Think of the Road Runner. The feet are spinning but he is not moving and then just as Wile E Coyote comes to grab him he takes off like a shot. That is where the online internet world is today. They are not moving forward, but with the infusion of over 200 million dollars in venture capital funds, and innovation at every corner, the traditional real estate model is going to be under signficant pressure very soon.
The consumer is learning how to find their own homes online. The consumer is recognizing that the traditional model of commissions is out of whack with the reality of the day. And the consumer is slowly being introduced to the concept of alternatives. Once we progress from the early adapter stages to where the masses start using the online services, which also will have matured into stable platforms, the game will change.
Real estate agents such as Bloodhound Realty that get ahead of the change will prosper. They will have adjusted their model to make use of the new tools to benefite their customers. But the old line, “We have always done it this way” realtors will wither.
The tension between traditional realtors and online upstarts is palpable, but modern real estate practice really requires the two sides to cooperate. In the United States, 77 percent of home buyers do online research, and there are hundreds, perhaps thousands, of local real estate sites. And while good real estate agents know how to close deals for their 6 percent commissions, their role as gatekeepers is coming under fire from cut-rate Internet brokers like Redfin.
Web-based players are still a long way from posing much of a threat to traditional agents, of course. For-sale-by-owner listings account for only 13 percent of U.S. listings. Thus, more than 80 percent of U.S. home sales still go through agents.
VCs certainly smell an opportunity.
Online real estate companies have, between them, raised more than $200 million in venture capital in the last two years, according to Dow Jones VentureOne and Red Herring research. As VCs contemplate downstream exits via acquisitions or IPOs, publicly listed real estate technology companies remain few and far between.
As Zillow Chief Financial Officer Spencer Rascoff puts it, “Compared to travel, where there’s $30 billion worth of public companies you can invest in, there’s $2 billion worth of public [real estate] companies.” Choices include LoopNet, online brokerage ZipRealty, lead generator HouseValues, U.S. portal Move.com, U.K. portal Rightmove, Australian portal realestate.com.au, and holding company Cendant. via RED HERRING
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