Technology continues to infiltrate real estate in ways we never thought possible. In Los Angeles, a company is replacing the traditional real estate model with robots and “big data”. Out west in San Francisco, another bold startup is using blockchain to help customers buy homes anywhere in the world. Everywhere you look – the story is the same.
Real estate technology has produced two of the most valuable startups in the nation today – WeWork and AirBnB. But there’s much more to it. This article explores how tech is disrupting the industry as we know it.
1. Direct challenge for the traditional real estate model
Rex Real Estate Exchange – a 2014 startup – seeks to overhaul the traditional real estate model. The firm uses robots and ‘big data’ to lower the cost of selling a home. While a real estate agent will charge a 5-6% selling commission, the company takes just 2%.
Perhaps the main challenge facing Rex’s approach is that both buyers and sellers still value quality personal services from a professional real estate agent. The facts are very straight on that. In 2015 and 2016, 89% of all home sellers relied on a real estate agent.
“At the end of the day, most people are still relying on the value a real estate agent provides,” says Adam DeSanctis, a spokesperson for the National Association of Realtors.
But Rex’s Chief Executive, Jack Ryan, argues this could change once people learn how much money they may save using their platform.
“Traditional real estate rates are just crazy compared with every other industry in the United States,” he says.
|Rex identifies probable buyers by rigorously analyzing consumers’ income, spending habits, location, and similar data. It then reaches out to them through focused advertising on social media platforms and websites such as Zillow.|
Although computers do the more sophisticated work, the firm employs salaried real estate agents to guide both buyers and sellers through the transactions. This way, customers get the same service they would with a traditional real estate agent, but at a fraction of the cost.
Rex Real Estate Exchange has so far attracted over $16 million from investors. Four years down the line, the firm has managed to put up office locations in Los Angeles, San Francisco, Austin, San Diego, and Denver.
2. Blockchain powered real estate transactions
Experts predicted digital currencies would at some point in time be used for major transactions. In the real estate context, a San Francisco startup called Propy is taking steps in that direction.
The company recently helped Michael Arrington, found of online publisher TechCrunch.com, purchase an apartment in the Ukraine using digital currency. The title change was recorded the old fashioned way – on paper – but with the blockchain address for the digital transaction inscribed on it.
A few years ago, it would be hard to envision use of digital currencies to conduct such a transaction. But it appears we are much closer. “I can’t really tell you the date. But I think it’s going to happen much faster than everyone anticipated,” says Alex Voloshyn, the Chief Technology Officer at Propy.
|In many parts of the world, regulations are changing to recognize blockchain contracts. In the U.S., the state of Vermont is moving in that direction. Propy hopes to position itself as a major global property store dealing in digital currencies.|
Real estate insiders who understand digital currency deals say that they have numerous advantages over traditional transactions. “They are more transparent, more efficient, less expensive, and less prone to corruption,” says Drew Nichols, lead agent at Greenville’s Palmetto Park Realty.
3. Smart contract technology
SmartRealty is a Seattle-based startup that is working to apply smart contract tech to everyday real estate transactions. The company has been developing a smart contract template and management system that will handle common transactions in buying and selling properties, as well as rental agreements.
|Parties involved in the transaction will be able to build their own contract that is specific to the transaction.|
Some of the major benefits this platform will offer include enabling users to securely track payments and efficiently solidify the terms of their agreement. It reduces risk of fraud or theft, and provides a faster, more reliable and trusted system for sale, purchase or rental of real estate property.
4. Virtual and augmented reality
Augmented reality is another real estate technology frontier that has a real possibility of appending to the home buying process. Tech savvy real estate professionals have often used augmented reality to market real estate and entice customers to purchase property in far-away cities.
|Since buying a home can be a very emotional process, the technology helps personalize things by putting the buyer in the actual space.|
Pandora Reality, a firm based in New York and Istanbul, creates augmented reality solutions for brokers and developers who want to depict the potential of an unfinished space.
Currently, the challenge with augmented reality is that it still does not offer a true sense of realism. But this capability is right around the corner, according to most experts.
5. Chat bots to answer simple customer queries
Powered by artificial intelligence, chat bots are emerging as the technology of choice for answering simple customer queries. This rapidly growing technology being used in multiple industries to empower customers while freeing up employees’ time so they can focus on other pertinent tasks.
The good thing about chat bots is their capability to work round the clock. They can furnish customers with a relevant market report at 2 am in the night, and answer numerous customer queries in a matter of seconds.
|Chat bots are becoming an instrumental part of the real estate marketing approach, capturing data and generating leads on autopilot.|
A good example of a commercial real estate technology startup that’s using chat bots is Truss. This is a Chicago-based real estate firm that helps customers find office space below 10,000 square feet. The company uses an artificially-intelligent chat bot to automate the process of finding office space in cities like Chicago, Houston, Dallas, Miami, Washington and Austin.
The primary feature on their website is Vera, a cartoon representation of the chat bot that beckons visitors to start the process of looking for the perfect space.
Many technology-oriented real estate firms are picking up the use of these bots to improve customer service, improve engagement, monitor consumer data, gain insights, save costs and increase growth.
Investors are betting big on real estate tech
In 2017, investors splashed over $5 billion into real estate technology. That was a huge leap compared to the $33 million invested in the sector 7 years ago in 2010. Although total real estate investing declined in Q1 of 2018 compared to the same stretch last year, there are many indicators this trend will continue to hold. Large real estate firms are increasing investment in new technology as they seek a competitive advantage – and there’s an urgency to find the most promising startups.
Real estate technology startups are getting some major attention from venture capitalists. Here are some major deals that happened in recent times.
- Late 2017, real estate technology firm Compass announced a $450 million investment from SoftBank Vision Fund.
- Apartment List is a San Francisco based firm that helps landlords find renters, and only charges after the landlord has success finding someone. The startup raised $50 million from Passport Capital, Industry Ventures, and other venture capital firms.
- Rentberry, a rental platform that uses blockchain technology to connect tenants and landlords, raised over $20 million in funding through its initial coin offering.
- Last year, Truss (the Chat-Bot Powered Commercial Space Finder) raised $7.7 million in Series A funding.
From applications that help manage multiple rental properties to machine learning solutions, technology will continue to impact real estate.Through innovation, and investing in promising startups, forward thinking players are positioning themselves to own this future.