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From Pocket Listings to MLS to Artificial Intelligence. The Future of Real Estate

eye-scanOh, my have things changed. The simple process of buying a house 50 years ago is nothing like it is today and I can say with 100% certainty, that in 20 years it will be unrecognizable from today’s process. Right now hundreds, if not thousands of technology companies are vying to be the Uber of real estate. But is eliminating the Realtor the right decision or is the answer going to be a combination of providing better search functionality to potential home buyers with specific Realtor insights? As they say, nothing is as constant as change and today change is happening faster than we could have ever imagined. Consider the widely held model of exponential growth. It goes something like this. If I took a hundred steps from my bedside table (each step being about 3 feet), I might end up in the middle of the street, but if I took a hundred steps, where each one was twice as big as the previous step, I might end up on the moon. You get my drift.
The business of real estate sales essentially got its start the moment someone discovered that they could make money brokering a deal between a willing buyer and seller. Back in those early days there was no centralized listing service. A brokerage was entrusted to sell a home and a very basic listing agreement was drawn up together with a rudimentary information sheet containing the basic facts of the house. Brokerages put advertisements in local newspapers and carried these sheets around with them. This is the origin of the term ‘pocket listing’. Buyers found homes the old-fashioned way; they would search the want ads or drive around town looking for a for sale sign. The system worked. It wasn’t efficient but it was all we had and I am always reminded of old school real estate when I watch the holiday classic “its a Wonderful Life”.
Move the needle ahead 50 years and the search is a lot different. We have the Multiple Listing Service now and sharing of listings is much easier. Agents have access to homes not just across any city but around the world. It really wasn’t that long ago when a buyer would call an agent and tell them they wanted to buy a house. The Realtor would type in a few parameters and would have access to several homes that met a client’s needs. Then the internet altered the face of real estate sales for ever. Search was opened up to the consumers in ways we never imagined. Today’s buyer can look at a home on the other side of the world and take a 3D tour. They can walk the neighbourhood from the comfort of their sofa and conduct the transaction from a smart phone. Today the Realtor’s role has also shifted from house finder to deal negotiator, marketer, stager and advisor. Where is it likely to go next?
Now that Tesla cars don’t need drivers anymore could the Realtor be removed from the real estate transaction altogether? It’s not that far-fetched. Consider this example; You are a young man preparing to go out for the evening. Your phone can already tell you which bars have the most girls because an eye scanner at the door has already calculated places to go to meet single women. At the bar a chemistry app has alerted you to a perfect match for you based on habits, education, social status and hobbies. You hit it off. After a few months of dating, the internet realizes that you two are a perfect match. You are buying two of everything…movie tickets, trips and dinners. Based on geo tracking, bots already know that you sleep over at her place 4 nights a week and based on the TV shows that you watch and the things you shop for algorithms have determined the style of home or apartment you are likely to gravitate toward. The internet knows how much your combined income can afford and in no time Artie, the artificial intelligence realtor bot emails you about the perfect home or condo. It’s an easy commute to work and you are pre approved for the loan. All you have to do is hit accept and the movers will show up in 30 days, pack your stuff and move you into your new home. Unlikely? Frankly we are already there. The tools and technology are already in place. Predictive marketing is widely practiced around the world. So what is stopping the internet from making this a reality? The answer is simple… Humans. Humans won’t take advice from a computer. Sure, maybe if you are on the space shuttle jetting around in space, you might take the advice of a computer, but here on earth, searching for a home? Nope. At least not yet.
So, what are Realtors likely to expect over the next 20 years? I can’t think that far away but it might be easier to look forward 5 years. I think it is fair to say that for the next 5 years, relationships and service will still rule the real estate transaction. People will gravitate towards the Realtor who knows the market and has experience and understanding. We will start to see some shifts in the way people live, smaller homes, co-owning, live/work, and perhaps people will live further away and take the autonomous bus, complete with work stations, into the city every couple of days. The public will continue to have more and more access to housing information, such as school districts and other neighbourhood statistics but few will have the ability or time to process it all. All the bugs of artificial intelligence and predictive marketing will be ironed out, but people will still need a lot of consulting around the home purchase or sale. Lastly, buying or selling a home will remain the single largest and most complicated transaction of most people’s lives and a skilled intervener will be paramount to the equation. The Realtor who can unlock the most helpful information will excel and those not willing to push the boundaries will wilt away. I love to think about this stuff.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association . The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE


