Real estate, technology and a peek into the future
What if selling your property was as easy as trading your car? That’s the promise of one real estate agency/tech company/capital investor.
The way you buy, sell and rent property is changing and the speed of this change could soon take many by surprise. Like a lot of industries, technology is playing a part in transforming real estate, and we see the huge injection of capital and ‘tech funds’ as the petrol on an otherwise slow-burning fire of reinvention. I’ve just come back from the USA and a real estate technology conference that’s exposed some of the trends storming into their marketplace. History’s shown there’s often an insight into our own future in what our American cousins are doing. So here’s what we saw and heard:
“Faster everything. Lots of certainty. And keep it simple.” America’s real estate consumers have to be the most impatient on the planet! Home buyers want to view the property now, they want all the data now, they want to execute documents electronically and they want their closing (settlement) to be in as little as a week. And there’s now companies in the USA offering exactly that. Sellers want a sale immediately, with no inspections, no marketing and no extended negotiations. And there’s companies that do that too!
Innovation in property marketing has been incremental over the past 20 years. Web-based advertising eclipsed newspapers a decade ago and gave buyers the ability to search current info on the full marketplace right then and there. Presentation tools like video, drones, floorplans and virtual tours are filtering through our market, making it easier for buyers and tenants to shortlist. The technology improves – this trip we saw some new virtual tours that are a real class above, with none of the warping, over-exposed views from windows and ‘stuttering’ of most current platforms. And importantly the costs are coming down so they’re no longer limited to high end property. We can now confidently predict that virtual tours (with your goggles on at home to really enhance the 3D experience) will be very commonplace for both sales and rentals within the next 5 years in Australia. It’s the inspection you can have now. The instant gratification.
While buyers and tenants are being well-served by innovation, there’s been very little change in the service to sellers of Australian real estate over the past 20 years. Despite talk of disruption, real estate agents have provided a fairly consistent offering. There’s been some discount fee brands (who couldn’t attract good salespeople and largely went out of business) and one UK arrival (Pink Blocks or something….) that charges a low fee to list your property for sale. This one advertises heavily and we’d argue it does have a place in the market. But its salespeople get paid to put property on the market, not to sell it. Not one more dollar for them to take enquiries, or negotiate, or do extra work for the sellers unless they’re paid an extra fee. Inevitably this leads to dissatisfied clients.
But now with investment capital ‘washing about’ America’s business landscape, anything with a technology angle to it is attracting huge attention/cash and the ability to innovate. So that agency wanting to make selling property as easy as a car trade in? They’ll buy the house you want to move to, shift you in, tidy and stage your old place, sell it, then transfer the new one into your name. Oh, and if the old place hasn’t sold in quick time they’ll buy that off you too. Easy and fast.
There’s two main ‘pain points’ for anyone selling: uncertainty over “when will my property sell?” and “for how much?” And that innovator, one of a stream of capital-rich businesses termed “I-Buyers”, is giving sellers answers to these questions. Right now Americans can log on to the websites, type in their address and within 24 hours have a written offer for their property. No marketing campaigns, no open homes, no drawn out negotiations. Using online data and automated valuations (the ‘tech’ part of the equation that draws Wall Street’s attention in a heartbeat) another of these I-Buyers is already buying upwards of US$100m of property every month. There’s lots of discussion about whether they’re really paying fair market value and they do charge a service fee of 6 to 14% compared to the standard Realtor commission of 6%.
These companies tidy the homes then flip them. They’re quick to get them back to market (usually in less than 14 days) and they’re lowering their on-sale costs by., for example, allowing buyers to inspect these empty homes unaccompanied with another new technology that monitors their movement through the dwelling! High volumes, low margins, but in a market that’s generally rising with the rest of the US economy.
So is this an innovation we’ll see in Australia? Stamp duties seem the obvious hurdle, erasing almost any margin. Even if our capital markets had an appetite to fund the idea would Aussies want this service? Would we take an offer for our property with some doubt of whether we’d got the ‘best’ price? But with certainty that it was sold quickly, allowing us to move to our next home or free up our cash?
The real question – what would you pay for convenience, for certainty and for speed in the sale of your property? It might not be the big new innovation in Australian real estate, but this American trend might well open the door for fresh thinking on the service offered by our agents.
We’d love to hear your comments!