If you want to change a system: address the system. Take it from where it all starts. Don’t fall into the fashion trap!
The pandemic has sped up the digitalization of real estate agencies and encouraged current players to rethink their offers. However, global transformation has not yet occurred, and most consider that real estate market is still late in adoption of digital and new technologies creating a gap between real estate professionals and market expectations.
We'll try to consider things from a different angle which might be qualified as harsh but tends in fact to be pragmatic not the least because nothing has come to date to really disrupt this market and populate a new vision. The present article focuses on residential real estate and not contech or smart building solutions.
A false diagnosis and the fashion trap
- Traditional agencies are Hybrid agencies
For a long time and still today, real estate agencies are seen as being the first responsible of late digitalization and are accused of staying in the dark ages. This postulate drives investments in the proptech ecosystem which fosters the belief that "traditional” real estate agencies still work with papers and pencils while, on the other side, we would have smart startup agencies coming with new models and digital methods.
Most traditional real estate agencies have adopted digital tools since 2000. Real estate professionals publish on listing portals, manage leads through CRMs connected to portals, offer rental management services, propose new services, etc. Physical agencies are in fact hybrid agencies. From an operational point of view, there are no big differences between "traditional" agencies and "startup" agencies.
What therefore makes the difference between traditional and startup? Reducing service fees by arguing injecting automation? What a strategy!
Lowering the price of a service is the oldest and most classical business strategy of the world and far from being an innovation. Automating a real estate agency will never be key to success even more when the ones you try to attack are already automated. Having in-house CRM solution or external CRM does not really change anything: agents manage clients with their CRM integrating automation. Automation in real estate agencies is therefore a poor value proposition to disrupt the market. The latter could be seen as arguable but how do you explain that startups with high automation always ends up increasing fees to finally revert to normal?
Then, what is key to success for a real estate agency? Just ask all the realtors, old or new, and they will all reply: salespeople. The biggest challenge of an agency is to attract and retain tremendous salespeople. So, the day we'll be able to clone a wonderful selling agent, we'll build a fantastic unicorn in real estate agency! This however is not possible…
- Semantic makes startup in real estate
Startups are just changing semantic. If you say that "you trigger alerts from your CRM and portals to generate contacts", you're a traditional agent but if you say that "you use a matching algorithm to generate leads", then you're a startup. It's funny to see that using of different words change perception and create an illusion of innovation in the collective unconscious. The most amazing is to see that clever people puts millions to crack the market in startup using the same good old methods of traditional agencies and then, fall into a fashion trap. Decreasing agency’s fees in a sustainable way based on automation is not viable since real estate agencies' operational costs consist mainly in external marketing costs.
Although we must honor all initiatives aiming at improving the industry, it shows that market is at saturation since it seems going in circles, generating poor ideas and focused on killing value instead of listening buyers and sellers calling for more added value and services. People wait for comprehensive information, enhancement services and reactivity.
Real estate is not late in digitalization but in experience
- The fragmentation of needs
Agencies are SMEs where the main goal is to find new clients, provide expertise and sell properties. They access to a very large pool of services and 3D solutions to promote their properties. Although technology and tools are available, the market is considered to be late in digitalization whereas we should consider that the market is late in building seamless experience.
A reason has also to be found in the landscape of services providers. Services' providers tackle a slice of the pie in an industry where building a seamless experience would require a global combination of services. This fragmentation prevents from building a global real estate experience since the agency would have to go for various layers of costs and solutions. In an industry driven by significant time gap between the mandate and the effectivity of transaction i.e. revenues, it would mean investing with the risk to be at losses. This however is not sustainable for small businesses.
- Selling a process vs selling a product
Fragmentation entails an increase of operational burden for agents whereas digital is said to simplify their organizations. It is not rare to see real estate agencies having opted for DIY solutions and having bought 3D camera which will finally end up in a closet…
The challenge for management is to embark the team in the adoption of new products since it triggers additional burden of work. Therefore, like all SMEs, real estate agencies need operational support and assistance to accelerate and consolidate services covering global needs.
Offering operational support is therefore an essential condition to start conceiving a significant change in the market.
Experience means UX design
Building a global experience in real estate implies tech and marketing replication to iterate on process, replying to new usage and reducing pain points. Even assuming an ideal world where real estate agencies would be fully equipped and able to offer a full content strategy, this would unfortunately not guarantee a higher performance. Marketing contents and products must be integrated in an optimized application to produce their full effect and meet users’ expectations.
Concretely, if a buyer has to click 3 times to reach the virtual tour from any listing from the listing, the impact of the product is reduced and it is likely that the buyer will not watch it. UX design must complement products to generate its entire effect, synergies and collect comprehensive data. Actors having the willingness to assist transformation in this industry, populate a new scheme and new usages must embrace the whole process.
Who can change the real estate market?
- Stop the bottom-up approach
An agency will not revolutionize the real estate market as it has not the power to secure the greatest number of buyers. Clearly, buyers and tenants are not obliged to deal with a specific real estate agency and will always search properties online without paying attention to the agency itself. Have you ever heard someone saying "I did not buy this beautiful home corresponding to my wish list because I wanted to buy with another agency?"
Pretending making a revolution implies gathering the greatest number of people. 90% of housing searches starts online meaning that buyers, sellers, agents prefer to execute their transactions through real estate portals. Even real estate startups must deal with experience, schemes and frameworks designed by listing portals. Thus, it seems logical to think that if any revolution has to happen, it will be driven by listing portals which have the capacity of powering experience at macro level and then, setting up new trends.
While the first generation of real estate portals has focused on bringing audience to real estate professionals, the new generation will build marketplace with transactional aspects, provide marketing content to agents as well as they will maintain stunning experience and collect comprehensive data. Since portals are where all starts, the industry should adopt a top-down approach to increase experience and reply to market expectations.
- The weakness of real estate portals
Real estate portals know that content is key. Virtual tours, 3D home staging, proper pictures with the right angle, adapted CTAs generate highest performance views and more leads on their platform. However, real estate portals are dependent on marketing contents provided by agencies themselves, thus preventing portals to take the next steps and create world-class customer experience.
Since users expect real estate portals to bring information on properties, the next generation of platforms will refocus on their primary role, i.e. a media providing comprehensive information about properties. Like Netflix in the entertainment industry, real estate portals will have to play an active role in content and information production, act like a reporter, strengthen their identity and populate new functionalities.
The future of real estate starts with real estate marketplaces. Empowering customer and agent experience is the direction.
If you want to change a system: address the system. Take it from where it all starts. Back to basics.