In the housing search space, all eyes are on the two Juggernauts: Zillow and realtordotcom/ Newscorp. And most of the discussion is about who has more listings, who has a better UI, etc…. However, there has not been a lot of talk about the innovations that will reshape the industry.
Here are some thoughts I would like to share with you and which I would appreciate your thoughts.
Personally, I see three potential directions that innovation in real estate tech could go.
1. More contextual data about homes and neighborhoods to help consumers make smarter choices. This is the direction Costar / apartmentsdotcom and findthebestdotcom seem to be going, as well as a number of early stage startups.
2. More vertical integration. Many sites now want to become an end-to-end solution for real estate transactions.– helping buyers get a mortgage, building inspections, closer tie-in with the advertisers, etc. This is where Nationstar and realtor.com seem to be going.
My guess is that contextual data will be the next disruption.
Unlike nearly every other consumer market, there is no source of reviews/ratings to help people make informed decisions about where to live (e.g. Yelp, Tripadvisor, Carfax, Experian, etc… are some of the examples from other markets).
Personally, I don’t even buy books these days without looking at reviews first. I have to think that anyone who can give consumers new information to help them choose the right home (the biggest spending decision most people will ever make) will ultimately win.
FYI – I do not agree that the next disruption is for someone to disintermediate real estate agents, as many people think. The more information becomes available, the more important it is to have experts to help interpret it.
History has proven this to be true. More people buy and sell their homes through agents today than at any time in the past.
I know that owners/landlords want MORE value. And they are entitled to it. Don’t forget value can be derived via cost reduction as well as additional services. Therefore utilizing technology we are able to reduce the cost for all owners, and yet ensure they get more value (in ways that are not in the current model). Yes there are some slight issues with viewings etc…., but as alluded to in a post earlier we are able to incentivize current renters to perform the viewings on behalf of the owners.
These new disruptive technologies are never going to please everyone, they have to start small and demonstrate considerable benefits over the current models. But I don’t doubt that when all the users compare how much money they have saved, and are able to go on more sunny holidays they will begin to migrate.
Some effective ideas worth considering:
1. Create a permanent national network of Property Profiles so each home has a single location for all information regarding insurance, taxes, bills, valuations, and all “the internet of things” that will come online over the next few years (a/c, security systems, etc…).
The property owner controls the home’s network and is the only one that can grant access. All family members have a profile and can use the home’s network to connect to the internet and other things on the network. Parents can control what their kids profiles can access such as bad websites or control of the oven.
When a transaction is desired, all parties must connect with the home’s closing table and contribute their piece to the transaction (contract, insurance, loan docs, money). The network needs to have a currency like Facebook credits so that the buyer and new lender can put money on the table. After the transaction, the credits are moved to the appropriate parties. Control of the Home’s profile is taken away from seller and the new owner assumes control, creating a living chain of title.
Real estate is the single largest market for fraud and money laundering. Conducting a transaction in this way creates a People, Documents, and Money trail. This also improves information flow through in the market since all information regarding a home & transaction is in one place and should have an improvement in market efficiency.
2. Team up with the mortgage services to contact each homeowner and offer a financial review of their home for free, kind of like a financial Car Fox for their home. In the process of providing the service, data is collected that can be used to improve Prepayment assumptions on a loan level. Prepayment assumptions are the most significant variable in determining the value of mortgages and MSRs. This could result in write ups on bank and mortgage service balance sheets and reverse some of the write downs from a few years ago.
3. With each home having a profile, one can apply one of the 3 methods of appraisal the income approach. Local brokers can claim a property, agreeing to manage it as a rental property. Local and institutional investors can place bids in the form of a desired return and indicate the dollar amount & locations they are interested in investing. It could take multi investors to get to a realistic amount of cash. Use a software to calculate an offer price derived from the investor crowd. This will create a standing bid for all properties should a home need to be liquidated to the investor market and significantly reduce Liquidity Risk in the market.
Maybe… Many people are working on pieces of this puzzle but no one is currently perusing a comprehensive approach.
There are a few other methods of reducing risks home owners and investors are exposed to by participating in the real estate market… too long to discuss in here.
All these things need to be done, this is not a market that can be improved by focusing on one little piece. It will be a fun decade for real estate.