Years ago, REALTORS kept paper lists of all the listings of houses for sale in a given area. Then came the MLS, the multiple listing service, a database of all listings nationwide. In order to be listed in this database, you had to engage with a real estate agent for your transaction, thus keeping a sort of “good ol’ boys club” for real estate transactions. You had to pay to play by their rules to buy or sell a home. They benefited from years for this monopoly, charging tens of thousands of dollars to “help you buy/sell a home”. These days are over.
Zillow changed the game
Now, if you want your property to be seen by 80% of potential buyers, you don’t need to use realtor.com or the MLS. You can just use Zillow. Practically overnight they have stolen the lion’s share of the traffic by providing a better map-based interface with filtering to enable buyers to see what is for sale around them. Whenever I have sold a property in the past couple years I can see the metrics and the trend, 80% of traffic is from Zillow, followed by 15% from Realtor.com, and then the rest is other tiny sites.
What about legality?
The legal legwork in a Real Estate transaction is not provided by the agent, it is performed by a closing attorney. A lawyer is the one that actually closes the deal legally and gets everything ready. They are the ones that link the bank with the title insurance and all the pieces necessary to close. You don’t need to use a real estate agent to close on a property.
Are Real Estate agents still useful?
Real Estate agents can still be useful, they can help first-time buyers navigate through a transaction and in theory they are better at negotiation than you might be, they provide a buffer between a buyer and a seller to keep emotions out of the transaction. There is some value in having an agent help a seller get their home ready for sale. To help convince them that their home is just a product and not a gem that is worth more because of emotional history/attachment to the property. Their incentive is to get the deal done and move on, not necessarily to get the best price. But is it really worth tens of thousands of dollars or more?
Low barrier to entry
It isn’t very hard to become a real estate agent. You can take a course over a weekend and after taking a test you can be licensed in your state! Due to popularity of TV shows about buying and selling real estate, flipping houses, and get-rich quick sort of ideas lots and lots of people became real estate agents during the boom. Now there are far more agents than there are properties for sale, it can be hard to tell a good agent from a not so good agent. I have encountered far too many agents that don’t show up for open houses, don’t respond to inquiries about a property, that don’t do a good job in general. In my opinion there are too many agents that aren’t providing value and aren’t necessary most of the time. I feel that the days of the REALTOR are over, that more people are going to be using online-only listing services such as Redfin and Zillow and the MLS will go away.