Technology is the new real estate

I recently wrote about companies that are going through identity crises. Are they real estate companies or are they technology companies? Regardless, the big name real estate disruptors have changed the industry. They have given home buyers control of their home search. They have also given home sellers choices of real estate services and commissions. But the recent trend of real estate companies touting themselves as technology companies may be a signal that large real estate brokerages want more change. But are they mistaking the map for the territory?

Are real estate brokers still interested in selling homes?

technology and real estate
Technology (infographic from nar.realtor)

Last November, the real estate brokerage Compass made headlines because of its ability to raise massive capital investments. In a Compass press release, the company announced raising $100 million in capital (Compass Raises $100 Million in New Investment Round; prnewswire.com; November 8, 2017). The colossal investment comes one year after raising $75 million in capital. The capital is to be used for expanding brokerage offices in new markets as well as “building new technology.”

Compass’ vision is to be “the world’s largest real estate platform.” The press release quoted an investor saying:

“Compass has proven that its technologically advanced platform is incredibly attractive to the industry’s top agents…Their position at the intersection of technology and real estate gives them the unique opportunity to be the single largest holder of real estate data, ushering in a new realm of possibilities for agents and clients alike.”

In a similar move, RE/MAX announced this week of its purchase of booj, a technology company. In a February 26th RE/MAX press release, the acquisition is touted as means to “…deliver core technology solutions designed for and with RE/MAX affiliates. The objective: technology platforms that create a distinct competitive edge for RE/MAX brokerages and agents…” (RE/MAX Takes Bold Step to Provide Best-in-Class Technology; remax.com).

Is the shift to  being a technology company about revenue?

It would seem that recent industry moves may indicate that real estate brokers would prefer to be technology companies. However, the latest trend may be more about generating revenue, raising capital and investor relations than it is about selling homes.

Lizette Chapman’s report on the matter is revealing (Tech Startup or Real-Estate Broker? Fidelity Values Compass at $2 Billion; bloomberg.com; November 8, 2017). Chapman likens Compass to Redfin saying that the company “is almost certainly unprofitable,” although generating massive revenue. In her reporting, Chapman quoted a seasoned real estate agent who was briefly with Compass, “The technology was mostly marketing tools…It was sleek, but I can’t say it was different from anything else out there.”

Although many home buyers and sellers turn to the internet for housing information, they don’t wholly rely on technology when choosing real estate services. According to the National Association of Realtors 2017 Profile of Home Buyers and Sellers (nar.realtor), a majority of home buyers and sellers hired agents with whom they worked in the past, or were referred by friends and family.

The problem with technology is that humans are the ghosts in the machine. The human element, contrary to technology, is erratic, messy, and highly subjective. The human element remains at the core of home buying and selling.

Many consumers recognize that tech and the internet are tools that are often used as gimmicks to get their business. Technology is not a substitute for an experienced real estate professional who can also empathize along the home buying/selling process. The turn to tech only underscores that residential real estate is still a personal business.

Choosing a real estate agent

Choosing a real estate agent is much like searching for a home.  It is an objective and subjective process.

The real estate agent is supposed to be a fiduciary that is supposed to protect your rights and assets.   A real estate agent is supposed to be honest and act with integrity.  They should act in your best interest.

The quality of an agent is not dependent on the firm. Quality agents are affiliated with almost all brokers. If you haven’t already, ask friends and family for their recommendations.

Prepare questions to interview several agents.  The purpose of the interview is to learn about the agent’s professionalism, training, and knowledge base.  You get to hear about their experience, and get a feel how they interact with you.  Besides asking about their experiences, ask how many years they have been selling homes, and if they full time agents.

If you live in an area where agents are licensed in multiple jurisdictions, ask about their experience in the area you plan to buy/sell. Just because they have a license to sell homes doesn’t mean they have extensive experience in that jurisdiction.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Industry disruptors changing real estate

Reat estate industry disruptors
Reat estate industry disruptors (infographic from nar.realtor)

Buying and selling homes hasn’t really changed much over the years.  It still requires a buyer and a seller.  Getting them together often requires a real estate agent or broker.  Sure, technology has changed the brokerage relationship dramatically.  It has also forced players in the real estate industry to change or get out of the business.  A new trend of real estate brokers are embracing technology like never before.  Will these real estate industry disruptors change how real estate services will be provided in the future?  Will these industry disruptors drive a new enthusiasm for “real estate technology brokers“?

