Let’s face it, the Miami real estate market is oversaturated with under-qualified agents and over-promising vendors. A slew of agents with a severe lack of experience and dedication are fed leads from automated systems daily. Overwhelmed with the noise, many customers inadvertently do themselves a disservice by working with the first agent they speak to. And the vendors – oh, the vendors. They prey on the real estate industry because it’s a big, lucrative, easy target. They offer forward-looking solutions, but what value are they adding to the end customer?
MIAMI REAL ESTATE MARKET – FASTEST GROWING LUXURY MARKET IN THE US
When you look at the sheer size of the Miami real estate market, this oversaturation starts to make sense. According to Knight Frank Wealth Report, Miami takes the title of #1 fastest growing luxury real estate market in the US, and #5 fastest growing luxury real estate market in the world after Madrid, Berlin, Paris and Cape Town.
Total sales volume for Miami in Q2 2019 topped $3.6 billion dollars. And the beast is still growing. Median home prices have increased for 30 consecutive quarters in Miami, a streak spanning 7.5 years while short sales and foreclosures have decreased heavily over time.
LUCRATIVE REAL ESTATE MARKETS CREATE OPPORTUNITIES FOR VENDORS
Any industry of this size is bound to have an influx of opportunistic vendors and agents, all grabbing for their piece of the pie. A great example of this is Zillow. About 70% of Zillow’s revenue comes from the company’s “Premier Agents” who pay for placements on Zillow to generate leads. It’s reported that Zillow brought in $300 million in revenue in Q1 2018 alone, which equates to over $200 million in revenue from agents paying to be connected to customers in one single quarter.
What is the consumer getting when they are connected to a Zillow “premier agent”? Literally just someone who has paid a fee to Zillow. That’s it. Not a trusted provider or anyone with any sort of guaranteed experience. This is a perfect example of the type of thing that exists to falsely build confidence and ultimately creates confusion.
There is no shortage of agents paying the Zillow’s of the world, which adds to the noise for the consumer. The chance that a consumer gets paired with an inexperienced agent while shopping around online is quite high. In fact, a 2014 NAR study reported 87% of all new agents fail after five years in the industry and only 13% make it, mostly due to issues with sales volume.
CAPITALISM FEASTS ON THE REAL ESTATE INDUSTRY
Outside of property listing aggregators, there are innumerable other “top” real estate agent short-lists and certifications. Many aimed at giving agents another badge with which to attract potential customers. While perhaps well-intentioned, many of the accolades that are not backed by the NAR are not executed or regulated consistently enough to prove any real distinction or value. In this way, they only serve to offer further confusion for the consumer.
According to statista.com, in 2016, agents and brokers’ ad spending amounted to 9.3 billion U.S. dollars. There are so many agents out there that don’t produce, yet they throw money at whatever hot new thing they think will make them rich and it skews and distorts the industry as a whole. And then 87% of these agents are gone in 5 years, largely because they weren’t able to generate enough business to remain profitable.
Investments in technology amidst the changing landscape also come into play. “According to PitchBook, an analysis firm owned by Morningstar, the amount of venture capital invested in real estate technology companies was up to $1.2 billion in 2017 from just $31 million in 2012.” But what technology is helping the consumer, and what technology is just designed to increase transaction volume for real estate agents?
WHEN IT COMES TO PICKING AN AGENT – BE PICKY
Consumers in the real estate industry are still too trusting. In general, they are not taking the time to vet their agents. NAR found that an estimated 72% of customers do business with the first agent they talk to. This is a recipe for disaster, leading to over 26% of people stating that they would not use their agent again, and so many more not knowing what they were missing.
Our advice to all consumers in the real estate industry: Break the trend. Take the time to vet your real estate agent. This is hard to do amidst the noise from vendors and inexperienced agents, but we promise it’s worth your time. Do this for yourself before paying an agent thousands of dollars to sell one of your most valuable assets, or signing a mortgage for hundreds of thousands of dollars that spans the next 30 years of your life.
Don’t just go with the first person you hear from. The automation that likely drove the speediness of that response will not replace the real value of an experienced real estate agent. The real value comes from the years of experience that are used to guide you through the real estate transaction process and maximize the potential of your investment.
THE LIMITATIONS OF AUTOMATION IN REAL ESTATE
Automation can sometimes be used to the consumer’s benefit, but the process itself is so complicated, granular, local, and personal. We’re not even close to tying all of the pieces together effectively in an automated way. Automation is still largely insufficient given the large amounts of money at stake and the magnitude of the decisions.
You need to know if the area in which you’ll live, vacation or invest will increase in value over time. This process can be so granular that two neighboring buildings can have vastly different property values and sales hurdles based on factors that an algorithm may never consider – such as frequency of maintenance, zoning, and whether or not they have a doorman and a secure lobby. The process is complicated. There is still a human element to real estate that can’t be relegated to an algorithm.
A good real estate agent focuses on the quality of their customer’s experience over the number of their leads. They make their customers feel comfortable and heard as they guide them through the process. Speaking to a knowledgeable real estate agent about the market, the pros and cons of the decisions to be made, and what to expect along the way provides a level of comfort that no amount of automation can replace. No automation can really take you through that complicated process in an informed way. Neither can a hyped-up vendor or a bad or inexperienced agent.
IN CONCLUSION
The growth in the Miami real estate market has created an opportunity for vendors and entrepreneurs to make money. Unfortunately, that doesn’t correlate to sustainable businesses that help consumers. Instead, a landscape has emerged where vendors prey on real estate agents and the consumers ultimately suffer through a lack of personalization and clarity. Vendors should exist to service-producing real estate agents, allowing those agents to add value to the end customer. Agents should leverage the available products and technology to the consumer’s ultimate advantage. The real estate industry has a ways to go to achieve a more symbiotic relationship between all parties.