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Industry Trends
January 14, 2023

The Evolution of Real Estate

I've become fascinated with the intersection of real estate and technology and I've thoroughly enjoyed the challenge of building a startup at this intersection. It's an amazing market that is as frustrating as it is beautiful. It's beautiful because of how decentralized and meritocratic it is. At the same time, it's frustrating for innovators because the decentralization and layers of bureaucracy make building a startup and taking it to market very difficult.

We saw firsthand over the last 10 years just how hard innovation is to come by in this space. If the real estate industry was going to be disrupted somehow, it would have been over the last several years when the capital was cheap, the number of realtors reached an all-time high, and sales volume spiked. During this same 10-year period, we saw major disruptions in other industries. Uber disrupted taxis, Airbnb disrupted hotels, Amazon disrupted the post office, TikTok disrupted social media, and Venmo disrupted cash. In all of these instances, something was replaced by something cheaper, faster, and easier to use. In the real estate industry, many thought the real estate agent could be cut out by technology, but we learned that isn't happening any time soon.

Here's how I'd sum up the last business cycle's effect on real estate sales...

Things that haven’t changed:  

  • Realtors are at the center of the transaction (90% of consumers chose to work with a Realtor which is an all-time high)
  • Consumers use Zillow to begin their experience and find homes to buy with a Realtor
  • Brokers/MLSs own and control the sales data
  • Tech companies struggle to integrate with MLSs slowing innovation
  • Commissions remain largely unchanged (3% has held strong but is under more pressure than ever.)
  • Brokerages cannot be tech companies (Unit economics don't allow it.)

Things that have changed:

  • The value of franchise brokerage brands are trending lower
  • Consumers find agents on social media or in their sphere (Hence franchise brands are becoming less valuable.) Agents have been forced to become influencers and pros on Facebook, Instagram, and now TikTok. This might be the biggest trend over the last several years that isn't talked about enough. This put the power in the agents hands and took it away from brokerages.
  • Consumer creative financing options have increased (Great trend powered by fintech)
  • Real estate teams are growing in popularity because of the support and lead generation they provide agents (Zillow Flex is adding pressure.) I have mixed feelings on this trend. This counter balances my previous bullet point about agents having power because if the leads are owned by Zillow and brokerages, agents begin to lose power. It is a bad thing for everyone if Zillow begins to centralize more power. No one wants that.

Interest rates, sales volume, and cost of capital are all trending back to their normal states and that means investment in innovation will be even harder to come by; however, I still think we will see some changes in the coming years...

Where will we see changes in the coming years?

  1. Brokerages will start to mimic EXP operating style
  2. Mortgage and creative financing options will continue to change how consumers finance their homes.
  3. MLS data will expand and become more accessible
  4. Fintech will make its way to Realtors and brokerages

Brokerages becoming more like EXP:

We are seeing that brokerages are extremely tough businesses to operate. Margins are too low to invest heavily in innovation. The only effective innovations we've seen in the last several decades on the brokerage front has been EXP's compensation model and virtual strategy. This has allowed them to stay lean and acquire agents very quickly.

They understand they are not a tech company and have licensed technology rather than trying to build it themselves. Again, this allows them to stay lean and focus on the agents via support and services. This is in contrast to Compass which has failed to live up to its "tech company" valuation. They also understand how to acquire and recruit agents effectively by leveraging referral based recruiting strategies that mimic multi-level-marketing. Again, this allows them to remain lean and rely on the agents for growth.

The trend here is brokerages are going to continue to get as lean as possible in order to make profits in the next several years.

Mortgages and creative financing options:

Mortgage applications will become more and more API driven. Fintech has exploded over the last several years. The data layer between consumers, banks, and technology vendors has become more connected and this will allow several things:

  1. The financing experience will be embedded into the transaction in a more seamless way which improves consumer options and user experience. Be on the lookout for innovations like Pylon and!
  2. Underwriting is going to become much more automated thanks to open finance providers like Plaid.
  3. Transaction data and consumer data will be more secure. Less paperwork and files will be sent around via text and email.
  4. Consumers will have access to and apply to more lending options which will increase competition and affordability.

