Disruption has long been used in conjunction with proptech in real estate, but what has the real impact been? Livian CEO Adam Hergenrother breaks down the reality of proptech and where we’re headed.
Adam Hergenrother is the founder and CEO of Livian. He believes that business is nothing but a conduit for personal growth and embraces the company’s vision to Love How You Live. When he’s not leading and growing his organizations, you can find Adam either in the mountains or out in nature with his wife and three children.
Video killed the radio star. Then YouTube and TikTok killed traditional music video platforms. And “radio” came back with a bang with podcasting and iTunes.
Blockbuster went bust once Netflix was on the scene. And Amazon decimated most brick-and-motor bookstores. Business disruption is inevitable. And the real estate industry was a prime target for some disruption — but it looks a bit different than what was expected.
Proptech hits the scene
About 20 years ago, proptech (all the tech tools real estate experts use to optimize the way people buy, sell, research, market and manage a property) emerged, gaining even more traction over the past five years or so.
Many technology companies entered the market with the goal of eliminating (or at least minimizing) the role of the real estate agent in real estate transactions. Others promised increased per agent productivity in exchange for large investments into tech platforms.
Either way, proptech’s plan was to disrupt the real estate agent — by lessening the needs for agents overall and for those that remained, significantly increasing their productivity. Fewer agents doing more business (often at a lower cost to consumers) meaning more money in consumers’ pockets, more money for brokerages, and much more money for tech companies, or at least that was the plan.
Instead, a 10-year brokerage study conducted by Real Trends shows that while brokerages have been investing in technology, per-person productivity (PPP) has slipped by 17.7 percent. Sure, technology has increased some agents’ productivity. But the data suggests that investment in technology by itself has not lifted the industry or the overall brokerages’ results.
Furthermore, many real estate technology startups entered the market hot and quickly fizzled out as mortgage rates rose and the housing market began to cool. Real estate technology is a valuable tool, no doubt. But it’s a valuable tool to be utilized by talented real estate professionals — not to replace them.
Consumers want people
Real estate is still one of the largest and most emotionally charged decisions and purchases that an individual will make in their lives. A highly skilled real estate expert is still preferred to an app.
Proptech did not disrupt the real estate agent as expected. What will disrupt the real estate industry is a renewed focus on developing full-time real estate professionals with higher per agent productivity.
Technology has made consumers savvier and more knowledgeable, and they need a real estate professional who is up to the challenge of the fast-changing market we are in right now.
Consumers and the industry are not looking for speed-based agents who will be the quickest to open a door for them. They want and need skills-based agents who have made it their mission to open the right door at the right time for their client while offering advice and real-time updates along the way.
The next wave
In addition to the increase of highly skilled real estate professionals comes an increase in per agent productivity. This is the next wave of disruption. We may see fewer agents in the industry, but those agents will be doing more transactions (yes, with the help of technology).
The increase of transactions per agent, with fewer agents, will put less of a burden on real estate teams and brokerages (overhead, coaching, recruiting due to turnover). Profit margins will increase, and additional funds will be available to be invested in those agents, who will, in turn, be able to do even more transactions (while deepening their knowledge of a variety of real estate deals).
All of which equals a more highly skilled agent to work with consumers, increased per agent productivity, and higher profits for teams and brokerages.
In real estate, nothing trumps knowledge and the ability to understand the influx of information, synthesize it, and use it to help consumers and clients make the best decisions for their families and financial future. Technology will help, but it has not yet disrupted the need for a competent and compassionate real estate professional.
Adam Hergenrother is the founder and CEO of Livian, the author of The Founder & The Force Multiplier, and the host of the podcast, Business Meets Spirituality. Learn more about Adam’s companies and culture here.