Soldier to Soldier Hawaii

Are Real Estate Agents Becoming Obsolete?

Hey guys, it's your friend Coby here. Have 
you guys ever wondered if the job of being a   real estate agent is actually necessary? Or if 
Real Estate Agents will Become Obsolete? Well,   today we are going to answer those questions. 
These seemingly straightforward questions are   tough to answer because a big problem arises: 
getting unbiased data is challenging. Most of the   articles written, videos made, or research done on 
this question have been done by real estate firms,   individual realtors, or the national association 
of realtors.

Do you see the problem here? Most   people talking about whether realtors will 
be obsolete have a conflict of interest on   the topic. Their livelihood depends on 
realtors staying relevant. It’s like   asking oil execs if clean energy will replace 
fossil fuels. Regardless of what the data says,   the oil companies will say ohh no, clean 
energy won’t replace oil because of X reason, Y   reason, and Z reason. People are known to twist 
the truth if it helps them. For example, we now   know that exon mobile scientists predicted global 
warming with precise accuracy in the 70s, yet Exon   proceeded to push back against the movement to 
clean energy publicly for decades afterwards.  Now I’m not saying that NAR or the National 
Association of Realtors is hiding some study   about the demise of realtors; I’m just saying that 
when we address a question like this one, we need   to do so in an unbiased way.

So today, I am going 
to present you with research not just from biased   sources but sources that don’t have a dog in 
the fight, and then based on this information,   you can draw your own conclusions. Now you might 
be wondering what my biases are going into this,   and I’ll tell you. Professionally I’ve worked 
In the auto industry, at an investment bank,   and in management consulting. I’ve bought 
one house, in which I used a realtor,   and I’ve renovated that house. So those 
are all of my biases. If you like unbiased,   well-researched videos about topics in business 
and finance, you should definitely subscribe, I’ve   made videos about the gender pay gap, the pros 
and cons of cryptocurrency, and lots of others,   and in all of them, I do my very best to present 
the data in an unbiased, educational and hopefully   entertaining way. Videos like this take a lot of 
time and effort to produce, and by subscribing,   you are making it possible for me to continue 
doing this.

And if you are like dude, I’ve only   seen a minute of your video, and you want me to 
subscribe? I totally understand, and I encourage   you to watch until the end of the video and decide 
if you’d like to subscribe. And speaking of the   rest of the video, here’s the game plan, We are 
going to talk about each threat to the job of a   realtor and if there’s a reason why that threat 
will fail, then we will talk about the barriers   that protect realtors from becoming obsolete and 
if those barriers will stay around over the next   couple of decades, So with that road map set let’s 
jump into the threats to the Realtor Profession.  Threat 1: I Buyers. The Threat of I buyers is 
often the first thing that comes up when asking   the question, will real estate agents become 
obsolete? I-buyers are companies like Zillow,   Redfin, Open Door, and Offerpad, who use 
algorithms to guess the value of a home and then   extend a cash offer to the homeowner.

Although 
these companies get big headlines on websites   like CNBC and the Wall Street Journal, their 
actual market presence is fairly small. I buyers   only account for about 1.5% of home purchases in 
the US. So why is this the first thing that comes   up when discussing the destruction of the real 
estate profession? Well, I think it’s because it’s   a tremendous pro-real estate agent case study. 
Many Ibuying programs have not done very well,   and almost none are profitable. Zillow famously 
shut down its home flipping program after losing   881 million dollars in 2021. Although Zillow has 
recently started offering instant cash offers for   people's homes again, Opendoor facilitates the 
transaction, and Zillow just gets a referral   fee when a customer sells to Opendoor. But 
the point is that the argument that “people   are better than algorithms” looks obvious when 
you see colossal companies like Zillow and Open   door that are unable to design algorithms that 
can correctly estimate home values in such a   way as to make a consistent profit. These business 
failures add credence to the safety of the real   estate profession. But just as it’s probably 
unfair to say due to one company’s defeat,   the realtor profession is safe, it is also 
unfair to say I-buyers will never have a   significant stake in the real estate industry. 
For comparison, in the automobile industry,   Even as recently as 10 years ago, Electric 
vehicles had less than a half percent% share   of the US automobile market; in 2023, that 
number is about 10%, and projections show it   climbing exponentially into the future.

There’s a 
real possibility that these companies will design   an algorithm that can be competitive in the real 
estate market and when they do, the ease of the   transaction will lead to I buyers building a 
strong market presence. But this threat only   really becomes realized if artificial intelligence 
and predictive modeling takes large steps forward. But, to be fair to the realtors out there. 
I-buying will never threaten realtors who work   with high-net-worth individuals and luxury 
real estate. Ibuying programs are aimed at   middle-class and starter homes that are similar 
to one another. Once you get into the realm of   multi-million dollar homes, the value offered by 
Ibuyer technology disappears. It makes sense to   make an algorithm guess prices for 800,000 homes, 
but the competitive advantage of that technology   falls apart when there are fewer homes with 
more differentiating features. So to review   what we’ve learned about IBuyer, they could pose a 
threat to the realtor who sells starter homes and   generic properties in medium-density towns.

