By Jeremy Conaway

Our first two columns of 2016 explored the relatively narrow band of issues generated by the emerging premium agent movement. That movement is being championed by the national portals and the industry’s growing vulnerability presented by the questionable influence and impact of the subpar “facilitator” agent. This third column of the year will revisit the question of the consumer experience issue, first raised in early 2015 as it relates to the two issues raised above.

All three of these subjects have been on the industry’s priority agenda for the past 18 months. The fact is, however, that the industry’s current disruptive environment is making these factors even more relevant. More specifically, we are seeing a classic case of convergence. Three formally marginally related issues are coming together to create a major shift in procedures. Understanding this new environment is critical to appreciating the dangers being presented.

There are two types of disruptions currently impacting the real estate industry and marketplace.  The broadest-reaching disruption is called “innovative disruption.” This is the change that occurs when new digital technologies and business models affect the value propositions of existing goods and services. Virtually every aspect of the American economy is currently being subjected to innovative disruption. Every time there is a significant digital or technological advance, the value in place of all systems that contain that technology in its previous configuration is automatically changed. The best-known and most quoted disruptive processes are called “digital disruptions.” These occur when competitors use innovative disruptions as competitive business advantages or weapons systems to improve their market positions or propositions vis a vis their competitors. In a relatively high tech, competitive and complex industry such as real estate, there is always a high number of each form of disruption occurring. This rate of change can seem quite chaotic for those businesses and participants caught in the middle with neither a disruption plan nor a developmental road map.

How does the contemporary consumer experience fit into this converging environment? In the traditional real estate sector, consumers almost unanimously elected to work with an agent and used one of several processes to select that agent. Once selected, the consumer proceeded through a buying and selling experience almost exclusively designed or selected but certainly executed by that agent. Depending upon whether that agent was a counselor or facilitator, the menu of services “experienced” by consumers was subject to a massively wide spectrum of agent selection or, in the alternative, default.  In this traditional system, a consumer pretty much got what they got with little ability to select or self-design a specific real estate experience.

To its credit, this system for several generations met the needs of the civic generation consumer who was, in all likelihood, selecting an agent that they were either related to or familiar with through some manner of community connection. This system was also deemed acceptable by the Boomer Generation that tended to be better financed, thus less vulnerable and, in the event of a crisis, were either themselves an attorney or had a close relationship with one. Unlike today, litigation at that point in time was a socially and economically acceptable option.

It was the arrival of the new “X” or “Y” generation consumer that spelled the end of the traditional system. Today’s “super” consumer is more informed, sophisticated and communicative than any of their predecessors. They fully understand that a consumer experience is now something that is investigated, determined and/or negotiated prior to entering into the transaction. They come into the marketplace having sought the wisdom of their peer group through various social media. They monitor the experience they are having in real time and stand prepared to take immediate action in the event that the experience being delivered differs from the experience they negotiated for and expect.

These considerations now bring us to the new real estate market and transaction experience. In today’s real estate marketplace and culture, there is an increasing awareness that there is a right way and a wrong way to execute and/or deliver a consumer experience. Moreover, there is an understanding that a proper experience includes dozens of factors and components many of which involve external and third party resources.

Today, there is a rapidly expanding movement within the industry to take the consumer experience to the next level through the automation of consumer experiences. Increasingly, automation includes the use of technology to monitor and/or to evaluate both mandatory (using transactional standards) and optional (selected by the consumer) elements. The current emphasis on transaction management (a primary form of automation) will soon lead to “branded” consumer experiences, such as Nordstrom’s in the clothing industry and Ritz-Carlton in the hospitality industry. The expressed interests of the Consumer Financial Protection Bureau (CFPB), and even the soon-to-be-experienced Upstream project, will all contribute to this consumer-centric movement.

This movement will, over the next few years, impact the marketplace and transaction in many ways. An immediate effect will be felt as consumers become more and more familiar with “branded” experiences and begin to demand similar experiences from brokerages and agents that have no formal experience model. One of its most dramatic impacts will occur as branded and automated programs become legal standards that courts begin to interpret as community standards. (Recall that during the medical malpractice era of the 1980s, courts routinely adopted standards developed and implemented by medical schools, such as UCLA, Stanford or Harvard as community standards in such places as Minot, Mount Pleasant and International Falls.)

In any event, whether by intent, judicial declaration or marketing genius, some combination created by the current disruptive forces sweeping across the national real estate marketplace will converge to create a national standard. This convergence will raise questions regarding the roles of both organized real estate and independent brokerages. Ultimately, universal standards will emerge. These are issues that the industry should consider before the pain, suffering and loss of litigation and regulation.