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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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17 Comments

17 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

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Opinion Editorials

The offensive myth of getting laid off being a blessing

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There’s an age-old trend in news to look for rags-to-riches stories. People love to hear about someone who’s down on their luck scraping together a genius idea and, through sheer grit (it seems), finding the motivation to finally strike out on their own and realize their dream.

Stop me if you’ve heard this one: Person X is laid off from their long-time but unfulfilling office job, say at an oil company in Alberta, or a marketing agency where their good ideas are consistently shot down.

What seems like a situation to for despair is actually an opportunity in disguise— see, with their newfound freedom Person X has the ability to fully commit to their small business pipe dream.

In fact, the story goes, getting laid off was actually the best thing to ever happen to this person.

This story is a myth.

Although I don’t want to discredit anybody who has had the willpower, luck, and resources to succeed at launching their business, there are many people who are laid off who are truly in critically terrible times.

The insidious underlying message of this myth is that anybody who is truly devastated by being laid off is being weak or lazy.

It serves to alleviate the guilt of those who may have survived the lay off themselves; it helps organizations justify the fact that they might have had to let an otherwise good employee go for their own, corporate-level problems.

The characteristics that many of these laid-off-turned-successful-entrepreneurs have in common are the same sort of privileges that many take for granted – health, youth, a personal support system to help keep the lights on, and an established network of people that can be turned into a market of clients.

What happens to the many workers who are victims of ageism when they are laid off in favor of younger, less expensive workers?

What happens if you’re laid off and you can’t use your newfound time to work on your business plan because you’re raising young children?

The entrepreneurs who find opportunity in being suddenly jobless were probably already on their way to striking out on their own, with their being laid off acting as the defined starting point for a plan they might not have known was forming in their heads.

If you, a friend, or a colleague have the unfortunate luck to be laid off, don’t let this myth get under your skin.

It’s okay to have a rough time with a huge life event that is absolutely terrifying and difficult.

Hang in there.

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Opinion Editorials

3 things to do if you *really* want to be an ally to women in tech

(EDITORIAL) Diversity is known to strengthen the overall performance of a company and its teams, and there are a number of ways you can be an ally to the talented women already on your workforce.

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More and more women are leaving their positions with tech companies, citing lack of opportunity for advancement, wage gaps and even hostile working conditions as some of the reasons why.

What’s better for the tech industry and its employees than cultivating inclusive and diverse departments? Diversity is known to strengthen the overall performance of a company and its teams, and there are a number of ways you can be an ally to the talented women already on your workforce. To name a few:

1. Be open to listening to different perspectives.

It can be awkward to hear so many reports of workplace politics stacking against women, especially if you’re not a woman!

Instead of getting uncomfortable or defensive – ask open ended questions and be interested in a perspective that isn’t yours and may be unfamiliar.

Don’t seek to rationalize or explain the experiences you’re hearing about, as that can come off as condescending. It’s common for women to be interrupted or spoken over in team gatherings. If you notice this happening, bring the conversation back to where the interruption began. Offering your ear and counting yourself as responsible for making space will improve the overall quality of communication in your company.

Listening to and validating what women have to say about the quality of their employment with a company is an important step in the right direction.

Expressing something as simple as “I was interested in what you had to say – could you elaborate on your thought?” can help.

2. Develop an Employee Resource Group (ERG) program.

An ERG is a volunteer-based, employee-led group that acts as a resource for a particular group of employees. An ERG can help to foster inclusiveness through discussion, team-building activities and events. It’s common for a department to have only one or two women on the roster.

This can mean that the day to day feels disconnected from concerns commonly shared by women. disjointed it might feel to be on a high performing team, without access to relatable conversations.

3. Be responsible for your company’s culture.

Chances are, your company already has some amazing cultural values in place. That said, how often are you checking your own performance and your co-workers performances against those high standards? Strong company culture and values sound great, but whether or not they’re adhered to can make or break the mood of a work environment.

Many women say they’ve experienced extremely damaging and toxic cultural environments, which lead to hostility, frustration, and even harassment. Take action when you see the new woman uncomfortable with being hit on at team drinks.

Call out those who make unfriendly and uncouth comments about how women perform, look, or behave.

Setting a personal threshold for these kinds of microaggressions can help you lead by example, and will help build a trustworthy allyship.

(This article was first published here in November, 2016.)

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Opinion Editorials

How the Bullet Journal method has been hijacked and twisted

(EDITORIAL) I’m a big fan of the Bullet Journal method, but sticker-loving tweens have hijacked the movement. Worry not, I’m still using black and white bullet points with work tasks (not “pet cat,” or “smile more”).

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It’s taken me some time to come around to the Bullet Journal method, because it took me some time to fully understand it (I have a tendency to overthink simplicity). Now that I understand the use, I find it very beneficial for my life and my appreciation for pen-to-paper.

In short, it’s a quick and simple system for organization tasks and staying focused with everything you have going on. All you need to employ this method is a journal with graph or dotted paper, and a pen. Easy.

However, there seems to be this odd truth that: we find ways to simplify complicated things, and we find ways to complicate simple things. The latter is exactly what’s happened with the Bullet Journal method, thanks to creative people who show the rest of us up.

To understand what I’m talking about, open up Instagram (or Pinterest, or even Google) and just search “bullet journal.” You’ll soon find post after post of frilly, sticker-filled, calligraphy-laden journal pages.

The simple method of writing down bullets of tasks has been hijacked to become a competitive art form.

Don’t get me wrong, I like looking at this stuff because I dig the creativity. But, do I have time to do that myself? No! For honesty’s sake, I’ve tried just for fun and it takes too much damn time.

With this is mind, this new-found method of Bullet Journaling as an art is something that: a) defeats the purpose of accomplishing tasks quickly as you’re setting yourself back with the nifty art, and b) entrepreneurs, freelancers, executives, or anyone busy would not have time for.

Most of these people posting artistic Bullet Journal pages on Instagram are younger and have more time on their hands (and if you want to spend your time doing that, do you, man).

But, it goes against the simplistic method of Bullet Journaling. The intent of the method.

And, beneath the washi tape, stickers, and different colored pens, usually lies a list of: put away laundry, feed cat, post on Insta. So, this is being done more for the sake of art than for employing the method.

Again, I’m all for art and for people following their passions and creativities, but it stands to reason that this should be something separate from the concept of Bullet Journaling, as it has become a caricature of the original method.

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