COVID-19 effect on the real estate agent marketplace

COVID-19’s effect on the real estate agent has already slowed interest in home viewings and open houses. It has given reason to sellers to use tools that show prospective buyers their homes through virtuals tours like Matterport or video conference products like Google Meets, which make it easier to show one’s homes to prospective buyers without having to permit entrance physically.  Coronavirus will affect the real estate agent

Real estate agents might have to start screening home buyers so that they can identify if their clients show signs of illness, such as coughing, sneezing, or any other allergies that may alarm homeowners through tours of their homes. Homebuyers might start getting a health check before starting the process to demonstrate that they have a clean bill of health. 

While these tools make homes viewable and limit contact with the sick, another interesting consequence may occur. What if sellers find direct contact with agents increasingly unnecessary? What if real estate agents become a burden themselves in a time where sellers are becoming more frugal? And what if real estate brokers become a bridge to infection? Coronavirus could trigger the disintermediation of the real estate agent as seller behavior responds to coronavirus.

Today, home sellers have several choices in deciding how to sell their homes. There are traditional brokerages that charge circa 6% of the homes’ value, (sellers’ agents keep 3% and offer 3% to buyers agents to bring buyers through the Multiple Listing Service (MLS)). There are flat fee brokerages that cost several hundred dollars to list on the MLS. There are marketplaces where you can directly advertise homes to the consumer such as Craigslist, Zillow FSBO, or Facebook Marketplace. 

In times of financial hardship, home sellers increasingly look to direct ways of selling their homes, without real estate agents’ fees. At Richr.com, home sellers can list directly on the MLS commission-free, eliminating the 3% real estate agents make. For example, home sellers would keep $15k in cash that can be instrumental in starting a business, taking the family on vacation, or put towards a family member’s college education.

How will home buyers’ behavior change when buying real estate?

Home buying has evolved over the last several years as iBuying enables owners to sell their homes in thirty days or less. In a market where coronavirus makes people nervous about selling, iBuying can remove the seller’s anxiety. However, iBuying companies like Zillow offers or Opendoor might need to reevaluate their model as home prices may start to decline, leaving no room to make a profit per transaction. A significant decline in valuations is a problematic situation as both have hundreds of homes and vast amounts of debt on their balance sheet. If there’s a 20% correction in market valuations or more, both companies may have to liquidate their assets to survive the impact that coronavirus may cause. 

The concerns of COVID-19’s effect on the real estate agent may be unwarranted when new tools become mainstream for them to communicate and transact directly with sellers without meeting in person. If homebuyers can prevent contact with real estate agents to stave off the contagion of the coronavirus, and save money, then this becomes an attractive method of buying real estate. Richr’s new way of buying homes and claiming 100% back from the buyer’s agent commission is a perfect solution to avoid real estate agents altogether. 

Will real estate agents become unnecessary because of coronavirus?

As more tools become available to both sellers and buyers that make it unnecessary to hire a real estate agent, agents may become a luxury rather than the norm, no longer a necessity. This would be similar to how travel agents, once the go-to way to book a vacation, have since become scarce in today’s society. 

Why should buyers and sellers put themselves at risk using a real estate agent during a pandemic or in situations where social distancing becomes paramount. The real estate agent’s value proposition of providing the personal touch becomes much less valuable in circumstances where people fear direct contact. Will we see fewer real estate agents in a world where coronavirus has a tight grip on the economy? Only time can show us the impact that coronavirus and social distancing will have on the agent-based residential real estate marketplace.