In an article published in Forbes, Natalie Karayaneva wrote that Artificial Intelligence (AI) and blockchain technology are kicking the can of the real estate industry and real estate agents down the road faster and faster. In Karayaneva’s view, technology and the “I want it now” mantra are requiring that agents “transform.”
Digital real estate business models such as OpenDoor, RealEstateNow and ZillowOffers are examples of companies requiring such agent transformation, as is Compass. Compass’s traditional 6% listing fee now requires agents to manage renovations of properties listed with the company for sale. Agents work with sellers to discuss improvements that may increase home values. The company finances all agreed-upon, upfront renovation costs with zero-interest loans and then agents collect payments for those renovation services when the property closes. (This business model, financed by Softbank, helped to render Compass a recent $4.4B valuation.)
eXp, an agent owned, company gives agents incentives for attracting other agents to its firm as part of the company’s recruitment program. eXp’s proactive agents participate in revenue sharing and successful agents with eXp become company shareholders. With a current market cap of some $605M, eXp’s business model encourages network effects and rapid revenue growth.
Even though Glenn Sanford, eXp’s CEO, said he doesn’t think an agent’s role “doesn’t and won’t much change,” Suzy Truax, the Chair of eXp’s Agent Advisory Council said, “The industry will consolidate into the haves and have-nots. Those who do not embrace the technology wave will be crushed by it.”
During 2018, Millennials, the kings and queens of the “I want it now” mantra, purchased 40% of all homes. The more Millennials participate in real estate, the more new technology will exponentially increase its role in real estate transactions.
One technology likely to dominate real estate in the near future, according to Karayaneva, is blockchain. Its efficiencies and speed will “…dramatically change the roles of all intermediaries in the property buy and sell process.”
Richard Teed, the first founding partner with Compass and principal with Teed and Company, said, “Real estate is just one area where smart contracts will record just about everything there is to record.” All processes will be automated; all key data will be stored on secure and un-hack-able blockchain. No need for data to go back and forth among buyers, sellers, agents, title officers. No document mishandling or falsification. The county recorder’s offices will simply secure imitable authenticity of deeds and real estate agents will easily verify transactions in real time.
Karayaneva foresees at time in the not too distant future that agents will act more as “data miners” than as “traditional” real estate agents. Just as Bitcoin miners support the network on their mining software, “future agents and title agents will verify transactions and store data on blockchain networks…” Agents will receive network tokens as compensation for their work in a real estate ecosystem just as Bitcoin miners receive tokens as compensation for their work.
Such “crypto economic incentives,” according to Karayaneva, will encourage agents to become data miners. All that’s required for such a change is for decentralized blockchain storage to evolve for brokerages, banks and title companies.