While the Silicon Valley is still the technology hub of United States – and from the look of things, it’s going to stay for decades to come – it doesn’t mean things aren’t happening all across the country. In fact, real estate startups are starting to pop up around the US.
And with CBRE’s acquirement of Floored back in January, it not only shows that real estate startups are starting to reach a maturation point, but also that technology is finally starting to make some waves in the real estate industry.
Why Did We Wait for So Long?
For your average home buyer, the impact of technology on the real estate market is still not exactly visible – but trusts us, it is in fact there. You just need to squint a little bit to really see it. However, unlike in many other industries out there, consumers still heavily rely on other people rather than applications to find what they want.
According to NAR’s Real Estate in a Digital Age report, people work with a real estate agent roughly 88% of the time to find a property they want. Although the initial process may start online, people still turn to the advice from a trusted agent when it’s decision-making time.
And that’s just one of the reasons why the housing market has been so resistant to changes. Here are a couple more reasons why people strain from technology in this particular industry:
- Despite all progress, real estate is still mainly local and knowing the neighborhood has value;
- Local brokers usually have the monopoly on property through the Multiple Listing Service;
- Most people don’t understand the information they are presented with so they need assistance from real estate agents;
- Overly-complex contracts, mortgages and closings make potential buyers more comfortable working closely with an agent, even if his fee is expensive.
The State of the US Real Estate Market
In addition to the reasons we listed above, the market in the United States pretty much different from any other market in the world. For instance, thanks to the intervention for the US government, the fixed-rate mortgages are almost universal in all of the states and locals, which is not so common in the rest of the world.
And that’s not all. The Mortgage interest-tax deduction is also a valuable part of country’s tax code and last but not least, the standard 6% commission for brokers in the country is much larger than in any other country out there – which you can see on the international property catalogue Tranio. Basically, our market is inefficient to say the least.
The Disruption Has Already Begun
You’re probably thinking, since people are so dependent on real estate agents and since the market is so specific, the housing market will stay the same for a long time, right? Wrong… You’re about to see that the housing market is not only ripe for a tech disruption but that some changes have already begun. And here are a couple of things you should have in mind:
· The Demand for Lower Commission Rates
This is not a new issue by any stretch of imagination. For example, just take a look at this 2005 Times article that talks about a variety of flat-fee and even about the possibility of discount brokers. And these complaints about the broker fees continued well into 2010s.
Two years ago, the Washington Post reported on the DANGER report, which rocked the whole industry with the acknowledgement that people are now demanding lower rates and that brokers all across the US are responding to the demand with new pricing models that are expected to become common in the next 5 to 10 years.
While people still need a real estate company to discuss the details of the purchase – especially when it comes to a commercial property, which tends to be more complicated – information out there, people simply need less from real estate agents. Simply put, agents are less essential than they’ve been before.
· The Upsurge of Real Estate Apps
According to a 2015 NAR survey, around 40% of first-time buyers look for properties online as a first step in the home-buying process. But the Internet is just a part of the story – ever since the introduction of the iPhone, home-sale data has been set free.
You know the saying – if it exists, there’s an app for it – and today, you can find a number of useful real estate apps like Zillow, Redfin and a dozens of others with just a few clicks. What’s more, these apps can help you right there on the spot, while you’re still looking at various properties.
For example, you can just take a walk around a neighborhood and use Zillow to see what homes are for sale, what they cost, what was sold at what prices. You can even get a virtual tour and see the pictures of the interiors. To cut a long story short, a simple app can now provide you with all of the information an agent can for a one-time fee or in some cases, completely free.
· The Amount of Available Data
Let’s back at Zillow once again. If you’re selling a house, you can easily use Zillow’s database to sell your house a lot faster. You just need to register at their official site to do it and the process is surprisingly quick and the best thing about it – it’s completely free.
You just need to search for homes similar to your – with the same number of rooms, the same proximity to schools, with an updated kitchen, so on and so forth – and use that information to create two separate lists. One should be a list of homes similar to yours and the other made up of homes sold in the last year or so. This will allow you to see what is currently at sale and what sold in the past.
These two price ranges will help you find a sweet spot in between and help you sell your house quickly. This is just one of the many ways consumers could use a huge amount of data out there to deal with their real estate problems without any intervention from a real estate agent.
The Bottom Line
In the end, you can clearly see that new technologies are changing the housing market as we speak. Not a day goes by without a fresh new startup popping up, promising to bring a new wave of innovation in the world of real estate. And we all have to agree that the tech revolution is inevitable in the real estate market, whether some people like it or not.