Technology-powered Real Estate brokerages are becoming more powerful industry players, as recent expansions by companies like Redfin and Woodward Asset Capital are pairing proprietary technologies with brokerages to change the way homes are bought and sold.
According to research by the National Association of Realtors (NAR), at the beginning of online listings in 1995, only 2 percent of buyers used the Internet as a search tool for Real Estate. By 2000, four out of 10 buyers searched for a home online, and in 2009, nine out of 10 buyers did. It has remained near that level ever since.
In January, Woodward Asset Capital, a developer of technology for the Real Estate and mortgage servicing industries since 2007, acquired the Real Estate brokerage Homesource Realtors near its Southfield, Mich., headquarters. Homesource has now been rebranded to SellerNation, creating a brokerage that exclusively serves sellers. The company plans to roll out operations in metropolitan Detroit by summer.
“Rather than develop the tools, software (and) system for other brokers who have been asking for versions of the technology we provide to banks, our direction is to develop it, own it and grow it as a brokerage model that we control,” said Ron Jasgur, president of Woodward Asset Capital and founder of Homesource. Woodward’s current technologies have been used to negotiate more than $22 billion in Real Estate offers from more than 100,000 agents nationwide.
Redfin, which transitioned to an online-based Real Estate brokerage model in 2006 (with agents spread throughout the country) after launching as the first map-based Real Estate search site in 2004, now has hundreds of agents across the U.S. The company announced in February that it is expanding brokerage operations into Minneapolis and St. Paul, Minn., with continued plans for growth, according to company spokeswoman Rachel Musiker.
Redfin operates in 17 states and the District of Columbia, employing agents with salary and benefits, in addition to bonuses based on customer satisfaction.
“Our founders realized that in addition to wanting to make information about homes for sale transparent to consumers, they wanted to shake up the traditional commission-based Real Estate business model,” Musiker said. “Redfin uses technology to make agents’ daily work processes more efficient, and we’re able to pass savings on to our clients.”
Redfin supports its brokerage business with technology developed in-house by engineers and data analysts. For buyers, this includes real-time stats and instant updates delivered to mobile devices; for sellers, Redfin provides a home value tool and price-testing service.
While technology is changing, buyer behavior isn’t. A 2013 NAR study shows buyers are searching a median of 12 weeks and visiting 10 homes, which is “a fairly consistent finding over time,” said Walter Molony, NAR’s economic issues media manager. However, companies that combine both technology and brokerage models may be able to capture a bigger piece of the pie. The study shows that 90 percent of home buyers who used the Internet to search for a home ultimately purchased through a Real Estate agent.
“When you get down to it, using the Internet to learn about the housing market and local listings is a little like taking a drink out of a fire hydrant,” Molony said. “Most buyers begin their search online, and then contact an agent to put it all in context, sharing the listings they’re interested in.
“It has become more likely in recent years that buyers first learn about the home purchased online, but then use a Real Estate agent to handle negotiations and the contract offer.”