Real estate tech is dynamic, and causes change at the same pace as other industries due to innovation.
It is important to keep clear the problems our industry faces.
How can technology can solve those problems? Where does technology fit into the industry?
How does technology try to arrange things to serve itself by making technology the focus of the service?
- Disruption Is Not A Solution for the Real Estate Industry
- Solutionism’s Shiny New Toys
- The Future of the Real Estate Industry
- Adaptation, Not Automation
- Peak Disruption
Disruption Is Not The Outcome of Real Estate Tech.
Politics, industries, institutions are all “broken” today.
“Disruption” is the catch-all solution for all these broken things, but is disruption enough as a solution in and of itself?
Disruption should be the result of a solution that works and not the starting point for how to improve on something. Otherwise we could just throw a wrench in the gears of the world and expect a utopia.
I created my slogan Key, Meet Door to not only make the real estate industry come to mind in the reader, but to also express a simple and pain-free philosophy.
Information technology and social media change industries with sexy promises of simple and pain-free processes.
Besides sometimes making processes more complex and frightening, they also hide the difficulty of these processes by glossing them over with buzzwords and sleek, digital interfaces.
New brokerage models have emerged in recent years via developments in real estate tech. Technology is their main selling point.
These models claim to streamline the real estate process, and to remove all the headaches which makes working with a Realtor a necessity for consumers.
The threat to the traditional real estate industry is obvious, but it does not have to be with proper review.
Solutionism’s Shiny New Toys.
Solutionism. n. The belief that all difficulties have benign solutions, often of a technocratic nature.
Technology has been a boon for the real estate industry, not only for Realtors, but for consumers.
Long before I was a Realtor, consumers had no access to search. They relied on Realtors to find suitable properties for them.
This put a lot of power in the hands of the Realtors, because limited access meant that Realtors controlled the consumers’ access.
Realtors could even steer consumers towards their own listings.
This can mix the interest of the client with the interest of the Realtor. (My guess is this conflict of interest led to the negative view some people have with the profession.)
Today, consumers can use the Internet to browse for properties themselves. They’ll often know more about the type of property they are looking for before the Realtor can even begin to help.
Many Realtors have complained about the loss of search. (For reasons to explored later, rightfully so). Instead, we should adopt services to better fit the needs of the modern consumer.
Technological innovators are capitalizing on our changing age. More people – starting with Millennials and trickling upwards to earlier generations – look to the digital world to make things easier.
This is natural, because buying and selling property involves huge costs and complex and uncertain processes.
There are four ways these innovators seek to disrupt the real estate industry, with mixed results:
1. Closing Costs
The Internet has moved many duties that used to fall on the Realtor (such as search) onto the consumer. Many new brokerage models in the real estate industry believe costs to the consumer then should be cut dramatically.
These models advertise flat-fees, or even zero fees (with conditions). To the consumer, likely nothing is more attractive than reduced fees.
The problem, however, lies with the misconception that the digital age has lightened the load of Realtors. Quite the contrary.
As the world changes and digitizes, Realtors must do the same. Our work is not becoming easier, only different.
Although we may no longer handle search by ourselves, our businesses are pressed to study and understand the search systems to give the most exposure to our listings.
Technologies such as virtual reality tours do work to lift the burden of literally showing homes to certain consumers. They also widen the market of buyers to the entire world.
At the same time, Realtors now must teach themselves how to use these technologies, and spend time putting them into action.
The extreme version of this marketing philosophy leads to the For Sale By Owner seller, someone who has chosen to skip Realtors entirely.
As one of my favorite online Realtor coaches, Kevin Ward, makes clear, having a qualified Realtor helps clients net more money than not having one. This makes even more sense in the digital age.
Recent brokerage models aim to capitalize on one of the real estate tech’s biggest promises – financing. Not only financing for buyers, but for sellers.
A home is likely the most expensive purchase that anyone will ever make.
When buying a new home, most people need to first sell their home to get the money they need for the next one. The timing of this process can be very stressful for real estate consumers in the hands of an inexperienced Realtor.
In theory, this type of brokerage purchases your current home for you. This gives you the funds you need to purchase your next home as a cash buyer.
However, the same problems exist here as they do with any type of financing. You have to pay for that money, one way or another.
The brokerage makes their money by purchasing your house at a low price. Otherwise it is not profitable for them.