But, 
it will not get anywhere close to threatening the   livelihood of the realtor in NY or LA selling 
million-dollar apartments or beachfront homes. But while the news focuses on the headlines 
of companies buying up properties because   they are cool and clickable, they don’t talk 
about how many of these companies are quietly   offering lower-commission realtor services than 
traditional real estate agents. For example,   you can use Redfin as your seller agent for 
just a 1-2% fee 1. This fee is about a third   to half of the traditional 3% fee that sellers' 
agents usually request. This 1%-2% difference can   save thousands of dollars on every sale. And if 
both the buyer and seller use Redfin’s service,   you would save 3-4% of the home's value and still 
get real estate agent-like services.

It’s pretty   easy to see how these savings could lead to a 
lot of cost-conscious consumers adopting this   technology, and this is shown in Redfin’s 
growth numbers. Over the last five years,   Redfin’s revenue has 5X’d. It’s not unrealistic 
to see that with such competitive pricing,   Redfin or other similar companies 
like Homie could grow to account   for a reputable 10 or 20% of the 
market over the next several decades. When you think of real estate agents 
becoming obsolete, it makes sense to   think of tech companies replacing them, but 
there is actually a more concerning simple   macroeconomic trend that could lead to a decline 
in the realtor as a profession, and that’s the   oversaturation of real estate agents.

Let’s 
look at some numbers. Over the past 3 decades,   the number of real estate agents has skyrocketed, 
going from 766,000 in 2000 to nearly 1.5 million   in 2020. The growth of realtors has outpaced the 
growth of the united states population by a factor   of 4. In the last two decades, we’ve seen a 39 and 
36% increases in the number of real estate agents;   this level of growth is just not sustainable. 
At a certain point, there will become too many   realtors for the number of homes that are sold 
each year in the US.

Now you might be thinking,   well, even if the growth of realtors is outpacing 
the population growth of the united states, that’s   ok if people buy and sell homes more and more 
often. And you would be right, except according   to NAR, we are actually seeing the opposite thing 
happen. People are staying in their houses for lon   ger. On average, people buy a home every nine 
years compared to every six years in 2007. Now   does any of this information mean that real estate 
agents will go extinct? Frankly, I don’t think so,   I just think you will see the growth of the real 
estate profession slow and people will only stay   in real estate if they are really good at it.

And 
in my opinion, this culling of the industry would   actually be a really good thing. Good real estate 
agents are amazing tools for home buyers and   sellers. Through amazing photos, good negotiating 
and pricing a home properly, they can help sellers   make more and buyers get the best price even 
when accounting for their commission. On average,   FSBO homes bring in between 5.5% and 26% less 
than when using a listing agent so people usually   aren’t saving much and sometimes even lose money 
when doing FSBO when compared to just using an   agent.

But as the real estate industry becomes 
more competitive, Bad agents, lazy agents, or just   not top-notch agents who don’t bring all those 
benefits to their clients will be forced out of   the industry. This would actually be a net benefit 
to everyone who wants a top-notch experience when   buying a home. So will the oversaturation of 
real estate agents make them obsolete? No,   probably not, but it will make the average agent 
step up their game to attract buyers and sellers. If you are wondering if smart contracts 
using blockchain technology will make   realtors obsolete Most likely, smart contracts 
will just reduce the amount of money and time   spent on closing costs. Yes, the realtor 
does help with paperwork so some people   may choose to use smart contracts and go 
it their own, but if realtors pass the   time and cost savings of smart contracts on to 
their clients, they will keep their clientele.

In my opinion, the greatest risk to 
real estate agents is not I buyers,   it’s not a rise in for sale by owner, it’s not 
smart contracts, it’s A tech company like Zillow   or Redfin using technology to act as the real 
estate agent and facilitating the preparation,   listing, negotiating, and closing of home sales 
for less money. But even this “threat” isn’t   much of a threat at this point. Despite their 
presence in our minds, companies like Zillow,   Open Door, and Redfin still have a minuscule 
part of the pie when it comes to revenue from   home sales. So with all this research, It seems 
like the profession of real estate agent is pretty   safe for the foreseeable future. Will the number 
of realtors continue to increase at the breakneck   pace of the last decade? I don’t think so I think 
we will see a slowing in that regard, but unless   a major entrant can really shake things up, the 
momentum of people using agents to buy and sell   their homes will likely keep agents as a central 
role in the real estate industry for decades to   come.

But if you have a source that proves this 
wrong, I’d love to see it. If you think I missed   something in my analysis, feel free to tell me 
what I missed in the comments. I’m not perfect,   and no one knows what will happen in the future, 
so I’d love to see any information you think would   add context to this case. Thank you, guys, so much 
for watching. If you are still here right now,   you probably liked this video or at least found 
it informative, and I bet you like learning about   the world of business, so if you want a weekly 
well-researched video like this one, subscribe;   I promise you won’t regret it. Thank you again 
for watching, and I’ll see you next time..

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