This blog post will argue that locational and procedural knowledge is what keeps realtors employed.
I am constantly being reminded about how much things have changed. I think about travel agents, CDs, network tv, cable tv, newspapers, fax machines, V8 engines, department stores, cigarettes, happy hours, Netflix, the internet, Uber, drones, cell phones, Thai food, holiday resorts…most things have changed. Yet some things remain mostly the same: real estate, junk mail, and newspaper flyers come to mind.
Two kinds of agents
So why have so many jobs disappeared, whereas real estate agents remain?
Travel agents were one of the first casualties of the information revolution. On the surface, their jobs were somewhat similar to that of realtors. The similarities are:
both have insider and location based knowledge.
both have ready access to the tools and the know how to put the transaction together.
Of course booking a one-week stay in Varadero is very low-risk compared to buying a home. The room you get may be too close to the nightclub or too far from the pool, but so what? Big deal.
The house you buy may be next to a proposed highway offramp. The condo board may be about to submit a special assessment to replace the paving stones with pavement. Those are big deals.
What is holding real estate back from changing?
Real estate has not changed for a couple of reasons.
1) You cannot buy a house on the internet. (One of my 365 Rules about Real Estate). You do not have enough information to proceed through and process the real estate transaction online. One major difference is viewing houses. You can buy a car online (though you might visit a showroom first) but you can’t really buy a house online.
Unless of course, you buy a pre-construction project off plan (and even then, they have a model home or condo suite for you to view), unless you buy new, you have to view. You have to get in your car and go visiting homes.
unless you buy new, you have to view
2) Confidence is the other reason the job of real estate agent remains. The buyer needs confidence in having complete information. That is key. Location based knowledge is critical. And being able to complete the transaction online is moot if home buyers are not prepared emotionally to be comfortable moving forward. They are not comfortable moving forward because they do not have the confidence of complete knowledge. There is a lot they don’t know and they know it.
The sales funnel
Anyone in sales has heard about the sales funnel. As salespeople, our job is to put clients into the top of the sales funnel, nurture and educate them through the funnel and ultimately help them become buyers at the end.
With home buyers and home sellers there are three basic stages in the sales funnel. With both buyers and sellers the location based information problem exists.
The location based information problem in relation to buyers and sellers
Buyers have no trouble putting themselves into the sales funnel. They start their home search online and by going to open houses. They start by shopping. Shopping is easy. Everyone has shopped. Shopping has buyers and sellers. With real estate, shoppers are buyers and they believe that realtors are the sellers. (Some are.)
What often happens next is that they (the buyer/shoppers) decide that they need or want an agent. This is the second of part of the sales funnel. It is in this part of the funnel that buyers glean knowledge, the knowledge needed to make good decisions. This is where discussions about neighbourhoods, schools, transporting, amenities, home features and everything else crystallizes the needs and wants of homebuyers. This is the most important stage of the sales funnel. This is where the realtor shows that he is not a seller but an advisor. This is where the location-based and other knowledge transfers to the buyer.
The third stage in the sales funnel is the buy. Not the sell, but the buy. The offer, the negotiations, the agreement, and proceeding through to the eventual close. This part of the process goes smoothly with experience, which is a kind of knowledge, a procedural knowledge, not a location-based knowledge.
A lot of realtors advertise their ‘negotiation skills’ as being important. Personally, I don’t think a lot of persuasion is needed when all parties have good information. The real magic happens in the second stage of the sales funnel. The third stage of the sales funnel tends to be a little anticlimactic.
Whereas with home buyers, the middle of the process is where the magic happens (where the location based knowledge transfers), with home sellers, the process is front loaded. Home sellers need the knowledge – procedural and locational – upfront. If home sellers get off to a good, they are well on their way to a successful home sale.
As an aside, it is too bad that so many get off to a bad start often with a bad price or with poor communication.
With home sellers, real estate agent’s location based knowledge, the most important asset we possess is needed at the beginning of the sales funnel.
The middle of the sales funnel with home sellers is taken up with effective communications.
And the end of the sales funnel for sellers is the buy, which should go smoothly as long as everyone has enough correct information.
So that is it. That is why we still have real estate agents. That is why the internet has not stolen our jobs. That is why there is not an Uber for real estate.
Agents usually tell a different story. We think we are great. We have egos that make us believe we are irreplaceable. We create a lot of fluff, to pad out what we do. Our presentations and interactions are loaded with smoke and mirrors and dogs and ponies. But really, there is critical mass in terms of both knowledge, and lead generation that keep the funnel full. Once we cross that threshold, once we hit critical mass, we simply become part of the sales funnel. Lets say its locational and procedural knowledge that we possess. The knowledge is spread out at ground level. Once the internet finds a way to centralize this knowledge, we’ll be like travel agents, newspaper editors and buffalo hunters.
Some people say that they don’t like change. To that I ask ‘do you like irrelevance?’