Why I’m Not Sold on Real Estate Technology
A friend invited me to evaluate a real estate technology product that would “transform the experience of buying, selling, leasing or renting a home.” That’s a tall order.
The press release stated:
“The Internet along with market forces of cost reduction and individual control, has led to fundamental changes in many industries. However, the real estate industry is largely unchanged. The market is cluttered with fragmented offerings which don’t provide a way to conveniently connect buyers with sellers and renters with landlords, or simplify the complexity of a transaction.”
Let’s review this statement through the lens of the consumer, home buyer and seller:
The Internet has led to Fundamental Changes.
This is true. Just think of online news, online games, social media, Amazon.com. In the real estate space, the most prominent Internet players are Zillow and Trulia – about to become one company.
Market Forces of Cost Reduction
This is a mixed bag. Online shopping for books and shoes, absolutely, although shipping can spoil the price. When it comes to the cost of an airline ticket, not so much. As it concerns real estate more consumers know now that commissions are negotiable. They always have been.
Market Forces of Individual Control
This, I suppose, means eliminating the “middle man” (middle person?). Booking your flight and hotel online is a breeze. So is selling and buying on Craigslist. In real estate, eliminating the middle man, the agent, has proven more difficult. The For-Sale-by-Owner route with total individual control has been around forever. The Internet should have been a boon for that business model. Yet, it hasn’t.
Real Estate Industry Is Largely Unchanged.
It looks like that from the outside. As an insider, one of the middle men, I experience the change every day. There are hundreds of real estate portals that compete for attention. Just yesterday, one of my clients called me with a screaming deal she found on the Internet. A four-bed, two-bath foreclosure being offered at an auction for $280,000. So said the consumer Internet portal. Digging deeper, I found the starting auction price to be $535,600. My client’s email reply was, “LOL, thought too good to be true.”
No Convenient Way to Connect Buyers with Sellers
Now, here I must disagree. What could be easier than to put an ad on Craigslist and find a buyer that way? How difficult is it to put a sign in a yard that advertises “For Sale by Owner” and lists the property Website? Why not simply send an email to your entire contact list saying that you are looking for a home? How about driving to your favorite neighborhood and knocking on doors telling the owners to contact you when they are ready to sell? (I admit this method may not be so convenient.)
Technology is Not Simplifying the Complexity of the Transaction.
Here I agree wholeheartedly. Nothing causes more frustration than the complexity. The solution, however, is not simply speeding up the process with paperless methods and electronic signatures. Speed and convenience do not improve understanding. The complexity of the transaction is rooted in the litigious society we have become. Just look at the Seller Disclosure, required by sellers of residential real estate in Washington State. During my 12 years in real estate this hard-to-read and not-easy-to-understand five-page, fine-print document has been expanded four times.
Needed: Real Estate Technology that Creates an Educated Consumer
My challenge to the people in software development who are fascinated with real estate technology is to focus on the education of the general public. An informed consumer would be in a much better position to understand the risks and rewards of selling and buying a home. As a real estate agent I try to educate through my monthly newsletters and my website.
The truth is that people live busy lives and are not inclined to learn about real estate facts, laws and procedures until they actually need to know. Once they need to know they rely on me to give them a crash course on how it all works or teach them along the way as we move through the process. Long before I earn any money I must earn their trust. And sometimes all I earn is trust.