Former arbitrage trader, current team leader and new Inman contributor Jen Berbas speaks to the vital due diligence role real estate professionals play for consumers, even after Sitzer et al.
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In the aftermath of the decision in the Sitzer | Burnett commission lawsuit and the filing of additional high-profile legal disputes, a narrative is emerging that questions the necessity of Realtors in real estate transactions. It suggests that eliminating Realtors could streamline the market, ostensibly saving costs for sellers and buyers alike.
This article on CNN, published less than a week after the Sitzer | Burnett verdict was handed down, states, “Using a travel agent to buy a plane ticket or a stockbroker to trade equities seem like relics of the past.” It goes on to equate this to using a Realtor, stating that real estate is one of the few industries that has not been impacted by the internet in a way that has resulted in cost savings for the consumer.
The flawed logic behind the travel agent or stockbroker analogies
There is flawed logic here that a consumer without an understanding of the financial markets may not notice. It sounds obvious to evoke the free market as the basis of all things logical but stock markets work because every single share of IBM is just like every other share of IBM. They are fungible.
Commodities markets work because grains can be graded and standardized to a degree and then traded without regard to the specific harvest from an individual farm.
However, no property is just like another. Even in large condominium developments, there are differences in view, finish out or the floor a unit is on. So, while it sounds logical to evoke the free market as a reason we don’t need Realtors, in the end, consumers need an expert by their side to help them navigate the complexities of one of the largest transactions of their lives.
What is at the core of this narrative? A thought that real estate transactions should happen without Realtors’ involvement since the consumer can find homes on their own. There could be merit to this idea if we assume a buyer’s agent only opens doors once the buyer finds the property on the internet and if we assume all a seller’s agent does is put a sign in the yard and put property details into an online database such as an MLS.
At the most basic level, a real estate transaction can occur without an experienced agent providing a high-touch service. There are many models currently in use providing flat fee services to enter properties into the MLS for sellers and buyers who purchase homes daily without representation as they believe they can find the home themselves and do not seek further guidance.
What do Realtors know that Zillow doesn’t?
Where that logic starts to fall short is when we get into the details of real estate. Is it important to a buyer to know that certain neighborhoods have septic systems, and require specific types of inspections to understand the cost of future maintenance? Is it important to a buyer to know where to find the relevant city codes for any future development on their property? Should they know what pending code changes being discussed at the city level could impact the value of their property by allowing more or less development than currently exists?
A buyer armed with a list of the necessary due diligence based on their location can have a better understanding of the possibility of costly repairs that await them post-closing. As in any field, using a seasoned professional to help guide you through the process can help you learn what you never would have thought to ask.
The suggestion that Realtors are no longer necessary overlooks the intricate, personalized service they provide that is unique to each buyer’s need and every property they prepare for the market. Experienced Realtors are more than mere door openers; they’re local consultants with an extensive understanding of neighborhoods, due diligence and market nuances that algorithms and apps cannot replicate.
A better analogy? Realtors are more like CPAs and attorneys
Comparing Realtors to CPAs and attorneys offers a better perspective than the comparison to travel agents and stock brokers. Like tax preparation and estate planning, real estate transactions can be complex and fraught with pitfalls that seasoned professionals are more likely to navigate effectively. These agents save clients from costly mistakes, akin to a CPA who can help mitigate taxes with effective planning.
Real estate has a “last mile” problem that will likely prevent it from becoming a standardized exchange commodity. Each home is unique, with features and quirks that defy one-size-fits-all solutions.
In essence, the role of the Realtor is not fading; it’s evolving. There will always be a place for local expertise, for those consultants who know the lay of the land.
As the financial markets and tax preparation industries have shown us, developments in technological efficiencies will not always equate to a lack of need for expert advice. The same holds true for real estate.
Jen Berbas is the team lead of the Berbas Group in Austin, Texas. She transitioned from a long career as a statistical arbitrage trader to a role in operations, where she discovered her passion for using processes to improve client experiences. Connect with her on Instagram and Linkedin.
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