REAL Trending Episode 49
Tech, iBuyers and Infrastructure
From REAL Trends, the trusted source for real estate industry news this is REAL Trending, episode 49. We’re breaking down the trends of the week and showing how they impact brokers and agents. I’m Steve Murray, president of REAL Trends. Today, we’re discussing what is tech about, the future of iBuyers, and who’s going to supply all this infrastructure? So let’s jump right in.
What is tech about? At our recent conference, the Gathering of Eagles, I heard probably the most definitive statement from one of the leading technologists in our industry, Josh Team of Keller Williams Realty International. Not once, but twice, on a panel he made a very, very interesting point which really does describe what tech is all about. So what did he say? He said very calmly and very directly that real estate technology must first be focused solely on improving the consumer experience. Yes, you need various tools and applications and it does start with a platform. He was emphatic about that.
But I thought it was interesting because I’ve literally never heard anyone so definitive about everything we’re designing that enables agents to be more productive or to be more in touch with their consumers and their customers and the prospect has to start with creating a tech delivery of information and answers and community information that is pleasing to housing consumers, even if they’re not in the market right now.
Because it’s a great experience of what we can deliver to them that’s useful that’s going to be the most valuable. It was interesting, adding to that in a later panel, what we called our tech pitch, we heard from a gentleman named Ernie Graham who, with some partners, built an incredible app called Homebot, which is like an AVM [automated valuation model] on steroids. But you know, he doesn’t call it evaluation AVM, he calls it a wealth tool for homeowners and or renters.
It doesn’t just say “Here’s what your home is worth,” it says, “Here’s what your equity is worth and here are the trend lines in that. And here’s how much interest and principle you’re paying. Oh, and by the way, if you put X numbers of hundred down more a month, here’s how fast you would pay that loan off and how much less interest would you pay.” I mean, it got the attention of our attendees, that’s for doggone sure. And actually, most people commented it was the most interesting thing technology-wise that they saw at the conference.
What was the key of Homebot? It’s very pleasing to the consumer. It’s very informative, it’s very design friendly, it’s very easy to use. And so I think what we heard, both from Josh Team and from Ernie Graham at Homebot is that we have to develop tools that are useful and pleasing, perhaps entertaining is another word we could use for technology in the real estate business.
No, no, it doesn’t mean that you don’t need accounting and back office and transaction management and digital signatures and all kinds of tools to communicate with customers. But I thought that Josh Team was correct, just like I thought Ernie Graham was correct. We have to focus on building tools that answer questions that are pleasing, that are informative and most of all that are useful to consumers for those who want to win the coming real estate tech wars.
On a separate area–the future of iBuyers, we were pleased to have leaders from four of the strongest iBuyer companies. By the way for readers, they don’t like that term at all, but given that we haven’t come up with something else thus far, we’ll stick with the term iBuyers, you know, companies that are buying homes directly from consumers and putting aside all of the discussion of how they do it and how they value it and how they process.
Probably the most important thing we heard, and something I had not heard before from anybody in the industry is, imagine if you have 5, 8, 10 of these companies, all well-funded, all offering the convenience and the certainty of a homeowner being able to find somebody that will pay them nearly fair market value and cash them out in a week. I mean, nobody can deny the convenience of that, nobody can deny the certainty of that.
One of the points they all made when they got talking about it is, today we’re stuck at around 5 million existing home sales and perhaps 500,000 to 600,000 new home sales a year. They put forth the opinion that if you eliminate the kind of friction that goes on in the normal home-selling and home-buying process and you do so for 10% or 15% or 20% or 25% of the homes in the marketplace you could actually increase the number of transactions.
People may well be willing to trade more frequently in and out of their homes, particularly when you consider that 22 million, one- to four-family homes, are owned by investors. By the way, that’s compared to approximately 84 to 85 million owner-occupied housing units.
So, one-fifth of all structures, one- to four-family, that are owned or owned by investors. What if they can trade like that? Will they buy more and sell more? Not to mention normal homeowners, if somebody can trade out within weeks and get a fairly large portion of their home equity out that quickly and move on to buying their next home, might we one day see a whole class of homeowners who are more like Amazon shoppers, you know, impulse buyers?
They’re out one day, they see a home they like and they go, “Martha, we would love that home. Let’s go get Opendoor, Offerpad, Zillow, Keller Williams, Knock [or] Ribbon. Why don’t we get them to buy our existing home and then we can get into that home? That looks cool and we like that neighborhood.”
That’s a fascinating topic and a fascinating thought for the future. May well the frequency and the number of homes being traded go up because of these companies. Interesting question. Each, by the way, reported that in more ways than naught, they use existing real estate professionals to help people buy and sell. They may not offer the same level of commission but they do use Realtors. We thought that was another positive outcome.
The third topic is, who supplies the infrastructure for the industry? I mean, we have six to eight companies engaged in a modern day tech arms race, Keller Williams, Realogy, Berkshire Hathaway, RE/MAX, Compass, Zillow, Redfin, Home Smart, eXp and others. “We’re going to build the platform to end all platforms. We’re going to provide every tech tools our agents can use.
We may build most but we’ll license the rest. Ours will be the platform of the future, the tech platform.” Well, that all sounds really good unless you happen to be a brokerage company that’s not part of one of those national companies, which by the way is at least half of the whole marketplace. Well, one thing else we learned last week is that there are a lot of companies, very big, strong companies engaged in building the pipes and the electrical systems, if you will, the sheet rockers, the framers, and the foundation builders.
Companies, of course, whom I’m talking about are people like Insight Real Estate, Loan Wolf and Market Leaders, Market Leaders being part of Constellation. These companies and their leaders discussed all of the various parts they’re working on to integrate into one platform. They’re also all in one way or another doing work for some of these national companies, helping them with integration, helping them with the parts that the platform guys don’t want to deal with.
All the necessary plumbing and piping and framing that needs to go on to build the kind of system will also be available to, if you will, independent brokerages throughout the country, likely in affordable prices and terms. So, we’re beginning to see that whether you’re potentially with a national platform or not, you may have access to all of the tools and technology that the big national and global players do.
Now, you probably won’t have the aggregated data they have. You may not have the artificial intelligence or AI that they’re going to have. But you know, it can all be built. It was a very reassuring message for the whole industry that outside of, if you will, the big 8 or 10 national companies, there will be some great companies providing technology tools to those who are on the other side of the fence.
Learn more about industry trends, marketing and technology strategies as well as listen to past REAL trending episodes on our website, www.realtrends.com/blog/. This has been Steve Murray, until next time.