Will digital Real Estate platforms be the death of traditional brokerage?

In case you missed it, digital home-buying platform Prevu recently secured $2MM in seed funding last week. The company represents a growing number of real estate startups attempting to disrupt the industry by increasing efficiencies and reducing costs in the transaction process. Much like the CRE platform Ten-X, these companies represent a fundamental shift in the traditional brokerage service model. Buyers, sellers, and brokers should take notice.

Like several other online transaction platforms, Prevu appears to have centralized, digitized, and automated as much of the listing, searching, buying, and selling process as possible, increasing overall efficiency. Where Prevu differentiates itself, however, is in their offer of a rebate to buyers of up to 2% of the traditional 3% brokerage commission. This cost savings will certainly be attractive to buyers, and while Prevu’s sales associates are making less per transaction, Prevu’s founders say this deficiency is made up in transaction volume, with their average associate completing 36 deals per year.  

So, is this model the wave of the future, or is it only viable in dense, Tier 1 markets such as New York City, where the company is based? Are traditional brokers and sales associates going to become extinct as we know them today, or will they simply adapt to offer more specialized or alternative services?

One thing I’ve learned over the years is that Commercial Real Estate transactions can be messy. You can’t digitally solve for personalities conflicts, egos, mental illness, greed, ignorance, sinkholes, new building codes, contamination, and the myriad other challenges that we overcome on a regular basis. I suspect that while digital transaction platforms will be very beneficial and successful for those clean, straightforward, simple deals, the rest will still require the expertise of a professional problem solver. And at the end of the day, that’s what we are.