In the 1990s, it was called disintermediation. In the 2010s, we are calling it disruption. Back then, we talked about a “new paradigm” that would alter the real estate business forever. Now we talk about “new business models” doing the same. The names may have changed, but the bottom line is this: I am still waiting for digital real estate transactions to be a common practice, not the exception to the rule.
What has really changed?
Next month in early August, like many of my colleagues, I am heading to Inman News Real Estate Connect in San Francisco. It’s hard for me to believe that it has been nearly two decades – twenty years or more than 7,000 days – since the first Real Estate Connect in 1996. Brad Inman held the first real estate + technology confab at his family retreat in the Sonoma Valley.
That was in late September 1996. Several months later, I met with Brad in a restaurant next to the Hyatt in Bellevue, WA, listening to him tell me what I missed and what he wanted to do next: a full-blown Real Estate Connect conference at the Hilton in San Francisco. He had a goal of 800+ people in attendance, including the Who’s-Who of real estate and technology leaders, at a sold out exhibit hall and wanted my help.
Now I think back to 1996 and 1997 to what real estate looked like then and what it looks like today. Despite all the talk about disintermediation and the gust of wind that Internet 1.0 blew into the aggressive expansion of technology into the real estate space, and the current blitz of amazing innovations, I have to ask: What has really changed?
It’s no longer Homestore that is the invincible giant: it’s now Zillow. But seriously, did Homestore add any real value to the real estate business? Has the consumer saved a dime because of Zillow? Or were both firms simply guilty of redistributing dollars and taking market share from someone else?
When I watch a real estate transaction today, I see almost exactly what I see when I bought my house on Bainbridge Island in 1996: the vast majority of folks still use a real estate agent, still typically pay a 6% commission, you still have to turn in a ton of documentation – more now than you did in 1996! – to get a loan, you still have to write a check for escrow (in Washington that’s the practice for a deposit with the Purchase & Sale Agreement, so that part is still NOT digital), and you still have to sign a bunch of papers until you can close your loan. It doesn’t take any less time than it did before, and in fact, because of TRID, for most folks, it is probably taking a bit longer than it did in 1996.
Will it ever really change?
For the first full-blown Real Estate Connect I wrote and issued a news release on PR Newswire, June 5, 1997. The headline was “Imagine Real Estate Tomorrow…A Paperless Real Estate Industry on the Horizon.” The sad fact is I could write that same exact headline today and only now would I be more accurate.
Yes, everything about the combination of real estate + technology that the Brad Inman envisioned (arguably more clearly and earlier than anyone else in the business) is taking so much longer than anyone imagined. But will real estate ever really fundamentally change?
I believe it will. I also think it could now happen very suddenly, despite literally decades of slowly trudging towards significant change. What prompted me to consider all of this was another bold prediction from a story covered on CNBC “Retail bank branch is doomed, and banks don’t know it.”
I spent nearly a decade working for a big bank (now part of CHASE) and what I read here struck me to the core. The reason it was so jarring is as I thought about the last time, I was actually inside a branch. I realized that the only time I have been in my local BofA branch in the last two years was to solve a complex problem. I now do 95% of my banking online and for the majority of that, I perform it on the BofA app, which is probably one of the most valuable smartphone apps I actually use. The other 5% is done at an ATM. I have absolutely no desire to walk into a branch and I used to originate loans inside a bank branch for a couple of years.
That BofA app – and their online website – fundamentally changed my banking behavior by giving me the ability to save a considerable amount of time by doing everything at my desk. I see the potential for the same thing to finally happen in real estate.
The biggest obstacle I think has been the ability to deliver true value to the consumer. Not just saving them time, but something that seriously saves them money. That’s the big piece that is missing, that many technology companies are chasing. The 100% digital real estate transaction, from the escrow deposit, to the filing of the documents with the local government office, must happen. We still are not there yet. But once we do that, something even bigger, more thrilling and delivering something of remarkable value that makes people change their behavior because it really is a better way that could finally and fundamentally change real estate as we know it.