Get the latest information on real estate investment markets and resources for investor-friendly agents and investors
March 28, 2019
It seems everywhere you turn the word “tech” is front and center. And when it comes to real estate, the term “PropTech” has taken over the conversation. Tech is supposed to have totally transformed the industry in a way that makes it almost unrecognizable. That hasn’t happened for the real estate industry, at least not yet.
The promise of technology unfulfilled
The promise of technology dramatically disrupting the way we buy and sell homes has been talked about for over 20 years. When the internet first appeared, dozens of new web-based startups multiplied faster than rabbits. Online discount and no commission brokers, CRMs, software companies and virtual brokerages flooded the market, most funded by deep-pocketed venture capital firms. All claimed that their particular digitally based model or software would upend real estate – reducing commissions, eliminating agents or rendering the entire transaction process entirely automated.
Early tech disruptors crash and burn
Well, as we know, things didn’t quite work out that way, especially as it relates to commissions. There is one early startup which turned out to be a bellwether for what would happen to most of those tech startups that attempted to dramatically disrupt the real estate marketplace.
Your Home Direct (YHD) was launched in 1999 in the New York metro area with great fanfare and lots of money. After a quick start out of the gate, they were promptly acquired by a large British broker, Foxtons. YHD/Foxtons, as they were called, shot to the stratosphere with the promise of 2% commissions. It wasn’t long before they came crashing down, beaten and bankrupt.
Like so many others, they claimed that the internet and technology allowed them to lower commission rates by greatly reducing agent participation and relying almost solely on the internet to do the rest. Sounds good, but it didn’t work.
Fast forward to today and another British broker, PurpleBricks, hit the U.S. market with great fanfare and a massive TV advertising budget. They have an identical model as YHD/Foxton’s, charging miniscule fees and claiming techs near magic abilities to disrupt the market. They too saw their stock skyrocket only to see it decline by 40% in a single day.
So, what became of tech’s promise to transform the real estate business?
Technology’s impact: evolution not revolution
Instead of revolutionizing real estate, tech has, on the periphery, changed the way search and transactions are done. Online search, customer interaction and price transparency, among other things, have all changed, for the better, thanks to technology.
However, the fundamentals remain the same. Commissions have hardly budged and the need for a human to be a part of the transaction remains central to the process.
A more measured assessment of tech’s influence on real estate
Real estate technology – a.k.a. PropTech - is being leveraged to supplement, and not replace, brokers and agents. Even the most farsighted and radical tech proselytizers have pretty much given up on disintermediation.
There’s a pretty simple reason for that. After dozens of failed startups and hundreds of millions of dollars, the writing is on the wall: agents, and their commissions, are here to stay. Consumers have shown that when it comes to making what is probably their largest single financial transaction, they want a human to help guide them through the process.
To help these humans, the more measured view of PropTech notes that tech tools can help brokers and agents sell more properties and do it in a more efficient manner while making buyers and sellers happier. Furthermore, PropTech has mitigated a lot of the complaints leveled at the real estate industry.
There is no shortage of tech tools to help brokers and agents increase their incomes. Augmented reality, paperless transactions, predictive analytics, easy-to-use CRM software, better search engines, AI and big data can empower brokers and agents like never before.
In fact, AI, data and predictive analytics are perhaps the most disruptive technology currently on the market today for real estate professionals. Not only can it provide insightful data about a property or market, it can also help brokers expand their target audience beyond just residential home buyers and sellers. It can help break new ground in, for example, the fast-growing rental property investor market.
Leveraging tech to capture those who invest in rental properties
According to the most recent CoreLogic Case Shiller market report, home prices are either stalled or going down in much of the country. In Seattle, prices have either flattened or declined, and transaction volume is down.
On the flip side, the rental property market is growing in response to the slowing residential market. Investors are moving capital to it and are desperate to find new investable properties. Moreover, they are frustrated that they cannot find enough knowledgeable brokers who know their respective markets and can add value by understanding the metrics of the transaction. There is a big disconnect between supply and demand.
A new company called RealPeek can help brokers supply investors’ demand for professionals who can help them in navigating this profitable and growing market.
The first thing an investor looks for in a broker or agent is if they know the market. Finding good investment properties isn’t easy. But a good local broker can. Using RealPeek’s advance search filters makes that job easy and faster, something investors truly value.
As important, investors need a broker who knows the metrics of the rental business. Just finding a property is only half of it. The question is, does this property have the potential of providing a good ROI for the investor. To determine this, brokers can use RealPeek’s advanced AI analytics. It provides sophisticated, easy-to-use data including cap rates, cash flow, and rent-to-value metrics. These are the data points that investors live by, and a broker who knows his way around them, is a broker who will make money in the rental property investor market.
Finally, while promise of tech in real estate is largely unfulfilled, part of the reason for this is that real estate professionals often shy away from it. Many believe it’s too hard to master, while others don’t see the real world utility in it.
Something that promises breathtaking data insights, but is hard to use, is almost useless. Something that is simple, but features dated technology is equally a waste of time. Fortunately, RealPeek’s advanced software package has a perfect balance – easy to use tool with cutting edge real-time data analytics.