As homeowners, we have grown used to technologies that were once considered revolutionary. From our electric stovetop to our Ring alarm system, technology has found its way into every corner of our home. Inevitably, it has also made its way into the real estate industry, which was previously considered by many to be immune to such developments.
Technology has already transformed the property management branch. The ability to change a houses’ temperature, have an automated security system, and be aware of any type of leak even when the house is vacant is something that many homeowners rely on. This type of technology has made it easier for investors to buy and manage real estate outside of their local area.
The rise of ibuyers (instant buyers), virtual reality house tours, and simply the increased use of the internet has changed the way homeowners approach buying and selling. 43% of real estate buyers searched for “for sale” properties online last year. The concept of buying a house without ever stepping foot in it lessens any geographical limit to home-buying. Now Jimmy from Florida can tour, buy, and manage a house in Nashville without ever stepping foot in Tennessee.
However, compared to other industries, real estate is only beginning its relationship with technology. On the seller side, ibuyers like Opendoor have also paved a new road for homeowners giving them the option to sell their homes for cash almost instantly. Other companies like Unison promise to invest in a portion of the seller’s home and share the long-term appreciation with them. This helps struggling homeowners avoid foreclosure and accumulating serious amounts of debt.
However, some drawbacks have delayed the application of these prop-tech startups. Opendoor, for example, promised society a better way to sell their homes, but after Opendoor reported its fourth consecutive year of losses, there’s good reason for growing skepticism. Zillow, another magnate in the industry, has recently closed its homebuying branch due to faults in its ability to predict home values. These companies make their buck by flipping homes and charging homeowners irrefutable fees. The missing puzzle piece for these iBuyers is finding a way to draw in buyers quickly. If they don’t, they’ll be left owning hundreds of devaluating properties with little-to-no demand.
Opendoor’s “I buy your home for cash now!!” model is intriguing to 66% of homeowners who accept that they will make less money using an iBuying platform, but would still use it if it made the process more efficient. So the key for iBuyers lies in finding the sweet spot.
How much less is a homeowner willing to get paid for their property in exchange of using the benefits we provide them?
For real estate agents, this market growth in iBuying hasn’t correlated to a decrease in sales. Even though iBuyers are spending thousands of dollars on advertising, they only account for 1.3% of all transactions. Additionally, their offers are a significant 13.1% lower than receiving a conventional offer.
Companies like Sell2Rent and EasyKnock take a different approach. These companies aren’t in it to buy property, they’re in it to facilitate the transaction. Their job is to find offers from multiple investors. This way, prices for the same property are raised through competition.
Airbnb revolutionized the world of short-to-medium-term rentals, threatening the hotel industry. WeWork changed the way millions of Americans worked, putting its foot down on office management companies. Now, hundreds of prop-tech companies are attempting to do the same.
According to the Zillow CEO, their inability to accurately forecast the market was the main cause of the stoppage of their home buying division. More drawbacks like this will inevitably burst in as technology finds its way into real estate’s cracks, but the forecast for homeowners and investors alike is optimistic.