People have been talking for years about how the Internet was going to  disintermediate real estate agents much in the same way that Internet has largely disintermediated travel agents. For the most part, things haven’t turned out that way. Here at nuroa we appreciate that real estate agents still play a critical role in the buying and selling of flats and houses.

But before I get too far ahead of myself, let’s define what “disintermediation” is. Simply put, it means cutting out the middle man; cutting out the (real estate) agents and putting the principals (the buyer and the seller) in more direct contact.

Why is disintermediation relevant? For the consumer, cutting out the middle man also means cutting out the middle man’s commission.

Take a look at the travel industry, for instance.  A lot of people buy their tickets or book their hotels online. No need to walk down to the local travel agent’s office and sit down while she searches through all of her catalogues. Now you can just do it yourself via Expedia or eDreams.

Real estate, however, has proven to be more difficult to disintermediate, because there’s so much more at stake than a €2000 vacation. For most people, their home is their castle. Buying a home is the most important financial decision in most people’s lives, and it involves lots of boring stuff like laws, numbers, notary publics and annoying sellers.

So here’s the big question: Would you really be willing to spend €400.000 online based only on pics and maybe even a video tour? 

I probably wouldn’t, and I bet that most people wouldn’t either. The notable exception is Spanish real estate giant Metrovacesa, which has proven that their clients are willing to buy new developments (obra nueva) online based entirely only on the specs. For second-hand homes, however, it’s likely that there is — and maybe always will be — a trust factor that can only be dealt with by physically inspecting a property and, in many cases, by receiving the expertise and guidance of a real estate agent.

That’s why I think that Redfin’s model makes a lot of sense. They decrease the importance of the real estate agent via the Internet, but don’t deny that the agent currently still has an important role to play. There’s a lot of interesting consumer advice online (whether in the form of Q&A’s, wikis, blogs, etc.), but real estate agents are still important for the part of the process that require human judgment and sensibility — all of the intangible stuff that might include body language, things like negotiating price, figuring out an owner’s urgency to sell, knowing when to kiss the owner’s ass, knowing when to ignore or threaten the owner, figuring out how to outbid a competitive offer without paying too much, etc.

Redfin, in effect, offers an Internet business with a human component — they call it the “Redfin Advantage”. Under this model, the customer does all of the parts that don’t need an agent — e.g., finding attractive homes online,  researching neighborhoods, scheduling home tours and making an offer. The agent only steps in an expert negotiator — a closer — is required. The agents are paid a salary by Redfin, and their bonuses are based on customer satisfaction rather than sales price, which means that agents’ interests are aligned with the buyers’ and everyone’s goal is to get the lowest sales price. (Under the traditional model, the agent’s incentive is to get the highest price possible, as her commission is usually a percentage of the sales price, so the agent’s incentive is probably more aligned with the seller or at best conflicted.)

As proof of their effectiveness, Redfin released a study yesterday noting that on average their clients saved $15,568. And at the end of the day, regardless of all of the bells and whistles related to different types of real estate sites, the bottom-line is the same: Home-buyers want the best property at the cheapest price. Whoever can accomplish that feat has a good chance at really disrupting the current marketplace.

Perhaps as a testament to the disruptive potential of Redfin’s model, the traditional real estate industry seems pretty much antagonistic towards Redfin, as the company only reinforces the idea that real estate agents are largely irrelevant, except maybe for certain later-stage parts of a transaction. And the take-home message is clear: Since agents are only needed at the last part of the transaction, they should cut their standard commissions dramatically.

What do you think about Redfin? Is it the future of real estate? Or is it more likely that at some point real estate agents won’t be necessary for even the latter stages of a transaction — will a clever algorithm someday be able to do it all? And even if a clever algorithm could do it, would you trust it with your life savings?  TechCrunch’s claims to the contrary notwithstanding, can a machine ever entirely replicate or surpass true expert knowledge?