How iBuying Proves The NYC Broker Indispensable
Why are agents so afraid of technology? To me, it possesses huge potential to enhance, not destroy, our business. Recently I participated on a panel of highly successful New York real estate agents and managers, at which the topic of iBuying arose. It came up during a larger conversation about technology in the residential real estate business and its potential to disintermediate the broker and make them obsolete. Several of my colleagues on the panel expressed their concern about this threat; one said she believes that in the age of technology “there is no loyalty anymore,” and that brokers in the majority of transactions could become obsolete. I strongly disagree; I believe that increased technology makes New York agents more indispensable than ever. Here’s why:
Inventory in our marketplace is often unique. I-buying has, till now, been spreading particularly fast in parts of California, Texas, and Arizona, especially Phoenix, which seems to be ground zero for ideas like this to prove themselves. These areas share a critical trait: lots of low cost, relatively similar homes which can be valued by sophisticated algorithms using square footage, location, and basic features to come up with pricing. Such algorithms become less and less functional as the product becomes more diverse. Manhattan, especially the co-op market, completely defies the categorizations on which such algorithms are based. A triple A building and a mediocre building may, and often do, stand literally right next to each other. Pre-war apartments may also differ enormously from floor to floor in size, in views, in detailing. One size never fits all here.
Co-ops by definition defy the iBuyer paradigm. It’s hard to imagine how Zillow or OpenDoor would have the time or expertise to assemble a Board package. There’s no algorithm for that! Plus the Board process makes a turnaround time of 90 days almost inevitable. That’s much too long for iBuyer companies which depend on a quick sale.
The wealthy live in a service economy, and they can teach us a thing or two. One reason the rich stay rich is that they have learned to spend their time doing what they do best, while delegating to other experts the things that THEY do best. That’s an essential ingredient of time management for everyone, and it explains why 87% of buyers, even those who begin seeking a home on their own, end up working with an agent.
New York is just too expensive. Even with the sort of mega-funding which companies such as Zillow and OpenDoor possess, homes in New York simply cost too much to make the paradigm workable. These companies will not be spending seven figures on a speculative purchase.
Buying or selling a home is a huge decision. It’s not like buying an airline ticket (and in any case high-end travel agents are coming back!) Agents also provide critical ancillary services – negotiating expertise, nuanced strategic thinking, and, yes, hand-holding. Most buyers and sellers become too emotionally involved to make great decisions on their own behalf. No substitute for a knowledgeable and reassuring voice exists online.
These points don’t mean to suggest that substantial areas of many national real estate markets won’t experience some disintermediation. We already see it in New York with lower-priced rentals. Inexpensive condos, more of a commodified product, will also be vulnerable to technology-driven sales. But overall, the luxury market will remain dependent on personal service providers. We are the trusted advisors of the real estate business, and that expert advice continues to be in demand.