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Are Real Estate Agents at Risk of Disruption From iBuying?

By Motley Fool Staff – Updated Sep 17, 2019 at 7:23AM

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iBuying trends in the housing market threaten to cut real estate agents out of the homebuying process.

As companies like Zillow (Z 3.04%) (ZG 3.07%) disrupt the housing market with their iBuying services, are real estate agents at risk of getting cut out of the process? Real Estate agencies such as Realogy and RE/MAX Holdings could stand to lose in this changing market.

In this clip from Industry Focus: Energy, Motley Fool contributor Luis Sanchez and Industry Focus host Nick Sciple discuss how the developing housing technology could impact real estate agents.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. A full transcript follows the video.

This video was recorded on Sept. 5, 2019.

Nick Sciple: I've heard anecdotally from some folks around the Fool that Zillow, when it comes to the iBuyer market, tends to be the highest touch, the most aggressive when it comes to offering and understanding the idiosyncrasies of a home. Then you have Redfin in the middle, and then Open Door with the least touch. Again, that's anecdotal from folks around the company.

Another area, when you think about these major iBuyers moving into the real estate buying and selling space, is the agents. As we've mentioned, Zillow's legacy ad business is very much dependent on agents. As you see this iBuying scale up, if Zillow and these other companies are buying these homes, these are transactions that real estate agents aren't participating in. Is there any risk in your mind of, as Zillow moves into this iBuying businesses, there could be some negative impacts on its core ad business?

Luis Sanchez: It's certainly possible. That business is basically built on real estate agents, which are the more traditional players, buying leads from Zillow to help in the process. One of the clear developments that is occurring through the development of the iBuying industry is that agents are getting left out of the process. They're being disrupted in a way that's not too dissimilar from how we've seen other industries get disrupted by technology. I can't imagine that agents are too happy about the developments in the industry as a result of iBuying. There's a lot of uncertainty with how the iBuying trends are going to shape up. Long-term, we really don't know if iBuying itself is going to work, if it's going to be profitable, if more than one iBuyer will be able to operate in this market. But, one prediction I won't be too shy about making is that I don't see how real estate agents are going to benefit from iBuying. I think they're getting cut out of the process. I wouldn't be too happy if I were a real estate agent here.

Sciple: Yeah. You've got certain numbers of transactions they're being cut out of. As you mentioned, Redfin and others are putting downward pressure on the brokerage fees that they can demand. A tough time to be in that industry. But, again, this is an industry that hasn't changed in a meaningful way in probably decades, so it's probably ripe for changes.

Luis Sanchez has no position in any of the stocks mentioned. Nick Sciple owns shares of Redfin. The Motley Fool owns shares of and recommends Zillow Group (A shares) and Zillow Group (C shares). The Motley Fool recommends Redfin. The Motley Fool has a disclosure policy.

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