By: Johnny Sengelmann
CEO & Co-Founder, Kintaro
Every day, you can read about a big bet on “XYZ Organization” who promises to disrupt a stodgy industry. Ever since Uber dismantled taxis, it’s been speculated that it’s not a matter of “if,” but “when” an industry will get turned on its head by a venture-backed company.
The number of startups in the US has exploded over the past 10 years, with over 63,703 active startups today. Off-the-shelf technology products and a deep talent pool have made it easier than ever for entrepreneurs to start businesses.
These forces, paired with a frothy venture capital market, make it almost inconceivable for any industry to be dominated by a single player. For every Amazon, there are 10 Shopify-like companies fighting to deliver comparable solutions for incumbents.
This is no different in real estate.
The US residential real estate market is the largest consumer market in the world at $90 trillion annually. Today, the vast majority of transactions in the US are conducted by 1.6 million registered real estate agents. As Web 2.0 has increased the amount of data accessible to consumers across a variety of industries, consumer expectations have changed.
Gone are the days where realtors act as a gatekeeper of listings and market data. If a buyer is looking for a home, they can simply look online at Zillow or Redfin. According to a 2019 study conducted by The National Association of Realtors, 44% of home searches start online.
Despite a change in consumer behavior, however, the real estate transaction provided by the traditional broker has largely remained the same. So have the fees charged by agents. Fees in the typical real estate transaction average 3% on each side, resulting in tens of thousands of dollars in commissions paid. In the US, agent commissions represent $85 billion annually with adjacent services like mortgage and title representing an additional $85 billion in commissions.
On paper, the real estate industry has looked like a dream scenario for venture-backed startups. There have been countless attempts to disintermediate the agent from the transaction to “disrupt real estate”.
The reality is, it’s not that simple.
Buying and selling a home is the largest investment that many individuals make in their lives. In other words, it’s considerably easier to change consumer habits around using a taxi than it is around buying a home.
In 2020 alone, there were over $32 billion of venture capital invested into PropTech with a significant portion allocated towards residential real estate. The major trends shaping the current landscape include:
While the jury is still out on the overall effectiveness of these technology systems, Wall Street valuations have indicated that these organizations are closer to technology companies than traditional real estate organizations.
Whether you’re a publicly traded company like Zillow or Compass, or a 60 year old brokerage, it’s clear that the need to attach core services like mortgage and title to increase revenue is part of the long-term solution. While industry stalwarts have stated for years that “the money is in the mortgage”, commission compression has turned this strategy from a “nice to have” to a “need to have”.
For businesses around the world, COVID-19 accelerated changes that technologists have predicted for a while. While remote work and video calls may have varying degrees of long lasting impact, in real estate, the digitization of the transaction is here to stay.
With people buying homes sight unseen, the role of the agent has fundamentally changed. If you’ve bought and sold real estate, chances are you likely have strong opinions about the value provided by agents. According to a study conducted by the National Association of Realtors, consumers look towards agents for their guidance now more than ever.
As technology continues to transform the world as we know it, the reality is that the most transformative technology may not even be invented yet. Within real estate, technologies like blockchain, the tokenization of real estate, and remote online notarization are speculated to be transformative in the digitization of real estate. Depending on who you ask, and what day of the week it is, you will get a different outlook on the long-lasting effects of these technologies.
It seems as though the most pertinent question being asked is, “Who will build the experience that gives customers the best bang for their buck?” Some feel as though the personalized experience provided by traditional brokers isn’t going anywhere, while others view Zillow’s top of the funnel dominance will turn into a full dominance of real estate. The reality is, the answer may not be that simple.
One of the historical challenges with disintermediating the agent from the transaction is that the needs of the customer vary from person to person. As such, it’s been difficult to fit a one size fits all program. For one person, a rent-to-own program from Divvy may be a perfect fit. For luxury buyers, a higher touch experience provided by Sotheby’s International Realty may be needed to maximize the sale price.
In order to defend their competitive position, traditional brokerages and brands must evolve their platforms into digital ecosystems that keep agents at the center of home ownership. Over the long term, the need for agents to act as consultants through the transaction and beyond will only increase. Whether it’s knowing what service to use for moving, who to use for a room renovation or simply knowing which coffee shop they should frequent, agents will need to embrace their role as community experts.
Through discussions with countless forward-thinking brands and brokerages, we’ve found a consistent desire to deeply integrate their operations into digital ecosystems, but a struggle to execute this vision due to limited resources. As such, many have looked elsewhere towards tools like Kintaro to unify their data and build a superior customer experience. In the long run, it’s our belief that agents are critical to building communities and are here to stay.
Johnny Sengelmann
CEO & Co-Founder
Kintaro
About Kintaro
Kintaro is a data platform built for the traditional real estate broker. It helps increase transaction volume and improve attachment rates of additional revenue lines like mortgage, title and insurance. Kintaro’s initial product is a business intelligence tool that unifies brokerage data and displays it through dashboards and A.I. driven recommendations. If you’re interested in learning more about Kintaro, please email Johnny directly at Johnny@kintaro.io.
CEO & Co-Founder, Kintaro
Every day, you can read about a big bet on “XYZ Organization” who promises to disrupt a stodgy industry. Ever since Uber dismantled taxis, it’s been speculated that it’s not a matter of “if,” but “when” an industry will get turned on its head by a venture-backed company.
The number of startups in the US has exploded over the past 10 years, with over 63,703 active startups today. Off-the-shelf technology products and a deep talent pool have made it easier than ever for entrepreneurs to start businesses.
