From Online Listings to Brokerage... A New Model?

Companies have been trying to disrupt the traditional real estate brokerage model for as long as I can remember. Most, if not all, have failed. Others have created behemoths, focused on listings that have truly changed the way business is done, think Zillow. But no one has truly created a new real estate brokerage model by using technology at its foundation. Now that hundreds of millions of dollars are being invested in real estate tech, will anyone be able to create a new model by combining both listings and brokerage?

Two sites that are taking on the challenge of building successful brokerage businesses in the residential and commercial sectors from a listings and tech foundation are:

Compass.com/about

TheSquareFoot.com/about

Notice the similarity in their language. Notice how technology serves as the cornerstone of their entire business model, and notice how they each clearly articulate the advantages of their company to their customers (Compass for homebuyers and renters) and (TheSquareFoot for commercial tenants).

What's driving this trend in the real estate industry? Is it the influx of tech entrepreneurs now descending on the real estate industry? Or is it reflective of the massive paradigm shifts taking place in the business world overall?

If you look at other industries such as insurance, hotels, banking, mortgages, autos, and more, online listings and online shopping have become the norm. What started in the consumer sector is now rapidly expanding to the business-to-business sector. Search for anything and you will most likely find a website that lists all of the options and pricing along with the ability to purchase directly on their site. Even Google, Facebook and Instagram are now following Amazon's strategy of a one-button push to purchase on their platforms.

With all of this information online, today's consumer is more sophisticated and knowledgeable than ever. They want to be able to shop on their own and narrow down their choices. Everything is flat. Everything is searchable.

Here are some of the more successful examples of how you shop, compare and purchase online ...

Amazon.com

Lendingclub.com

QuickenLoans.com

Esurance.com

Expedia.com

Overstock.com

Orbitz.com

Travelocity.com

Zenefits.com 

But what about real estate?

It was only a matter of time until all real estate space would be available for viewing, comparing, and sharing. Zillow and Trulia have built the first massive open MLS. Others have since followed and are fighting for market share as well (home.com). Listings, listings and more listings.

Many other sites are doing the same in commercial… LoopNet42floorsOfficespaceCommercial Search,  Property LineRealMassive, and Catylist.

It makes sense. As a small business owner myself, I know what type of space I want and where. I want the ability to do my own homework no different than how I shop for anything and everything on Amazon.com

However, the key point here is that I also know that I don't have the expertise to negotiate with a landlord or home seller and make the best decisions on consummating a deal. There is simply too much money at stake, along with my business survival (and my marriage:) depending on me not F'ng up this decision. That's where Compass and TheSquareFoot models make sense. Once I see what I like, I need a living, breathing, experienced pro to help me navigate the process. After all, buying a home or renting office space is not the same as buying a book, phone, or even shopping for a mortgage.

But who is the market for this type of service? Is it tech savvy CEO's who are comfortable navigating through the web for space options? Is it young professionals who have grown up online? Or in time, will it just become part of the research and due diligence process that every real estate decision maker will incorporate into his or her search process?

With Compass and TheSquareFoot, I do think this trend of online listings to brokerage is something that will only grow in the future, and I bet therefore that both companies will build sustainable, viable businesses. Is it nationally scalable? Well, if they can do it in NY, chances are they can do it anywhere.

So, maybe the answer to the question of whether or not anyone will truly ever disrupt the real estate brokerage business is NO! But, that doesn't mean there won't be many exciting, unique and viable businesses that are built like Compass and TheSquareFoot that will use technology as the cornerstone to their business, without ever forgetting that it's a people business and always will be. That's why they call it "brokerage" cause you still need the "broker".

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By Michael Beckerman
Founder & CEO | The News Funnel
More posts by Michael here