I recently wrote about companies that are going through identity crises. Are they real estate companies or are they technology companies? Regardless, the big name real estate disruptors have changed the industry. Today’s home buyers are in control of their home search. Additionally, agent commissions are viewed much differently than they have been in the past. But the recent trend of real estate companies touting themselves as technology companies may be a signal that large real estate brokerages want more change. But are they mistaking the map for the territory?
Last November, the real estate brokerage Compass made headlines because of its ability to raise massive capital investments. In a Compass press release, the company announced raising $100 million in capital (Compass Raises $100 Million in New Investment Round; prnewswire.com; November 8, 2017). The colossal investment comes one year after raising $75 million in capital. The capital is to be used for expanding brokerage offices in new markets as well as “building new technology.”
Compass’ vision is to be “the world’s largest real estate platform.” The press release quoted an investor saying, “Compass has proven that its technologically advanced platform is incredibly attractive to the industry’s top agents...Their position at the intersection of technology and real estate gives them the unique opportunity to be the single largest holder of real estate data, ushering in a new realm of possibilities for agents and clients alike.”
In a similar move, RE/MAX announced this week of its purchase of booj, a technology company. In a February 26th RE/MAX press release, the acquisition is touted as means to “…deliver core technology solutions designed for and with RE/MAX affiliates. The objective: technology platforms that create a distinct competitive edge for RE/MAX brokerages and agents…” (RE/MAX Takes Bold Step to Provide Best-in-Class Technology; remax.com).
It would seem that recent industry moves may indicate that real estate brokers would prefer to be technology companies. However, the latest trend may be more about generating revenue, raising capital and investor relations than it is about selling homes.
Liz Chapman’s report on the matter is revealing (Tech Startup or Real-Estate Broker? Fidelity Values Compass at $2 Billion; barrons.com; November 8, 2017). Chapman likens Compass to Redfin saying that the company “is almost certainly unprofitable,” although generating massive revenue. In her reporting, Chapman quoted a seasoned real estate agent who was briefly with Compass, “The technology was mostly marketing tools…It was sleek, but I can’t say it was different from anything else out there.”
Although many home buyers and sellers turn to the internet for housing information, they don’t wholly rely on technology when choosing real estate services. According to the National Association of Realtors 2017 Profile of Home Buyers and Sellers (nar.realtor), a majority of home buyers and sellers hired agents with whom they worked in the past, or were referred by friends and family.
The problem with technology is that humans are the ghosts in the machine. The human element, contrary to technology, is erratic, messy, and highly subjective. The human element remains at the core of home buying and selling.
Many consumers recognize that tech and the internet are tools that are often used as gimmicks to get their business. Technology is not a substitute for an experienced real estate professional who can also empathize along the home buying/selling process. The turn to tech only underscores that residential real estate is still a personal business.