These forces, paired with a frothy venture capital market, make it almost inconceivable for any industry to be dominated by a single player. For every Amazon, there are 10 Shopify-like companies fighting to deliver comparable solutions for incumbents.
This is no different in real estate.
The US residential real estate market is the largest consumer market in the world at $90 trillion annually. Today, the vast majority of transactions in the US are conducted by 1.6 million registered real estate agents. As Web 2.0 has increased the amount of data accessible to consumers across a variety of industries, consumer expectations have changed.
Gone are the days where realtors act as a gatekeeper of listings and market data. If a buyer is looking for a home, they can simply look online at Zillow or Redfin. According to a 2019 study conducted by The National Association of Realtors, 44% of home searches start online.
Despite a change in consumer behavior, however, the real estate transaction provided by the traditional broker has largely remained the same. So have the fees charged by agents. Fees in the typical real estate transaction average 3% on each side, resulting in tens of thousands of dollars in commissions paid. In the US, agent commissions represent $85 billion annually with adjacent services like mortgage and title representing an additional $85 billion in commissions.
On paper, the real estate industry has looked like a dream scenario for venture-backed startups. There have been countless attempts to disintermediate the agent from the transaction to “disrupt real estate”.
The reality is, it’s not that simple.
Buying and selling a home is the largest investment that many individuals make in their lives. In other words, it’s considerably easier to change consumer habits around using a taxi than it is around buying a home.
In 2020 alone, there were over $32 billion of venture capital invested into PropTech with a significant portion allocated towards residential real estate. The major trends shaping the current landscape include:
- RE Brands = Tech Companies- The role of the modern-day brand in real estate has evolved. Brands have always provided operating platforms for franchises and agents to grow their business. In the past five years, we’ve seen traditional real estate brands evolve into technology companies by investing hundreds of millions of dollars into technology through acquisition and home-grown systems.
While the jury is still out on the overall effectiveness of these technology systems, Wall Street valuations have indicated that these organizations are closer to technology companies than traditional real estate organizations.
- Alternative Models- Over the past few years, billions of dollars have been invested into alternative transaction methods in real estate. From iBuying companies like Offerpad, Opendoor and Zillow Offers acting as intermediaries to reduce transaction friction, to new-age real estate companies building models around the needs of a specific consumer profile like Divvy, Homie and Orchard, there is no shortage of opportunities to explore new ways to buy and sell homes.
- Commission Compression- As cheaper alternative transaction models have gained consumer attention, we’ve seen commission compression take hold. Shrinking margins have forced real estate companies to rethink their business models.
Whether you’re a publicly traded company like Zillow or Compass, or a 60 year old brokerage, it’s clear that the need to attach core services like mortgage and title to increase revenue is part of the long-term solution. While industry stalwarts have stated for years that “the money is in the mortgage”, commission compression has turned this strategy from a “nice to have” to a “need to have”.
For businesses around the world, COVID-19 accelerated changes that technologists have predicted for a while. While remote work and video calls may have varying degrees of long lasting impact, in real estate, the digitization of the transaction is here to stay.
With people buying homes sight unseen, the role of the agent has fundamentally changed. If you’ve bought and sold real estate, chances are you likely have strong opinions about the value provided by agents. According to a study conducted by the National Association of Realtors, consumers look towards agents for their guidance now more than ever.
As technology continues to transform the world as we know it, the reality is that the most transformative technology may not even be invented yet. Within real estate, technologies like blockchain, the tokenization of real estate, and remote online notarization are speculated to be transformative in the digitization of real estate. Depending on who you ask, and what day of the week it is, you will get a different outlook on the long-lasting effects of these technologies.
It seems as though the most pertinent question being asked is, “Who will build the experience that gives customers the best bang for their buck?” Some feel as though the personalized experience provided by traditional brokers isn’t going anywhere, while others view Zillow’s top of the funnel dominance will turn into a full dominance of real estate. The reality is, the answer may not be that simple.
One of the historical challenges with disintermediating the agent from the transaction is that the needs of the customer vary from person to person. As such, it’s been difficult to fit a one size fits all program. For one person, a rent-to-own program from Divvy may be a perfect fit. For luxury buyers, a higher touch experience provided by Sotheby’s International Realty may be needed to maximize the sale price.
In order to defend their competitive position, traditional brokerages and brands must evolve their platforms into digital ecosystems that keep agents at the center of home ownership. Over the long term, the need for agents to act as consultants through the transaction and beyond will only increase. Whether it’s knowing what service to use for moving, who to use for a room renovation or simply knowing which coffee shop they should frequent, agents will need to embrace their role as community experts.
Through discussions with countless forward-thinking brands and brokerages, we’ve found a consistent desire to deeply integrate their operations into digital ecosystems, but a struggle to execute this vision due to limited resources. As such, many have looked elsewhere towards tools like Kintaro to unify their data and build a superior customer experience. In the long run, it’s our belief that agents are critical to building communities and are here to stay.
Johnny Sengelmann
CEO & Co-Founder
Kintaro
About Kintaro
Kintaro is a data platform built for the traditional real estate broker. It helps increase transaction volume and improve attachment rates of additional revenue lines like mortgage, title and insurance. Kintaro’s initial product is a business intelligence tool that unifies brokerage data and displays it through dashboards and A.I. driven recommendations. If you’re interested in learning more about Kintaro, please email Johnny directly at Johnny@kintaro.io.
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