This also raises the question of putting the interests of the broker against the interests of the client.
3. Ease of Process
Some brokers advertise themselves as a completely new and modern way of marketing your home. For example, automated home showings.
Instead of having an Open House, your house is always open.
Instead of having Realtors show your home to potential buyers, people can let themselves into your home with a secret lock code sent via text message.
If these features sound great to you, it’s because these models are counting on you to misunderstand the work that Realtors do.
The most obvious question is, do you really want total and open access to your property, by anyone, at any time, without any accountability?
In our current system (which by the way uses cloud, mobile and BlueTooth technology), only a licensed Realtor can provide access to a property that is for sale.
The listing agent will know the showing agent’s name, brokerage, license number, email, office number and cell number.
They will know at what time the showing began and when it ended.
The other way such brokers depend on consumer ignorance is how they advertise the ease of using their system.
When in fact, with the traditional method of showing homes I’ve just described, showings are scheduled at any reasonable time through the Centralized Showing Service (CSS), something any Realtor with a brain has been already using for years.
With CSS, sellers have total control over showing times, and they even have the option to approve, cancel or reschedule showings using their phone.
4. “Haggle-free” listings
The “haggle-free” model lists properties with the added bonus of not letting the buyer negotiate the listing price at all.
I’ve yet to understand how this is attractive to buyers.
The Future of Real Estate Tech
Perhaps in the future, homes will be mass-produced, like smartphones or ballpoint pens. This could be a large market for low-income housing and/or third-world development.
I’m a strong advocate for blockchain technology. There are many uses it will have to make real estate processes easier for both consumers and professionals.
Especially for futuristic, mass-produced housing, such properties could zip around from owner to owner worldwide at the speed of light.
The trend of solutionism, then, is to seduce consumers with streamlined apps that seem to make troublesome processes flow with the ease of a mouse-click or screen-swipe.
Many clever entrepreneurs, tech evangelists and real estate industry insiders are working hard to transform the industry with technology, and I am one of them. I also realize, however, that there are limits to what real estate tech can accomplish due to the basic nature of the industry.
Adaptation, Not Automation.
Real estate is intensely personal. People want a home that is theirs.
They want to see it with their eyes, and to take in the aromas baked into the kitchen walls.
To feel the textures of the finishes and materials. To hear the laughter of their children echoing from the rooms.
As technology learns to further copy our senses, it will always stay a marketing tool.
Of which the aim is to get buyers into the home to experience first-hand for themselves.
Nothing can replace real human encounters in the physical world (as long as real estate itself remains physical).
The more valued a property is to the consumer’s real life, the more this principle must be realized.
Now the tech-savvy Realtor comes in. With solutionism’s promise of automation comes the problem of overlooking and overriding problems that do not fit into their perfect models.
If all houses were in perfect condition, if all title was clear, if all buyers and sellers were honest, we’d have no need for Realtors.
If all industries were perfect, we would have no need for professionals (or even for the apps to jump in and disrupt everything).
The human being’s greatest strength, and possibly its reason for being superior to artificial intelligence, is adaptability.
Ask any computer engineer if computers are “smart,” and they’ll tell you they are stupid. Because they follow code.
If the code encounters an unforeseen problem, it crashes. (Hopefully, your Realtor doesn’t perform that way.)
Brokerages and services that are seeking to disrupt the real estate industry have a major problem. Their product is not digital.
The product is real estate, and it is as real as life itself. The word “real” is in the name.
It is important to not lose sight of not only the product, but of the service that Realtors give to consumers.
Instacart, no matter their innovations, must deliver physical groceries. Objects in the real world that can go stale, rot, carry diseases and pesticides, or just plain taste bad.
The wave of the Age of Apps is crashing on the shore. The dream of a perfect world controlled by “disruptive” apps falls apart more and more as practical and experienced consumers return to the hard truth that life can be difficult and unpredictable.
This is not to say that technology cannot and will not greatly improve the real estate industry. Technology can only be a tool to ease our lives, and not become our lives.
The key and the door are some of the most central images in human culture. These images can mean transition and return, routine and possibility, security and danger, exclusivity and access, mystery and familiarity.
Even when keys and doors are entirely replaced with smart devices, we’ll always need physical doors, and the means to open them.