PHOTO: We are in the early innings of what I call the “institutionalization of home buying and selling

Think about it: You can go to any developed country in the world and buy the same cup of coffee at Starbucks for $4 or the same BigMac from McDonald’s for $5, but you cannot use the same real estate agent twice in two years to buy or sell a $300,000 house and have the same experience! Why? Because real estate agents are independent contractors doing their job…well, independently.

While agents are often affiliated with brands like Coldwell Banker, Century 21 or Keller Williams, they are NOT employees of those brands, so those brands cannot dictate how their agents do their job and therefore control the consumer experience. In fact, most of these brands aren’t even in the real estate business; they are in the franchise business. The franchisor’s customer is the real estate broker (aka the franchisee) and the broker’s customer is the real estate agent, not the consumer. Yes, the broker has a fiduciary responsibility to the consumer, but the consumer experience, relationship and transaction are owned by the agent. So basically, real estate agents have total discretion over how your home is bought and/or sold, and no two agents do their job the same, and most agents don’t do their job the same way twice. The median annual salary of a real estate agent is $45,990, so agents have little in the way of capital, technology or other resources required to make the purchase and sale of your home predictable, convenient, transparent or cost effective. Confused? You aren’t alone! This arcane, inefficient structure is the way residential real estate has been done for the past 50-plus years, but all of that has started to change in a big way.

We are in the early innings of what I call the “institutionalization of home buying and selling.” Unlike the last wave of real estate innovation pioneered by the likes of Zillow and Trulia (in full transparency, I was a founding team member of Trulia), this wave of transformation is not being powered by companies that have real estate agents as paying customers. Instead, this wave of transformation is being powered by technology companies cutting out middlemen to work directly with consumers in order to dramatically simplify and streamline some or all of the process of home buying and selling. Whether you are trading-in your old house for a new one with us at Knock.com or selling your house off-market to modern-day home flippers known as iBuyers, in five to 10 years consumers will likely be buying and selling homes to and from companies, not through agents. In just the last three to four years, the first wave of these disruptive companies have raised billions of dollars to build technology platforms that increasingly transform the complex and laborious functions of the home transaction performed by agents into a more seamless, certain and transparent experience.

To understand how this wave of innovation and its impact on real estate agents is different from the last, let’s take a quick history lesson on how the first few waves haven’t changed much of how things are done.

Real Estate Web 1.0

The first wave of real estate “innovation” began in 1996 and involved little more than moving home listings online from the MLS and newspapers. That year, the National Association of Realtors (NAR) licensed Realtor.com to private company HomeStore to launch a public website displaying property listings. In 1997, Realtor.com became the exclusive online real estate listing source for several consumer media outlets like USA Today and AOL, making it the largest website for real estate listings. But, as the name Realtor.com implies, NAR’s primary customer is the real estate agent, not the homebuyer or seller. In a failed attempt to appease its real estate agent customers and keep them relevant to the home buying and selling experience, NAR restricted Homestore from displaying critical information on Realtor.com, including past and recently sold homes used to determine home prices.

Real Estate Web 2.0

By 2005, tech investors started to stir again and it became obvious to a few of us entrepreneurs that the exorbitant fees and information thiefdoms plaguing the home buying and selling experience were exactly what the internet was supposed to fix.

Trulia launched in October 2005 as the first independent home search engine, basically “Google for Real Estate.” We went directly to brokers and agents to get their listings on Trulia.com to avoid the information restrictions NAR placed on Realtor.com. By doing so, we were able to democratize the information buyers need to make the biggest purchase of their lives, and traffic to Trulia.com soared. Not only did we show homes for sale and recently sold homes, but we also liberated tons of other information like crime statistics, school data and average commute times. We used maps to help people visualize local boundaries and heat maps to show price and search trends down to the neighborhood level.

In early 2006, Zillow launched the Zestimate, giving consumers home price estimates instantly without talking to a real estate agent for the first time ever, and traffic to Zillow also soared. A year or so later Zillow added homes for sale like Trulia.