Technology and Innovation in Real Estate
What is the role of technology and innovation in the residential real estate sector? There are two schools of thought between new and innovative companies. One is technology must reduce or eliminate the role of professionals (broker / agent, title attorney, lender) in modification and the other is technology must improve the quality of service and efficiency of those professionals.
History and many failed companies have shown that most users want professionals who advise during the sale or purchase of a home, a weight of DIY options.
The overarching goal of technology and disruption in the residential real estate sector is to help professionals deliver a higher quality service more efficiently, which in turn will improve the experience and reduce costs (commissions / fees) for the consumer. It’s also important to improve the technology that enables buyers and sellers who prefer a DIY approach, but that’s not where the bulk of the investment should be.
1 challenge: fragmented purchasing power
The biggest challenge facing startups in the residential real estate sector is the fragmentation of the purchasing power of the industry, making widespread adoption difficult and expensive. Most real estate agents are independent contractors who make their own decisions about what systems and technology to pay for, so an entrepreneur / entrepreneur with a great idea has to convert tens of miles (or more) of people instead of just a handful of decisions. manufacturers with great purchasing power.
Most agents are loosely organized into brokerage offices, brokers, and franchises that theoretically have greater purchasing power to support startups, but it may be difficult to find technology that is useful or adopted by agents and their clients to justify the cost of implementation across the organization due to so many niche practices and the independent nature of agents.
As they say: technology made for everyone is not good for anyone.
Some brokerages implement top-down in-house technology development and, as a result, have produced large platforms / systems, but even those technologies lack the disruptive innovation that startup industries do because they cannot reach their core business in the future. failed technology development.
Many of the large brokerage firms that practice top-down technology development suffer from common illnesses, such as expensive systems that become legacy systems before generating enough value to justify the cost. The cost of in-house development is too high in many cases, which is why many of the companies with the technology / disruptor brand announced the first and largest permits / layoffs in the industry within weeks of the COVID-19 pandemic .
There is a great opportunity for disruptive technology in the residential real estate sector, but the fragmented nature of the industry makes it difficult for desperate new big companies to reach profitability fast enough to survive.
This is one reason why venture capital money has been invested in the PropTech (Property Technology, which also includes commercial real estate) industry in recent years, with investments increasing from $ 491 million in 2013 to $ 12.9 billion in the first half of 2019.