One of the more peculiar innovations within the last decade was the launch of Carvana, an online used car dealership that took the traditional dealer out of the picture. With Carvana, buyers can shop for and purchase a car without speaking to anyone or spending hours at a dealership.
Carvana will even deliver the car to your doorstep and take the car back within seven days if you don’t like it.
So, if Carvana’s figured out how to turn a traditional sales process upside down through full digitization, why can’t real estate brokerages pull off the same thing with homes?
It seems like things are moving in that direction. In March 2020, just before the pandemic began, I wrote on the changing role of real estate agents. I stated that technology, increased consumer access to real estate data, and the relative purchasing independence of Millennials and Gen Zs will reduce the power a real estate agent has in any given transaction.
The necessity of a real estate agent has decreased with every passing year. Companies like Zillow, Redfin, and others have fully recognized this—and now Rocket Companies, the parent company of Rocket Mortgage, has entered the fray. Last week, Rocket Companies announced Rocket Homes.
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What is Rocket Homes?
Rocket Homes is a one-stop shop for someone’s entire real estate adventure, whether they’re buying or selling a home.
According to Rocket’s press release, they’re pulling together a full suite of services that include “credit reporting, home search, the industry-leading ForSaleByOwner.com process, on-staff real estate agents, a nationwide network of trusted real estate professionals, iBuying services to provide a back-up offer to sellers—along with direct connections to Rocket Mortgage, America’s largest mortgage lender, and Amrock, a premier closing and settlement services provider.”
While not directly eliminating real estate agents, Rocket will be hiring in-house agents and connecting customers with local real estate professionals. However, Rocket will be reducing commissions from the average 3% threshold to just 1.5%.
So, if an agent sells a $200,000 home, they’ll collect $3,000, not the traditional $6,000.
So far, this Redfin-like structure simply seems like a way to standardize the transaction process. But Rocket Homes’ in-house agents will be working from a centralized office located in Detroit—meaning this will be nothing like traditional real estate.
Furthermore, newcomer agents are typically trained by brokerages to talk “For Sale By Owner” (FSBO) sellers out of doing it on their own. And experienced agents know that there often are a number of benefits to working with a professional. For example, FSBO homes aren’t typically listed on the multiple listing service (MLS), and many sellers don’t understand that homes require specific marketing tactics and photos need to be professional.
But in a hot real estate market—and thanks the existence of home-search platforms like Zillow—homes are selling regardless of whether a listing agent is present or not. Rocket Homes is capitalizing on this by openly encouraging clients to sell their homes by themselves.
By providing real-time data and insights and leveraging its partnership with ForSaleByOwner.com, Rocket Homes will make it easier than ever for FSBO sellers to accomplish the arduous task of selling a home on their own.
That is a direct blow to real estate agents who work for traditional brokerages.
Plus, Rocket is going to guarantee every home’s sale within its platform through its iBuyer program. The intended goal is to eliminate the need for buyers who are also selling their home to add a contingency clause to their offers. These clauses enable buyers to put the home they’re buying on hold until they’re able to sell—and in a hot real estate market like the one we’re in currently, those types of offers are unattractive to sellers.
Removing contingency clauses and guaranteeing the sale of someone’s home is something real estate agents and brokerages haven’t been able to offer.
All in all, while Rocket Homes won’t steal everyone’s market share overnight, this is certainly the groundwork towards a digital-centric, agent-less transaction—and an indication that modern agents may need to consider adjusting their business strategy to ensure success.
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How should real estate agents respond?
The future is uncertain. We’re still years away from agent job security being truly threatened by these new programs, but traditional brokerages are paying attention and need to start making adjustments.
Keller Williams has gone on the defensive by enhancing its technological capabilities and protecting real estate data that it receives from clients. KW Command, the Keller Cloud, and a robust agent training program are prime examples of a traditional brokerage fighting for market share by becoming increasingly consumer-centric in an industry that’s known historically being skewed towards agents.
But the real question is whether brokerages will be able to withstand the extreme technological advances of much larger, centralized companies like Rocket and Zillow that invest 10 times the amount of money on digital services.
Real estate is a local business, sure. Homes are best toured before purchasing, absolutely. But it would be naïve to assume that real estate agents will always be required to open the door when it is just as easy for a company to extend its door unlocking apps to customers. Agents should consider: What can I offer that a digital service cannot? The answer to that may lead to the right strategy for weathering this industry-wide change.
This decade will be interesting to watch.