Real estate today looks a lot like it did twenty years ago. Homeowners work with intermediaries like brokers and banks to connect with prospective buyers. New tech developments, however, are poised to change the real estate market.
In the past, the main technological innovations in real estate have been websites like Zillow and Redfin, which moved real estate listings online. But the real estate market today is especially ripe for disruption. Lack of affordable development, a slow and complicated buying process and a lack of transparency have all inspired startups to use new technology to radically change real estate.
Big data appraisal
Big data analytics — the use of software to analyze huge amounts of data — is being used to change how we buy and sell homes.
Companies like Opendoor are using advanced analytics technology to make buying and selling homes as frictionless as possible. With the Opendoor model, a home-owner wanting to sell their house asks to have the property appraised. The company then uses a combination of data, analytics software and a small team of appraisers to put a value on the property. Once priced, selling the house is as simple as clicking a button to accept the offer.
Opendoor hopes to eventually make every step of the process — whether you’re buying real estate or selling it — just as easy. In recent months, they have begun selling homes directly to customers. In the future, the business may be more of a real estate marketplace than a high-tech broker, facilitating sales between home-owners and buyers.
Opendoor’s chief executive hopes that the platform will change the role of a real estate agent from broker to advisor. The agents of the future will provide potential homeowners advice about how to pick a good school district or how to know what you can afford.
Opendoor’s entry into the market has inspired other companies and investors to follow suit. Startups OfferPad and Knock, which offer similar real estate services, have entered the market. Real-estate listing websites like Zillow and Redfin have also begun to offer their own version of the services.
Blockchain-based real estate
Cryptocurrencies have radically changed our understanding of the possibilities for greater transparency and decentralization with currency. Blockchain may do the same for real estate.
In the future, it may become normal for the buying and selling of real estate to utilize blockchain. If two parties agree to transfer real estate using a blockchain-based platform, both the buyer and seller may be able to cut out intermediaries like brokers and banks. By communicating directly with the party they plan on selling to or buying from, both parties will save both on time and in fees.
Real estate is traditionally considered a highly illiquid asset due to the slow process of buying and selling it. With blockchain, this may change. Real estate, when treated as a token or cryptocurrency, can be readily traded from party to party.
With new blockchain-based platforms, information about the ownership — both past and present — of real estate properties traded on the network will be stored on the blockchain, and visible to every party that uses the network. This information could increase the confidence buyers and sellers have in the system and decrease the incidence of fraud.
Hi-tech affordable housing solutions
New startups are also helping the real estate industry adjust to the way that millennials and Gen Z are living. A full third of millennials still live at home. Most millennials that have moved out are renting instead of buying homes. Things don’t look better for Gen Z, who are expected to spend a substantial amount on rent.
This has presented a problem for traditional real estate companies. While there may be large amounts of housing available, there aren’t a lot of people who can afford it. Meanwhile, the development of affordable housing has slowed significantly.
New startups have presented several paths forward. Some, like housing construction company Katerra, wants to tackle the problem on the supply-end. Katerra’s strategy is to develop modular, prefabricated housing with low construction costs and sell them to customers in need of affordable housing. Others, like tech startup Divvy, use data science to source rent-to-own properties for tenants with bad credit scores.
How technology will change real estate
At the moment, the real estate market is open to major disruption. New technology has made processes like valuation easier to automate than ever before. Difficulties like a major lack of affordable housing, the slowness of the buying and selling process and the current necessity of intermediaries are all problems that startups are hoping to take advantage of.
DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.
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