One of the more peculiar innovations within the last decade has been the introduction of Carvana, an online used car dealer that pushed the traditional dealer out of the picture. With Carvana, buyers can buy and purchase a car without speaking to anyone or spending hours at a dealership.
Carvana even delivers the car to your front door and takes it back within seven days if you don’t like it.
So if Carvana figured out how to turn a traditional sales process upside down through full digitization, why can’t real estate agents do the same with home ownership?
It seems like things are moving in that direction. In March 2020, just before the pandemic started, I wrote about the changing role of real estate agents. I explained that technology, improved consumer access to real estate data, and the relative shopping independence of Millennials and Generation Z will reduce a real estate agent’s power in any given transaction.
The need for a real estate agent has decreased year by year. Companies like Zillow, Redfin, and others have fully realized this – and now Rocket Companies, the parent company of Rocket Mortgage, has stepped into the fray. Last week, the Rocket Companies announced Rocket Homes.
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What is Rocket Homes?
Rocket Homes is a one-stop shop for a person’s entire real estate adventure, whether they are buying or selling a home.
According to Rocket’s press release, they are putting together a full range of services that include “Credit Report, Home Search, the industry-leading ForSaleByOwner.com process, on-site real estate agents, a nationwide network of trusted real estate professionals, iBuying services to back up sellers.” – along with direct connections to Rocket Mortgage, America’s largest mortgage lender, and Amrock, a leading provider of closing and settlement services. “
Without eliminating real estate agents directly, Rocket will hire in-house agents and connect clients with local real estate professionals. However, Rocket will reduce commissions from the average threshold of 3% to just 1.5%.
So, when a realtor sells a $ 200,000 home, they’re making $ 3,000, not the traditional $ 6,000.
So far, this Redfin-like structure just seems to be a way to standardize the transaction process. But Rocket Homes’ in-house agents will be based out of a central office in Detroit – meaning this has nothing to do with traditional real estate.
In addition, newcomers are typically trained by brokers to discourage For Sale By Owner (FSBO) sellers from doing this themselves. And experienced agents know it often are a number of advantages of working with a professional. For example, FSBO homes are not usually listed in the Multiple Listing Service (MLS), and many sellers fail to understand that homes require special marketing tactics and photos must be professional.
But in a hot real estate market – and thanks to the existence of apartment search platforms like Zillow – houses are being sold regardless of whether or not a broker is present. Rocket Homes takes advantage of this by openly encouraging customers to sell their homes themselves.
By providing real-time data and insights and leveraging its partnership with ForSaleByOwner.com, Rocket Homes is making the tedious task of selling a home easier than ever for FSBO sellers.
This is a straight blow to real estate agents working for traditional brokerage firms.
Also, Rocket will guarantee every Home sales within its platform through its iBuyer program. The aim is to spare buyers who also sell their home the need to add a contingent clause to their offers. These clauses allow buyers to put the house they are buying on hold until they can be sold – and in a hot real estate market like the one we are in right now, such offers are unattractive to sellers.
Removing contingent clauses and guaranteeing a home sale is something that real estate agents and brokers couldn’t offer.
All in all, while Rocket Homes won’t steal all market share overnight, it certainly is the foundation of a digital-centric, agentless transaction – and an indication that modern agents may need to consider tweaking their business strategy to ensure success.
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How should real estate agents react?
The future is uncertain. We’re still years away from these new programs really threatening agent job security, but traditional brokerage firms are paying attention and need to start making adjustments.
Keller Williams has gone on the defensive by improving its technology capabilities and protecting the real estate data it receives from clients. KW Command, the Keller Cloud, and a robust agent training program are prime examples of a traditional brokerage battling for market share by becoming more consumer-centric in an industry that is historically known.
The real question, however, is whether brokers will be able to withstand the extreme technological advances made by much larger, centralized companies like Rocket and Zillow, which invest ten times the money in digital services.
Real estate is a local business, of course. Houses are best viewed before buying. However, it would be naive to assume that real estate agents have to open the door whenever it is just as easy for a company to expand its door opener apps to customers. Agents should consider: What can I offer what a digital service cannot? The answer to that can lead to the right strategy to weather this industry-wide shift.
This decade will be an interesting one to watch.