One the largest players in the real estate industry is Zillow.  Although Zillow has a number of services that can bring home buyers and sellers together, they are mostly a technology company that serves to provide consumers information.  The company generates revenue by selling services to real estate brokers and agents, as well as mortgage companies and loan officers.  Many consumers visit Zillow’s websites to view information about homes for sale or rent that are listed with brokers or the homes’ owners.  Consumers don’t pay Zillow a fee or commission for the service.

Over the years, many have talked about how Zillow’s technological influence will predict the real estate industry’s future.  Those real estate prophets foretold a time when home buyers and sellers will be able to do business on the internet without a real estate agent or broker.  But in reality, Zillow’s influence only cemented the necessity of a broker or agent to facilitate the transaction.  Zillow’s success has generated millions of dollars in revenue, but the company has struggled to post an annual net profit.

Redfin is another real estate company that has a significant internet presence.  Some think of Redfin as a technology firm offering real estate services.  But the reality is that it is a real estate brokerage built around technology.  Redfin has built its brand, and went public this year.  Although the company generates millions in revenue, the Seattle Times reported that Redfin’s IPO offering indicated that the company has yet to post an annual net profit and has accumulated losses of $613.3 million (Seattle real estate company Redfin files to go public; seattletimes.com; June 30, 2017).

Companies like Zillow and Redfin are not the only players in real estate know for technology, but they may be the most well-known.  These companies are part of a new generation of companies that strive for a huge internet footprint to drive business.  But Zillow and Redfin demonstrate that technology in and of itself is not a guarantee of profitability, nor has it been an absolute “game changer” for the real estate industry.  Instead, technology has been the catalyst for change.

Industry disruptors and real estate

Consumers probably don’t realize the subtleties, but the rapid changes in real estate technology has forced real estate agents and brokers to change how they engage their clients.  Since companies like Zillow and other real estate aggregator sites have propagated the internet, the role of the real estate agent and broker has shifted away from being the source of information to being the source of a meaningful analysis.  Agents and brokers have also shifted their roles from information keepers to transaction managers.

What better way to be a real estate change agent and industry disruptor than to build a business around technology.   Redfin is probably the most poised to make major impact to how consumers are served in the real estate industry.  With all of its tech goodness, Redfin’s contribution to the industry hasn’t been as much technological than financial.  The brand will likely be known for being instrumental in reducing real estate commissions.  In markets where Redfin has been successful in establishing its brand, agents have been under significant pressure to lower listing commissions and/or offer buyer rebates.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Blockchain, Bitcoin and real estate

blockchain
How will blockchain help the real estate transaction? (infographic from floridarealtors.org)

Is a Bitcoin mortgage in your future?  Probably not.  Mortgages will not be in Bitcoin in the near future.  But that doesn’t mean that the blockchain technology that underlies cryptocurrency won’t be making the real estate transaction cheaper and more efficient.

Brad Finkelstein reported on the difficulties of a Bitcoin mortgage (Virtually No Chance Soon for Any Bitcoin Denominated Mortgages; National Mortgage News, 2014).  Cryptocurrencies have a history of volatility, Bitcoin most recently lost about a third of its value (see: Bitcoin at crossroads after shedding more than $27 billion in value; marketwatch.com; September 14, 2017).  Instability of the currency is a major issue for a thirty-year mortgage.  Finkelstein stated that such short-term losses could cause the mortgage holder to “lose their shorts,” and cause the borrower to default.  He also pointed out that regulatory hurdles will be difficult to transcend, stating that mortgage rules and closing disclosures are calculated in dollars.  Not to mention the difficulty of appraising a home’s value in Bitcoin.  Additionally, all parties that are part of the transaction (such as appraisers) need to accept payment in Bitcoin.

Finkelstein also pointed out other cryptocurrency flaws.  Unlike currencies such as the euro or yen, cryptocurrencies are not backed by a government that guarantee an exchange rate.  Because of the lack of government backing, cryptocurrency values are easily manipulated.  Cryptocurrencies have also been associated with illicit internet transactions.