Commission Discussion 101

commissionGenerally I have done my best to stay away from the great commission debate. In a lot of ways its kind of a moot point. If you are a seller you can pretty much pay whatever you want. You can even pay nothing and sell your home yourself. But a few weeks ago I was lucky enough to have one of our top agents at my Mastermind session and he made a point that has really stuck with me. He said that in his experience 25% of the people he meets never talk about commission. They completely understand the value he brings to the table and are willing to pay for his insights, experience and market understanding. Then there is another 25% who see little value in his offering. These people firmly believe that mls is the only thing they need to get a home sold and will list with the person who will do it for the lowest commission. Usually they are disappointed in the outcome and statistics have proven that on average, if they do sell the home themselves, they receive 13% less than they could have by using a Realtor. Then there’s the other 50%. That middle group that is essentially your battleground. These are the people who you need to prove your value to.
So, what is your value proposition? We hear about it a lot but if you were put on the spot, could you adequately explain why you deserve the commission you want? I’ve been at it long enough to know what my value is. I have practised it over and over and over again. I know how to deliver it in a way that doesn’t warrant a response. There is no discussion, no debate, no counter proposal. It’s on the table. Lets move on and sign up this listing. Of course you can get easily pulled back into the debate but you have to be resolute in the discussion. Of course you won’t win them all especially when a potential seller says that another agent will list their house for less and supply the same level of service. When that happens my response goes something like this;
“I appreciate the choices that exist for you, and across every good or service that exists there are several price points. You can buy a $20k car or a $50k car. Both will get you from A to B. But the cheaper model may take more time. It may choose a route that is bumpy or unpaved, the radio only gets one AM channel and the seats are uncomfortable. Yes, you arrive at your destination but the experience in getting there was unpleasant. Like the better car, the experience you get with me will be unparalleled. I know where I am going and I know how to get there based on my many years of experience. My understanding of the conditions in the road play an important role in determining strategy for arriving at our destination quickly and successfully. In addition, my service has no chance of a breakdown. My team is highly tuned and able to anticipate and solve every problem and the car that you drive will look its very best throughout the journey”.
The debate is often easier when the difference in commission rates is larger but stories and comparisons always work the best and I believe it is fair to say that every person who opted for the cheaper item or service, whether it be a car or computer, lawn care or renovator was disappointed in their decision.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association . The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE


The Top 1% of Real Estate Agents in Toronto (2017 Addition)

Nearly five years ago I wrote a blog post where I researched the number of agents at the Toronto Real Estate Board and calculated the number of deals that they did. Back then there were 34,000 Realtors and the statistics were pretty interesting. You can see the original post here. Over the years, that post has been consistently the one that has received the most views. I have had many people repost it or use it in their own research and it has been the source for information across many boards in Canada. Those same people inevitably ask when I planned to revise those statistics and until now it hasn’t been much of a priority.
Five years ago I had a much different view of the Realtor landscape. It was time for me to set the record straight. Understanding who your competition is and how much work they do will invariably tell you a couple of things. 1. If I’m prepared to put in the effort, this is how many deals I am likely to make. 2. If on the other hand I am satisfied to use my ability to sell the odd house to supplement my income then this is what my competition is up to. Have a look at the chart above. It’s a little different that the bar graphs from my previous post.
As you would imagine, the number of agents has increased from 34,000 to over 46,000. That’s an increase of 35%. So what are those extra 12,000 agents doing out there? Well for one, the number of agents who have not done a deal in the last year has nearly doubled. Now this number is not completely accurate because there are a lot of agents out there that are doing rental deals, in fact I have talked to many who are making a good living on rentals. Never the less selling homes or condos has become increasingly more competitive. Consider that in 2012 TREB recorded about 86,000 sales. This year we should realistically achieve about 110,000 sales or an 18% increase in sales with a 35% increase in agents.
Another interesting shift is the way we do business. Five years ago there were only 7 agents who did over 200 transactions. Today that has more than doubled to 15. 39 agents sold between 100 and 200 homes in 2012, today 50 agents achieved that goal. This, of course is due to the wide acceptance of teams and the new sub-brokerage model where a successful realtor is incorporating as a sub-brokerage of their master brokerage. Incorporation is not for everyone. It is a tedious process that may not be available to all brokerage models. Same with teams. Often agents are spending more time managing their team members and find that the costs are much higher than anticipated.
It’s an interesting landscape out there for realtors these days. More realtors, more competition for listings. So what does this actually mean. Well in today’s world it means showing your value more than the next guy. With the divide widening between the haves and the have nots agents are faced with the inevitable decision to hunker down and work harder or be content to rely on business from friends and family.
In the past the chart has been a great tool for recruiting. I ask new agents what their plans are for building their book of business. The reality is that your competition is not the other 46,000 Realtors out there. It’s just the 5 or 6 that dominate the neighbourhood you want to work. If you think its impossible to break into a particular neighbourhood consider that in a recent Mastermind at our office one of our very success sales representatives commented on this very notion. In his area there are 7 other agents that do a lot of repeat business. Their signs are recognizable yet combined he and the other 7 only account for about 20% of the sales in the district. To separate yourself into the top 1% or the top 460 TREB agents, you need to do a minimum of 40 deals a year. That is a hard goal to achieve but can be mastered in 3-5 years of very hard work.
Mark McLean is the Broker/Manager at the Bosley Real Estate Queen St W office, the Immediate Past President the Toronto Real Estate Board and a director at the Ontario Real estate Association . The opinions expressed here do not reflect the opinions of TREB, OREA or Bosley RE

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