MLS data will expand and needs to become more accessible:

In my opinion, all eyes need to be on the MLS data layer. This is not talked about broadly in the media or experienced firsthand by most people so consumers and entrepreneurs do not have the opportunity to weigh in. Entrepreneurs like me that were not on the inside before they started their company typically struggle to get in the door. It takes years to get meaningful penetration.

This matters because the data that lives in the MLS has a ton of potential to be leveraged in new and exciting ways by entrepreneurs like myself. Think AI, next-gen lending, and home search. All of these will depend on MLS data being more open and accessible. If it takes too long for entrepreneurs to get access or even learn about, that will have a major negative impact.

It's a tricky problem to solve but I'm finding more and more people are putting in a good effort to make it better. Industry veterans like Bill Fowler for instance have noticed MLS data is expanding in definition and use cases. Bill says, "MLS data is, historically, a set of data meant to aid the marketing of a for sale property. That data was meant to have a shelf life equal to the time a property spends on the market. MLS data is becoming more permanent, but the industry still views it as largely temporary."

I believe once the industry begins to view this data as evergreen and real-time, the value will increase substantially. For example, machine learning will begin to work it's magic. We're already seeing this with AI photos, real-time valuations, and auto-generated property descriptions.

With this being said, I know I still have so much to learn but I have a good sense of what is preventing and slowing down change...

  1. Data structures and technologies being used to store and access MLS data are messy.
  2. Bureaucracy is DEEP and the layers of approval are numerous.  
  3. Fragmentation (600 MLS's across the country) prevents easy collaboration and nationwide rollouts of new technology. Even if an entrepreneur was onto something big that will have a positive impact, it's impossible for the market to realize it immediately. There is no virality in the real estate market.
  4. Lack of diversity in age… when I was at RESO (Real Estate Standards Organization (RESO) this past year, I was the youngest person in every room by a long shot. The average age had to be in the upper forties. I was 26... I’d love to see more young entrepreneurs and people on the MLS side. Especially since my demographic will be buying homes aggressively over the next several years... if they can afford them. Real estate is naturally older but we need to find ways to get more participation from younger generations. The average age of real estate agents in the US is 55 years old... Harder problem to solve but worth bringing up. I love what Mike DelPrete is doing with his class at the University of Colorado Boulder.  

In October, I left RESO's fall event feeling extremely excited and energized. People are working hard to create change but there is a way to go.  

To summarize and leave people with something to think about... when you make data more accessible, you make it more valuable. Just look at the banking and finance space. Plaid and other fintech providers have caused an explosion in innovation and value in the finance industry. Consumers got better user experiences and banks got more customers. I’d say the same will happen in real estate. Consumers and agents will have a better experience buying and selling homes while MLSs will find more customers and ways to monetize. Banks didn’t get disrupted when they opened their data. Neither will MLSs or brokers. Let’s keep pushing and see where it takes us!  

Fintech will gain traction with Realtors and Brokerages

The payments flow in real estate transactions is very broken but we are starting to see that improve. Paper checks are still common for escrow. Agents' commission payments are still extremely manual. Referral fees are paid manually and via paper check in most cases. It's past due for major change.

Payment providers like Earnnest, Payload, DepositLink, and others will continue to expand their reach and get the market used to fintech and streamlined payments. This will make way for more fintech like Symba however these fintech providers will need to build platforms rather than features. As it stands today, payment providers are functioning more as plugins and features rather than platforms that integrate data from across the transaction. Platform plays will be necessary in order to avoid downward pressure on payment fees. It will become commoditized.

This is where Symba is focused. Starting with agents, we are building a fintech platform that leverages the data in a transaction to create a more seamless business management experience for agents and their brokers. Things like deal tracking, bookkeeping, taxes, commission payments, referral fees, and escrow will be streamlined, automated, and secure inside our first-of-its-kind platform.

Exciting times ahead!

Published by:
Evan Knowles
CEO of Symba