Why hasn’t technology disintermediated the real estate agent? Is there an execution failure from all the companies, or is there a more underlying issue that makes brokers harder to disrupt than meets the eye? Why do we still need a human agent when transacting real estate, but not for trading stocks, booking flights, or reserving restaurant tables?
RentHop, an apartment search marketplace founded in 2009 , started with the premise that real estate agents were no longer adding enough value to justify high transaction fees. Three years later, after many business model pivots and skirmishes with the brokerage industry, RentHop finally embraced the real estate professionals. Today, this company and a slew of peer competitors earn a majority of their revenues matching buyers to brokers.
What Does a Broker Do Today?
To analyze the potential digital transformation of the real estate industry, we first decompose and group broker services by potential for technology disruption.
Easy to Automate
- Interview and survey buyer preferences
- Determine buyer qualifications against seller requirements (max budget)
- Research historical data for pricing
- Gather required buyer documentation
- Coordinate related parties (lender, lawyer, inspector)
- Filter inventory to find suitable matches
The above items are considered low-hanging fruit and “easy” to automate. Numerous tools and services already exist to perform the above tasks. However, a first-time home buyer still needs to know which website or app to use, and learn how to properly use it. For each new technology that enables consumers to analyze real estate more effectively, it adds to a list of skills expected from a seasoned professional. For those unwilling to invest the time to research the latest resources, the agent becomes even more valuable!
Possibly Automate, with Caveats
- Find potential customers
- Spot good deals and match them with reliable customers
- Advertise the listing on the most relevant channels
- Aggregate listing information sources and keep them up-to-date
- Schedule the tour, meet buyer, and gain access to the space
Some tasks are easy to automate in theory, but two decades of innovation have not yet shown promising results. Marketing platforms are always changing at the rate of technological innovation, and real estate agents seem best at evaluating and adopting to the latest trends (and we see lots of variability in skill of adoption ). Are humans or machines quicker about switching to the next new mobile, social, or virtual reality advertising platform? 
On the scheduling frontier, every year dozens of new startups launch hoping to be “the OpenTable of real estate.” The plan is to aggregate all the sellers and agents in town, post the inventory with available showing times, and have buyers schedule viewings without dealing with a human (maybe a low-cost assistant shows up for the touring portion to represent the seller).
The analogy has two major flaws: The stakes are vastly different when shopping for dinner home for the next many years. More importantly, a restaurant customer is very likely to show up and purchase food. However, a customer who tours an apartment only has a very low probability of transacting (agents show homes all day long and are happy to complete just a handful of deals per quarter). The low conversion rate makes the economics of a broker model more desirable for sellers to seek help. Many agents schedule many showings in a crowd-sourced fashion, but only one winner receives a commission check.
Difficult to Automate
- Observe customer reaction and adjust search parameters
- Convince buyers to submit offer
- Navigate the negotiation process
- Convince client to sign and close
The true challenge acknowledges that finding a home is as much an emotional decision as it is quantitative. Individuals have unique utility functions, yet can’t articulate or understand all the components (often making irrational decisions in the heat of the moment). A skilled agent carefully re-evaluates the search during their interactions through a series of explicit questions (what did you think?), passive observation (looks like the small kitchen turned her off), and deduction of revealed preferences (I wonder why this house excites them). The agent decides whether to make significant adjustments to the search, or in extreme cases, politely cease working with the client.
The extreme variability in broker incomes also suggests that client interactions require skill and are not merely a commodity. In most US cities, the median agent earns between $30,000-$50,000 a year while top agents earn over $200K (in high-demand markets, the dispersion can be 10x or more). Among the many explanations for earnings variability, the most important difference is the agent’s closing rate — the number of houses sold or leases signed per year.
For now, brokers can distill for us a process that so far hasn’t been properly captured in a database schema, a block of text, a set of photos, or even a virtual reality tour. (Word Count: 797)
 US Department of Justice: Competition in the Real Estate Brokerage indsutry
 RentHop (Wikipedia)
 Getting the Agent Without the Fee
 RentHop: Easier Apartment Hunting Without the Broker Fee
 Want to Disrupt an Industry? Try Actually Working In It First
 RealtyHop Helps Investors Find Underappreciated Rental Properties
 With Revenue Tripling, RentHop Makes Apartment Search Smarter
 Oliver, A New Apartment Finding App Cuts Out The Middleman
 Inman News, Real Estate Agent Salary: High-tech Agents Lead the Pack
 National Associate of Realtors, Field Guide to Working with FSBOs
 NYC Broker Leaderboard (timely response rate to online inquiries)
 Real Estate Commission Explained, Revealed, and Compared
 Real estate has always been a two-sided marketplace, but the costs of multi-homing are very low relative to the size of the transaction ($500K house for sale vs. $20 to advertise in another unsaturated channel). Brokers earn commissions on closed transactions and are highly motivated to try any new channels if there is a reasonable chance of gaining a marketing advantage.
 Zillow, RealtyHop, Trulia, PadMapper, StreetEasy, RentJungle, and Zumper are among many competitors that also began with aspirations of eliminating the need for brokers only to capitulate later into becoming an aggregation portal of broker offerings.
 Apartments for rent in New York City and Boston are among the few markets with open listing rentals. The landlord does not grant an exclusive right to one broker, but crowd sources the tenant search process to all licensed agents who must find customers and collect commissions at their own expense.