The city of Pittsburgh has three rivers (Monongahela, Allegheny, and Ohio) that converge in the middle of town. These rivers all have a glorious history and they are the true foundation of this great city. Steel mills may have come and gone, but the rivers have been and always will be part of Pittsburgh.
Like Pittsburgh, the real estate industry has three historic rivers of thought that are converging. The three rivers of thought in real estate are automated agent selection, agent demographics, and agent professionalism.
1. Automated Agent Selection
There is a renewed effort in the real estate space to find an electronic way to connect buyers and sellers with Realtors®. We’ve been talking about this for years and still there has been no successful/effective way to fully automate the find a Realtor® process. Many see this as the great battleground/goldmine in real estate today. If someone gains control of this process, they will have successfully inserted technology between Realtors® and their clients.
Frankly, this seems unlikely to happen, at least on a grand scale. According to a survey by the Illinois Association of Realtors®, less than 10% of homebuyers found their agent through technology while 50% relied on a recommendation from friends or family.
Someone may gain a small foothold with automated agent selections, but real estate is still a people business despite the massive influx of technology in the past 20 years. In addition, the other two rivers of thought are problematic to the automated agent selection process.
2. Realtor® Demographics
We have talked for years about the increasing average age of Realtors® and the lack of a diversity in the membership. The general worry is that buyers are getting younger and more diverse while Realtors® get older and remain predominantly white. Will Realtors® become “out of touch” as this trend continues, or is this irrelevant?
First, it should be noted that the average age of a Realtor® actually dropped to 56 years old this year (from 57). This is the first drop since 2007, according to NAR’s 2014 Member Profile. A decade ago, the report showed an average age of 52.
The increase in average age is easy to explain – Realtors® don’t retire. As the saying goes, “Realtors® don’t retire, they just become listless.” Forty percent of NAR’s members are 60+ years old. That mass of above average members pulls the overall age of members up naturally. The fact that the average age actually went down in 2014 indicates a strong surge of younger members.
The lack of diversity in the Realtor® world has always been surprising. The organization is dedicated to fair housing practices and has no underlying prejudice that I have detected in the past 20 years. Despite this, 85% of members qualify themselves as “white” on the NAR survey and that number goes to 91% for the over 60 crowd. The younger section of the membership (under 40) is a little better at 75%.
This lack of diversity makes automated agent selection more difficult. Realtors® demographics simply do not automatically match with typical buyers and sellers.
3. Agent Professionalism
And then there is agent professionalism… another topic we have discussed (complained about) for years. In 2009, NAR developed some strategies aimed at improving the professionalism of members. Required training, testing, and agent reviews were all part of a proposal that never saw the light of day.
NAR is taking on the topic again and we can expect some action this time. Only time will tell if the NAR Board has the boldness to approve major changes, but NAR leadership has shown a willingness to embrace change in the last two years (for example, Realtor.com and the new Core Standards).
Research, however, shows that the problem is more of a lack of self-confidence within the Realtor® ranks than it is in the public’s eye. A 2010 survey by the Pennsylvania Association of Realtors® showed that 48% of homebuyers strongly agreed that Realtors® are professional, but only 33% of members thought the same. In addition, that same survey showed that the public strongly considers Realtors® more knowledgeable (58% to 43%) and more ethical (39% to 33%) than members.
Will NAR finally take action on defining professionalism and requiring members to live up to that standard? If they do, how will this help the process of automating agent selection?
What Will This Convergence Look Like?
What the Realtor® organization does in the coming months about professionalism will be interesting, but how this concept converges with demographics and automated agent selection will be compelling. If we actually define what is meant by “professional” and we can figure out a way around the lack of Realtor® diversity, someone may be able to move forward with automated agent selection. But, is that what we really want?
Realtors® certainly do not want a computer to decide which clients select them. You only have to look at the malaise over Realtor.com’s AgentMatch for proof… and that was a friendly attempt. Firms don’t want a computer to make such a decision, unless, of course, they own that computer. NAR might secretly want to own the automated agent selection process, but it is not the type of competitive issue they generally pursue.
So, that leaves third parties vendors like Zillow, Trulia, and Google as the most likely suspects. Good luck, because even with the convergence of these three issues, this is going to be a tough paradigm to shift. Realtors®, unlike books and hotel rooms, are not a commodity to catalog and index. Despite their lack of racial/ethnic diversity, NAR members are not generally similar. They come in all shapes and sizes, all types and categories, and from all parts of the country. In other words, they’re humans.
Designing a computer program to match clients and agents goes against the fundamentals of the real estate business. Can it be done? Sure. Will it be widely adopted? I doubt it, but matching humans seems to work in the dating business, so maybe I’m wrong. It will be interesting to see how this all works out.
Note from the Editor: The image above is not in Pittsburgh, rather a depiction of converging rivers.
