As we start another year in the real estate industry we look forward to what the new year might bring. Some of us want to continue the success we had ending the decade, and some of us want to learn from the missteps we made and make improvements for the new year. I’ve always looked forward to the inevitable prediction posts that come in the waning days of each year, so this year I decided to share my own predictions.
We probably won’t see a 100% accuracy rate on these predictions, but that’s part of the fun about forcasting. Sometimes we’re right on target, and sometime we look back and ask ourselves what we were thinking. However, regardless of the accuracy, it’s just plain fun. So, let’s get to it.
Compass Deflation
Compass has been the golden child and media darling of the real estate world for the last couple of years. They’ve experienced round after round of VC funding, that’s filled their coffers to brimming. Most notably in the form of their initial round funding of around $800 million from Softbank. With that funding, they’ve been able to buy their way into a lot of the most competitive markets in an effort to achieve their 20/20/20 goal(20% of the top 20 markets by 2020).
A lot of the hype and buzz is starting to die down and the VC money hasn’t been flooding in anymore. 2020 is the year that the rubber is going to meet the road for Compass. They’ve got to get to the nitty-gritty of brokerage management and deal with the everyday issues every brokerage does: agent retention/recruiting, commission compression, and customer acquisition.
Compass has some very intelligent people on their roster, and they have the potential to do well. However, they’ve ridden the tide of positive hype and flush wallets. Gone are the days of the 100K agent signing bonuses and here are the days of investors asking what the profit plan is. Will Compass be the next WeWork or the next Realogy? We may very well find out in 2020
Agent Job Shift
The role of the agent, and customer expectations, are changing. This isn’t a new concept, but it’s one that’s going to become more and more prevalent. There are a lot of agents that still believe their job is to help their clients find and home, and while that’s technically part of it, it’s not an accurate statement. Yes, agents often know about listings that may be coming soon or off-market deals, but these make up a very low percentage deals that actually happen in most markets. The modern consumer doesn’t need help finding houses they’re interested in. There are more sites that have more listings, and listing information, than ever.
I don’t need an agent to help me find a home. What is need is someone to advise me on the transaction. I need someone to tell me that if the house was built before 1978 it might have led based paint or if it was built in the 60’s or mid-70s it probably has aluminum wiring. I need someone to explain to me how the transaction works, because buying a home isn’t like buying a TV, or a computer, or even a car. It’s an extremely critical transaction that can have extraordinary repercussions on a client’s life. See available inventory is not what customers need help with anymore. The devil is always in the details, and that’s what customers need and want.
Agents are no longer salespeople, or at least not just salespeople. They are consultants and advisors. Customers are hiring an agent to advise them on their home sale and purchase. How to stage the property, what repairs to make or request, how the heck the offer/counter-offer process works. That is where the agent’s value lies and that’s why customers will turn to an agent.
The iBuyers Are Coming!
iBuyers market share is growing! Now panic, scream, and run in circles. I’ll wait….Have that out of your system? Good.
The number of iBuyer transactions per year rose and rose quite a bit in certain markets. Are iBuyers going to kills off agents? No. There will always be a market for iBuyers.
Think about it for just a second. There are certain types of sellers that are willing to take below market value for a quick, guaranteed sale. Sellers who inherited property have no investment in the property, so anything they get is pure profit. Sellers that have a lot of equity, need to move their house quickly, may take a lower offer if they get offered a short close window with no contingencies. However, most sellers are going to want to get the most they can for their home.
This is another scenario that agents are going to have to adapt to overcome. Agents are going to have to demonstrate their value and how they’re going to procure the highest price for a seller’s home, shifting more to that adviser role than simply a salesperson.
Smart Home Technolgy blows up…..
…in agent’s faces. Ok, maybe that’s a little dramatic, maybe not. Smarthome technology, or Internet of Things, implementation is booming. The exact numbers vary, but current estimates put in-home voice assistants at around 36% and all estimates have those numbers climbing at a high rate. The adoption rate of Google Home and Alexa devices has been a gateway to other connected devices, like smart light bulbs and smart plugs.
The bulbs and plugs are easy to take with you when you leave. However, we’re now seeing “smart” devices of a more permanent nature getting installed in homes. Smart Thermostats, fixtures, light switches, outlets, fridges, and even smart HVAC vents. These kinds of things aren’t easily moved when the home sales. So, how do these items transition from one owner to the next? That’s the problem agents are going to have to deal with. Is it the agent’s responsibility? Not really, but how many times to agents get a call for advice or guidance about any number of random things to do with a house that a client recently bought or sold?
Where it’s going to be problematic for agents is that the smart home market is a mess right now. There are no real standards for how these different devices integrate or, more importantly, how to transition them from one owner to another. How happy do you think a new homeowner is going to be when they realize that the previous owner still has access to the thermostat, locks, lights, and cameras in their new home? Not please at all.
The good news is that there are plans in the works to put standards in place to make working with these devices easier for the layperson, but the bad news is that until those standards are in place the smart home revolution is going to be a problem for agents.