Although cryptocurrency mortgages may not be feasible, Finkelstein noted that “cash” transactions conducted in Bitcoin is a possibility.  Luke Stangel reported on a Miami mansion recently listed for sale in Bitcoin (Brother, Can You Spare a Bitcoin? Miami Mansion Is Listed for About 1,400 Bitcoins; realtor.com; September 6, 2017).  Two real estate agents interviewed about the sale stated that some aspects of the transaction may still be traditional, such as an escrow being deposited as well as title transfer.  However, the transferred funds would be Bitcoin.

Stengel’s report suggested that the interest in conducting real estate deals in cryptocurrencies is to speed up the sales process and provide a secure transaction.  However, because of the associated processes that occur during a transaction, the timing of such a transaction may not differ much from any other cash transaction.  Security is another issue and can be debated as Bitcoin and other cryptocurrencies have had their share of hacking too.

With so many issues and hurdles, cryptocurrency on its own may not be the (immediate) future of real estate.  However, its underlying technology is of interest.  The technology that makes Bitcoin and other cryptocurrencies possible is called blockchain.

Blockchain technology has the potential to revolutionize the real estate transaction by reducing the time and cost needed for processing a mortgage and title.  Blockchain technology is essentially a chain of blocks.  Each block records and holds information.  When a block is recorded, it is encrypted and cannot be changed.  The recorded information can be currency (such as a Bitcoin transaction), records, contracts, etc.  The draw to blockchain is that it is decentralized, making it difficult to corrupt and easy to restore.  Additionally, retrieving information is much faster because the chain of information is essentially available at your fingertips.

Many are skeptical of blockchain technology.  Not so much because of its disruptive potential, but because it is not impervious to problems.  Some issues include security, cost and complexity.   A revealing critique of blockchain was written by Jason Bloomberg (Eight Reasons To Be Skeptical About Blockchain; forbes.com; May 31, 2017).

However, blockchain advocates still maintain that the technology provides ease of access and secure recording of blocks of information.  The touted benefits are claimed to decrease the time of the average real estate transaction, and reduce the cost to the consumer as well.

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Self-driving cars and home buying

self-driving cars
Self-driving cars (infographic from crowdcompanies.com)

Technology has made homes more efficient and environmentally friendly, while also making them more comfortable.  Technology has made the business of real estate become increasingly easier through electronic communications and electronic signatures.  Technology has also made finding a home much easier too.  It’s obvious that the real estate industry has been greatly impacted by technology, but will the self-driving cars technology impact real estate?

A curious article that appeared in a recent issue of Appraisal Journal suggests that self-driving cars will eventually influence real estate (A Largely Unnoticed Impact on Real Estate-Self-Driven Vehicles; Appraisal Journal; Winter2017, Vol. 85, No.1, p51-59).  The authors, Levine, Segev, and Thode, discuss how self-driving cars will likely become a standard on our roads, as well as likely changing the way we think about where we live.  There is a suggestion that the wide spread adoption of self-driving cars could bring about a suburban renewal.  As self-driving cars become more abundant, some suggest that would influence some home buyers and their decisions on where they choose to live.  The concept of owning a self-driving car could make the choice a little easier to opt for the less expensive suburban home with more land.

However, you should consider that owning a self-driving car might not make your suburban commute more convenient.  For many home buyers, a reason to move closer to an urban area is to reduce the commute time to their jobs.  For some, the thought of increasing their commute time even by ten to fifteen minutes (by virtue of an extra metro stop) is unacceptable.  Sitting in your self-driving car is not much different than sitting in a metro car or bus.  So the notion that owning a self-driving car could spawn suburban growth may not hold water.

Owning a self-driving car won’t make the suburban commute less expensive.  Many home buyers decide to live closer to their jobs to save money and energy.  The self-driving car is like any other car, such that there are operating costs.  Regardless whether your self-driving car is electric, gas or hybrid, there are fuel costs.  There will be maintenance costs too.  And of course, you need to a place to park it like any other car.

Even the value of commercial real estate may not necessarily be affected by self-driving cars.  These vehicles won’t reduce travel time to the store, nor would they make any business more convenient than another.

