Real Estate Agent, the Web, & the Future

Will the internet do to real estate agents what it's done to travel agents? That question has incited fear among some in the real estate world. The recent launch of a do-it-yourself real estate website by one of the founders of expedia.com has given new urgency to the discussion. Yet the fact remains that we are well into the maturity of the ecommerce age, with no end to the real estate agency industry in site. Are real estate agents finally out of the internet-competition woods?

What the Web Has Done to Travel Agents

In case you're not familiar with the effect the internet has had on the consumer travel agent industry, just pay a visit to your local travel agency. Very likely, you'll find either a vacant storefront or another business. It is widely believed that the internet—in particular, do-it-yourself travel websites such as expedia, travelocity, orbitz, and priceline—has proven more competition than most travel agents could bear. How were the websites able to beat the travel agents? There were arguably two big factors:

1. Cost. Cost savings is the most commonly cited factor in the decline of the consumer travel agency industry. This was one case where "cutting out the middle man" wasn't just a slogan. When the travel agent no longer had to be paid, a trip usually got that much cheaper. But perhaps the biggest challenge to travel agents wasn't the cost savings to consumers, but to the airlines. The airlines aggressively pushed the new travel websites, cutting agents' commissions at the same time. It is widely believed that the airlines saw they could get more money selling through the internet than through agents.

2. Knowledge. Travel agents had sold themselves to customers largely on the basis of their knowledge of travel planning and the locales to which they sold trips, and their ability to find the lowest airfares and best-value hotel rooms. Yet the internet put a great deal of that knowledge at people's fingertips. For instance, airlines' published fares—and even cut-rate "consolidator" fares—were now just a web search away. Ditto for hotel rates, travelers' reports, local profiles, and State Department advisories.

Real Estate Agents and the Web: Better Outlook?

The commercial mass-market world wide web is now over 10 years old, and unlike travel agents, real estate agents are still going strong. In fact, the last few years have seen the ranks of real estate agents swell with thousands of people who found the field not only exciting but potentially lucrative. Could it be that there are problems with the comparison between travel agents and real estate agents?

• Cost. At first, cost would seem to be a more important factor for real estate agents than travel agents, given how much money is involved. Yet money weighs in favor of real estate agents as well as against them. Both buyers and sellers stand to make more money if represented by real estate agents, who can puff up or negotiate down the price of a property.
• Knowledge. Consumers have shown themselves quite willing to do their own research for travel plans. The knowledge needed to handle real estate transactions is arguably much more daunting. Failing to dot all the i's and cross all the t's can lead to quite a real estate headache, even legal or tax problems. Meanwhile, the seller in the real estate market is usually an individual person; in the travel industry, the seller usually is a monolithic corporate giant like Delta or Disney. For the average individual, "branching out" into real estate by building up a wealth of knowledge on the subject may not repay the investment.
• Fun. Ultimately, planning your own travel can be fun: you learn about different places and get to imagine what each experience would be like. It's hard to see how selling or buying a house is fun in the same way. Sure, there are the exciting expectations for the future after the sale has closed. But the buyer and seller are still involved enough in the process even with a real estate agent that they aren't missing anything but the stress.

Looking to the Future of Real Estate and the Web

What will the future hold for real estate agents? The new website, zillow.com, founded by one of the founders of the travel website expedia.com, may point the way. Despite all the travel agent vs. real estate agent comparisons the site excited, it does not actually allow visitors to buy or sell real estate. At least for the moment, then, it does not affect real estate agents on the important issue of costs.

Yet zillow.com may pose a real challenge to real estate agents in the area of knowledge. As reported in the Los Angeles Times, the site aims to be for real estate what Kelley Blue Book is for automobiles: an easy way to find out the value of a property. Simply type in the address, and you get a number—even if the property is not on the market.

To be sure, many real estate agents quoted in the news scoffed at the machine-generated property values provided by the site. But the knowledge the internet offers buyers and sellers—knowledge once only available from real estate agents--will likely get better in the future. Will more knowledgeable buyers and sellers choose to go it alone? Will they just demand a better deal from real estate agents? Or will agents be able to justify their current services and fees?

One thing's likely: how real estate agents market themselves is going to get quite a bit more complicated.