House Price Index

The US real estate magazine Inman, recently published an article entitled Piecing together the future: A click-to-buy real estate world.  The author, Brad Inman, essentially pieces together what he thinks the US real estate industry might look like in the coming years and the impact it will have on realtors. Here’s his early take:

1. The first shift: Online home search: Recent and still occurring, which changed the realtor’s value prop
2. Enter the big dogs: New financial players are entering the space making the transaction easier and faster, and making way for what he calls the ‘more seismic’ shift….
3. A click-to-buy and sell real estate world: Where some realtors move to the sidelines

The following are key excerpts that provide insight into Mr. Inman’s logic and opinions:

The First Shift: Online Home Search

Beginning 20 years ago, the house buying process was unequivocally altered by online home search. Buyers took the house hunt into their own hands. Agents slowly relinquished some of their clout, as consumers grabbed control of what homes they wanted and where they wanted to live. [Although] search did not alter the process of buying and selling a home, but it certainly shook up the steps of finding a house.

The dawn of online search was also an eye-opener for agents and brokers who began to feel the technology squeeze on their value proposition. Over the last two decades, agents and brokers moved several degrees away from the center of the transaction.

Now get ready for a more seismic shift.

Enter The Big Dogs: New Financial Players

… Financing… has always been a hurdle to creating a more efficient market on top of the clumsy and time-consuming process of selling…. Enter new financial players with big bucks eager to get in the middle of the lucrative real estate market. It starts with digital mortgage operators like Quicken and loanDepot but more importantly with a crop of big Wall Street investors who look at things quite differently from the old-guard mortgage lenders. [These are companies like] Knock, Opendoor, OfferPad and Zillow Instant Offers, which remove friction for the consumer and change the model for the realtor.

A Click-To-Buy And Sell Real Estate World

Knock, as an example, is representing buyers, often existing move-up homeowners. Here’s how it works (which has been paraphrased). Knock:

• Helps buyers find homes with its technology and salaried employees help buyers find homes
• Purchases the house in cash on behalf of the buyer, using its private equity debt lines
• Moves the buyers in and gives them (temporary renters) a $10,000 home improvement credit. This cuts out the… loan approval and closing process
• Lists the buyers’ existing home and sells it the old fashioned way on the MLS, and
• Gets paid by the seller, once it sells (i.e. the person who holds title to the new home until the old one is sold). Their debt line is in effect being used as a bridge loan to create this instant purchase.

Think about it, a click-to-buy home purchase. No hassle, no friction.

Is this merely a pipe dream by some budding entrepreneurs? I don’t think so. Knock has helped 2,000 buyers and sellers in a single market, Atlanta, and it is spreading out now to 10 markets [in the US]. The same thing is happening on the sell side by Opendoor, OfferPad and Zillow Instant Offers. Sellers are a click away from a sale.

Where’s The Realtor?

Different than the discounters and a generation of robo sell-it-yourself kids who tried to disrupt real estate, these new models are full commission. But they deploy a new set of tricks, technology and processes that will alter how homes are bought and sold.

[Agents will not be] squarely at the center of the transaction but more on the sidelines, as the institutional players with new tech partners make things happen quickly with certainty for the buyers and sellers.

Over time, the future will become a click-to-buy and a click-to-sell world — a one-stop shop — all wrapped into a new marketplace… The multiple listing service data will still drive search but no longer be the only marketplace.

Will agents be cast aside, working as salaried licensees? No, but for the majority of agents… there will be new opportunities…. As for the best agents, they will begin to align themselves with the funders who are making deals happen quicker.

A Two-Tiered Market

[All told] the industry may quickly bifurcate into two groups: one offering a click to buy and sell model and one doing things the old way…. I am certain the industry is morphing, quite fundamentally, and not around the edges.