Let’s face it, self-driving cars isn’t the internet.  These vehicles are a convenient way to travel for sure, but they won’t change how we communicate.  Nor will they change the basic requirements we seek from our homes.

However, a government policy shift, much like the policies favoring designated car-pool vehicles and mass transit, could tip the scales in making the self-driving car the vehicle (no pun intended) to changing the real estate landscape.  Creating special lanes for self-driving vehicles could reduce commute times, thus reducing fuel costs.  Requiring dedicated parking for self-driving vehicles could also influence commercial real estate.  However, like the impact of designated car-pool vehicles, a major impact to our lifestyle is unlikely from self-driving cars.

Choosing where you live is a personal decision that is impacted by many external factors, including quality of life.  Of course the self-driving car is a technological advance that is surely to affect how you travel.  However, it is doubtful that owning a self-driving car will largely impact your quality of life and how you decide where to live.  In fact, the authors of the above mentioned article point to a 2016 Kelly Blue Book survey that indicates that a majority of Americans prefer “cars that are not fully autonomous and retain some ability for individual control.”

Copyright© Dan Krell
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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

Domestic robots in home

domestic robots in home
It’s time for domestic robots in home (infographic from tumotech.com)

Today’s smart homes are still a far cry from the futuristic visions of the last century.  Home automation has certainly advanced over the last one hundred years.  Think about the washer and dryer, and even the personal computer.  It’s time for domestic robots in home.  If you’ve seen episodes of the 1960’s TV show The Jetsons, you remember how Rosie the Robot cooked, cleaned and was a companion for Elroy.  Rosie’s legacy has set the bar very high for domestic robots – and we are approaching that standard rapidly!

Many home automation tools that were developed through the 1960’s were not available to the average person because of costs and/or technological limitations.  Consider that remote controlled television was developed in the 1950’s, and color television became widely available during the 1960’s.  The personal computer as we know it was developed in the 1970’s, but wasn’t widely available until the 1980’s.  However, as home automation rapidly progressed with the technological jumps of the last half of the twentieth century, devices became more affordable and common place.  Fast forward fifty years, virtual reality is the home entertainment trend and many refrigerators have more computing power than the PC’s developed in the 1970’s!

Today we take for granted many of the automated systems in our home.  What takes minutes with the help of our modern appliances, took hours with early rudimentary counterparts; and most likely an entire day without any automated assistance.  Certainly the average person fifty years ago would not have imagined their home being automated by programming their appliances, and certainly not on a cell phone.  The 1962 and 1964 World’s Fair introduced the futuristic smart home to the average person; and to some extent, we’ve already surpassed those expectations.  We were introduced to the idea of a centralized “brain” that controlled the home in 1962; and computerized appliances and time saving devices in 1964.

As smart homes advance, robotics will be an integral part of your life.  In fact, you can buy a robot today.  Of course, you’ve heard of Roomba the floor cleaning robot.  Roomba’s parent company, iRobot (irobot.com) also sells a pool cleaning robot and other robotic devices for the home.  There is the Litter-Robot (litter-robot.com) to clean after your cat.  And although they’re not like robots portrayed in the movies, there are humanoid robots for sale today that can be programmed for simple tasks.

Tumotech (tumotech.com), the online magazine about future disruptive technologies and innovations, declared the rise of domestic robots in a May 12, 2014 article The robot revolution – The rise of domestic robots.”  Initially, it is thought that advances in robotics will allow robots to clean homes, take care of the lawn, be a security patrol, and even tend to those who are ill.

As robotics and other technologies rapidly develop and merge, it is conceivable that we will have humanoid robots doing much of our daily tasks and interacting with us as companions in twenty years!  However, having humanoid robots in the home may not be as wonderful as we anticipate.  In their chapter “If I had a Robot at Home… Peoples’ Representation of Domestic Robots,” psychologists Scopelliti, Giuliani, D’Amico and Fornara suggest that robots taking over our daily tasks and moving in to our homes may be detrimental to our self-esteem and personal identity (Designing a More Inclusive World. Edited by Keates, Clarkson, Langdon & Robinson, Springer, 2004).

Copyright © Dan Krell

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.