This is an ongoing series of articles that cover the topics and insights shared during the three-day Real Conf 2021 hosted by Adfenix. The following article summarizes the keynote discussion with Per Hedenmark on Day 1 Session 1 of the conference.
Per Hedenmark is the Founder and CEO of Norban, a proptech company that helps sellers through an integrated marketplace and brokerage service. It is the first real-estate hybrid agency in Scandinavia. Per’s topic will cover the overriding question:
Who are the players? What are their characteristics?
- Traditional agents - they have been around for a long time, and they represent the non-digital side of the digital landscape today.
- Portals - these are websites where different real estate agencies collect listings and benefit from traffic that they may not be able to get on their own. Here, the commission model differs - either it’s the end customer that pays the portal or the agent. In fact, in Australia and Sweden, it’s usually the customer who pays the portals while the rest of the world sees agencies footing the bill.
- Affiliates - For the purposes of this discussion, an affiliate is a company that sends leads to agencies, specializing on getting traffic based on what people search for. They can be likened to a layer between the customer and the agency.
- Online agents - or agencies without agents; these are the more DIY professionals who often work on a really low commission, working with a lot of digital components
- Social media - a huge player in the industry, as real estate agents can also utilize social media to get around portals to get their traffic
- Hybrid agents - a fairly new player, hybrid agents are a combination of an online agent and digital components.
- iBuyers and power buyers - a major trend in the last five years. An iBuyer is a company that buys the home or property directly from the customer, no agency involved, while power buyers are more or less the same, except they place more emphasis on the buyer, providing them with muscle power to make a purchase, and once the purchase is made, the power buyer also helps them make the sale.
What are the threats?
- For the portals - there are many. Although portals had a good start, generating a lot of money and making their presence known in the industry, things are starting to change, owing to two factors:
- Social media - agencies or agents can easily bypass portals by heading straight to social media platforms themselves, gathering traffic from there and diverting them to their listings, which is the whole business model of a portal.
- Reaction - closing in and focusing on the transaction side of business in the last few years reveals that portals do feel threatened, and it also explains why the largest portal, Zillow, started branching out with their own iBuyer in the first place. (Zillow went on to close up its iBuyer company in November 2021).
- For online agents - with the world around us being so steeped in digital, the idea of hiring a traditional agent might seem redundant. Everything else is ordered online, why not an online agent? But online agents face some serious issues too:
- While online agents do minimize the stresses of handling transactions, agreements and paperwork, they don’t necessarily follow through with the negotiation, bidding processes, or viewings, if any. It seems unlikely that the assurance of a low commission alone would convince customers to step into such a huge investment and not have a reliable player - the agent as a person - to walk them step by step to the end.
- There hasn’t been any concrete proof supporting the idea that online agents have the ability to crack into big city markets. Their strength is evident on the outskirts, away from the cities, but much less so in the urban or central areas.
- For the hybrid agents - In theory, hybrid agents are promising, combining the best components of human and digital ability. However, potential issues arise when we ask, ‘how digital are they?’ The digital components help resolve efficiency and system issues with tools such as CRM, internal system etc. But those do not necessarily address problems that arise on the customer’s side and to be a good digital player, a true emphasis has to be placed on the client, which currently, hybrid agents don’t seem to do just yet.
- For the iBuyers/power buyers - This can be broken down into three parts:
- Massively capital intensive as a business model - you need to either have venture capital coming in, or banks, or a combination of the two, but in a post-Covid world where potential for a down market is high, the resulting effects if the market goes down by 30 to 50% could be profound, and a huge threat to this business model.
- Dependent on high commission markets - this business model doesn’t pay commission because they buy a property without having to pay anyone else, and sell later on. However, this dependency on a high commission market is also foreboding, especially in places like Sweden, where the commission market is already very low compared to the rest of the world.
It’s important to keep in mind that circumstances differ from place to place. While there are many good startups in Scandinavia, the traditional agency setting still has a strong footing because of its low commission. The UK and US are ahead in terms of having more room to host more players that go cheaper, but in Scandinavia it’s difficult to go any lower.
The future of real estate seems bound to see more of the likes of the hybrid agent - combining the humanizing aspect of agents with all the tech prowess of digital technologies. The goal is to have the digital side truly focus on customer needs, create transparency, promote efficiency and cut costs. There is, however, the overwhelming reality that the role of agents, as they adapt to the digital landscape, is here to stay.
To sum up :
- Real estate today features a host of players, each with their own set of dilemmas in the digital landscape.
- These players are: traditional agents, portals, affiliates, online agents, social media, hybrid agents, iBuyers and power buyers.
- Each player faces a number of serious threats to their mode of business, ranging from competition from other players in the field, inflated capital requirements, inability to catch up to modern consumer trends and buying behavior, or digital incapacity to truly resolve the many pain points of a customer’s experience in their home buying/selling journey.
About Real Conf.
Real Conf 2021 is a three-day virtual event exploring ways that agencies and brokerages can leverage the power of digital to increase business opportunities, elevate the brand, and empower agents to deliver success. The conference features hundreds of invaluable insight from keynote speakers, panel discussions and case studies from experts in the field.
All 15 sessions with 25 speakers are now available to stream on-demand.
Gain full access to the stream and watch the sessions in their entirety by signing up here: https://www.adfenix.com/real-conf
