some places, it’s required to post salary information. In 2021, the Equal Pay for Equal Work Act went into effect in Colorado. Colorado employers must list salary and benefits to give new hires more information about fair pay. Listing a broad salary range skirts the issue. It’s unfair to applicants, and in today’s climate, employers are going to get called out on it. Your brand will take a hit.

Don’t obfuscate wage information

Every employer likes to think that their employees work because they enjoy the job, but let’s face it, money is the biggest motivator. During the interview process, many a job has been lost over salary negotiations. Bringing up wages too early in the application process can be bad for a job applicant. On the other hand, avoiding the question can lead to disappointment when a job is offered, not to mention wasted time. In the past, employers held all the cards. Currently, it’s a worker’s market. If you want productive, quality workers, your business needs to be honest and transparent about wages.

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Opinion Editorials

3 reasons to motivate yourself to declutter your workspace (and mind)

(EDITORIAL) Making time to declutter saves time and money – all while reducing stress. Need a little boost to start? We all need motivation sometimes.

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Clean work desk representing the need to declutter.

It’s safe to say that we’ve all been spending a lot more time in our homes these last few years. This leads us to fixate on the things we didn’t have time for before – like a loose doorknob, an un-alphabetized bookshelf, or that we’ve put off ‘declutter’ on our to-do list for too long.

The same goes for our workspaces. Many of us have had to designate a spot at home to use for work purposes. For those of you who still need to remain on-site, you’ve likely been too busy to focus on your surroundings.

Cleaning and organizing your workspace every so often is important, regardless of the state of the world, and with so much out of our control right now, this is one of the few things we can control.

Whether you’re working from a home office or an on-site office, take some time for quarantine decluttering. According to The Washington Post, taking time to declutter can increase your productivity, lower stress, and save money (I don’t know about you, but just reading those 3 things makes me feel better already).

Clutter can cause us to feel overwhelmed and make us feel a bit frazzled. Having an office space filled with piles of paper containing irrelevant memos from five years ago or 50 different types of pens has got to go – recycle that mess and reduce your stress. The same goes with clearing files from your computer; everything will run faster.

Speaking of running faster, decluttering and creating a cleaner workspace will also help you be more efficient and productive. Build this habit by starting small: try tidying up a bit at the end of every workday, setting yourself up for a ready-to-roll morning.

Cleaning also helps you take stock of stuff that you have so that you don’t end up buying more of it. Create a designated spot for your tools and supplies so that they’re more visible – this way, you’ll always know what you have and what needs to be replenished. This will help you stop buying more of the same product that you already have and save you money.

So, if you’ve been looking to improve your focus and clearing a little bit of that ‘quarantine brain’, start by getting your workspace in order. You’ll be amazed at how good it feels to declutter and be “out with the old”; you may even be inspired to do the same for your whole house. Regardless, doing this consistently will create a positive shift in your life, increasing productivity, reducing stress, and saving you money.

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Opinion Editorials

How to identify and minimize ‘invisible’ work in your organization

(EDITORIAL) Often meaningless, invisible tasks get passed down to interns and women. These go without appreciation or promotion. How can we change that?

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Women in a meeting around table, inclusion as a part of stopping gender discrimination representing invisible work.

Invisible work, non-promotable tasks, and “volunteer opportunities” (more often volun-told), are an unfortunate reality in the workforce. There are three things every employer should do in relation to these tasks: minimize them, acknowledge them, and distribute them equitably.

Unfortunately, the reality is pretty far from this ideal. Some estimates state up to 75% or more of these time-sucking, minimally career beneficial activities are typically foisted on women in the workplace and are a leading driver behind burnout in female employees. The sinister thing about this is most people are completely blind to these factors; it’s referred to as invisible work for a reason.

Research from Harvard Business Review* found that 44% more requests are presented to women as compared to men for “non-promotable” or volunteer tasks at work. Non-promotable tasks are activities such as planning holiday events, coordinating workplace social activities, and other ‘office housework’ style activities that benefit the office but typically don’t provide career returns on the time invested. The work of the ‘office mom’ often goes unacknowledged or, if she’s lucky, maybe garners some brief lip service. Don’t be that boss that gives someone a 50hr workload task for a 2-second dose of “oh yeah thanks for doing a bajillion hours of work on this thing I will never acknowledge again and won’t help your career.”  Yes, that’s a thing. Don’t do it. If you do it, don’t be surprised when you have more vacancies than staff. You brought that on yourself.

There is a lot of top-tier talent out there in the market right now. To be competitive, consider implementing some culture renovations so you can have a more equitable, and therefore more attractive, work culture to retain your top talent.

What we want to do:

  1. Identify and minimize invisible work in your organization
  2. Acknowledge the work that can’t be avoided. Get rid of the blind part.
  3. Distribute the work equitably.

Here is a simple example:

Step 1: Set up a way for staff to anonymously bring things to your attention. Perhaps a comment box. Encourage staff to bring unsung heroes in the office to your attention. Things they wish their peers or they themselves received acknowledgment for.

Step 2: Read them and actually take them seriously. Block out some time on your calendar and give it your full attention.

For the sake of demonstration, let’s say someone leaves a note about how Caroline always tidies up the breakroom at the end of the day and cleans the coffee pot with supplies Caroline brings from home. Now that we have identified a task, we are going to acknowledge it, minimize it, and consider the distribution of labor.

Step 3: Thank Caroline at the team meeting for scrubbing yesterday’s burnt coffee out of the bottom of the pot every day. Don’t gloss over it. Make the acknowledgment mean something. Buy her some chips out of the vending machine or something. The smallest gestures can have the biggest impact when coupled with actual change.

Step 4: Remind your staff to clean up after themselves. Caroline isn’t their mom. If you have to, enforce it.

Step 5: Put it in the office budget to provide adequate cleaning supplies for the break room and review your custodial needs. This isn’t part of Caroline’s job description and she could be putting that energy towards something else. Find the why of the situation and address it.

You might be rolling your eyes at me by now, but the toll of this unpaid invisible work has real costs.  According to the 2021 Women in the Workplace Report* the ladies are carrying the team, but getting little to none of the credit. Burnout is real and ringing in at an all-time high across every sector of the economy. To be short, women are sick and tired of getting the raw end of the deal, and after 2 years of pandemic life bringing it into ultra-sharp focus, are doing something about it. In the report, 40% of ladies were considering jumping ship. Data indicates that a lot of them not only manned the lifeboats but landed more lucrative positions than they left. Now is the time to score and then retain top talent. However, it is up to you to make sure you are offering an environment worth working in.

*Note: the studies cited here do not differentiate non-cis-identifying persons. It is usually worse for individuals in the LGBTQIA+ community.

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