It’s 2019, and the pace of innovation across industries is accelerating at breakneck speed.
Mobile experiences have unlocked new shortcuts for travelers. Busy 9-to-5 professionals are ordering pre-cooked dishes to their doorstep because meal kits weren’t convenient enough. Walk-out trackers are eliminating the need for long lines at the grocery store. (If you’ve ever tried to grab lunch at the supermarket in a big city, you know what a game-changer this is.)
And yet, the process of buying or selling a home looks a lot like it did 10, 20, 30 years ago. Each step of the way still relies at least in part on manual systems, physical paperwork, analog communications or tricky logistics, leaving consumers exhausted by a time-consuming and costly endeavor.
But it’s naive to think that real estate is standing still. The pressure to reduce friction is more palpable than ever. According to data from CB Insights, the amount of venture capital poured into real estate tech increased from about $20 million in 2008 to $3.9 billion in 2018.
In the next five years, the face of real estate will be transformed by technology.
Waves Of VC Funding Fuel The Rise Of Real Estate Tech
With the value of the housing market totaling a massive $33.3 trillion, there’s enormous opportunity for anyone who can claim even small slices of market share or solve a single pain point.
Entrepreneurs have taken notice. Consumers demand convenience, certainty and choice in all aspects of their lives. Our firm is among a slew of startups in the space that are actively working to improve different segments of the home buying transaction, in ways that I predict will change everything we currently know about buying and selling homes.
In the early 2000s, companies like Zillow and Trulia put the power of property search in buyers’ hands. The next wave of transformation will come through AI and big data. These technologies will narrow down a consumer’s options among a sea of listings (think property match, rather than property search), and innovations like voice commands will make asking to see the perfect home even easier.
The Showings Process
Improvements in virtual, augmented and mixed reality will empower more people to purchase homes sight unseen, while self-guided tours and smart locks will make on-demand showings the norm.
Access To Home equity And Timing Multiple Transactions
It’s tricky to buy a new home before you can get the money out of your old one. Companies are fixing that with offerings like home swaps, trade-ins and trade-ups that reserve your next residence while they take care of your existing home sale. Meanwhile, instant buyers, known also as iBuyers, ease the seller’s plight with quick closings.
Blockchain has the potential to make digitized closings more secure through the use of smart contracts. These encrypted forms eliminate the need for sharing sensitive wire information over hackable platforms like email.
Paper-Driven Escrow And Closing
Streamlining closing is an uphill battle against steep regulations, complex processes and ingrained human involvement. Yet there’s been headway made in settlement technologies, e-documentation and virtual notarizations.
Where The Real Estate Agent Fits In
Tech disruption often means machines replace a job that humans once did. While this might be the case for mechanical, repetitive work like factory assembly, bowling alley pin setting and subway ticket punching, real estate is fundamentally different. Despite all the improvements toward a more convenient, streamlined transaction, there are a few reasons why real estate agents are positioned to remain vital players.
For one, consumers will have a hard time moving away from an open-market process. Basic economics would say a market process is the only way to get the most money for your house — any other way you slice it, there’s an intermediary who takes a cut at the homeowner’s expense. And not everyone (arguably, a slim minority) will want to navigate that market alone, especially when it comes to their largest financial asset.
As technology smooths out certain pain points, however, the agent’s value proposition will shift even more toward an advisory role empowered by as much technology as they’re willing to adopt, learn and integrate into their own processes. It will be critical for agents to accept rather than resist the changes around them and find ways to make their clients’ lives easier.
Real Estate: An Industry Of Its Own
The truth is that real estate is unlike any other good or service. You can’t compare selling your house to selling a cup of coffee. Decisions surrounding a person’s home hold more weight than their next e-book purchase or shopping app download. No one will snap their fingers and revolutionize such a highly regulated, complex exchange overnight by releasing a new-fangled API.
Evolution in this space will come as a series of baby steps, gradual tweaks and solutions that will converge and go mainstream in the future. Real estate is on the precipice of change. It’s a slow ride, but blink and you’ll miss it.