What are the odds that artificial intelligence will render real estate agents obsolete in the near future?
If you answered “nearly 100%” then you answered right. At least according to a recent Oxford study on artificial intelligence.
Scary stuff? Maybe. But is anyone crying that automobiles made blacksmiths obsolete? The world changes, and we each have a choice: continue to learn new skills and evolve alongside the world, or be rendered obsolete.
Over the last decade, we’ve seen massive disruption in the taxi industry (courtesy of Uber), the hotel and hospitality industry (courtesy of Airbnb), the mobile phone industry (the first iPhone was released in 2007, if you can believe it was that recent). And those are just the obvious headline-heavy examples.
The real estate industry has somehow managed to sit mostly still and avoid major disruptions. Buyers and sellers still mostly use real estate agents, landlords still use property managers, renters still search classifieds (albeit electronic ones) and apply for rental units.
But how much longer can real estate avoid true disruption?
Here are five ways that the real estate industry will be disrupted over the coming decade; perhaps overwhelmingly, or perhaps slowly, but change is coming.
1. Rent Auctions
A South African startup has created a system for renters to bid on rents for available rental units. Wh
Less desirable properties will see little enthusiasm and few bids, and lease for appropriately low rent. Hot rental units will rent for appropriately higher amounts, all based on current demand for that exact rental unit and location.
The company also offers a standard fixed rent listing option, although 60% of landlords are opting to use the auction method. The landlord sets a reserve for the rent, and the company takes a fee of 25% of the rent over the reserve amount.
Renters can use the system to secure a home that they feel particularly strongly about – perhaps this unit is right next to their work, or on the same block as their sister. Sometimes a home is worth a little more to one person than it is to everyone else, and the auction system helps both the landlord and tenant get what they want.
A nifty idea, and one that may see wider adoption outside of South Africa.
2. Flat-Fee Online Brokerage Services
It’s already happening: sellers are saying sayonara to realtors and using flat-fee online brokerage services.
Not for a lower percentage fee, either – for a flat rate. In the UK, an online brokerage firm offers several flat-rate options, at rates between 425-725 pounds. Included in all service levels is the MLS listing, buyer background check, buyer financing verification, negotiation support and a property showing calendar. On the high end, the service also includes a dedicated local agent and professional descriptions for the listing.
Negotiation assistance helps drive deals forward, rather than stalling them, with no agents worrying about their commission.
Here in the US, Owners.com has exploded in popularity for a similar service. Their most expensive package is only $695 and includes state-specific sales contracts, addenda and disclosures.
What do sellers give up for this cheaper service? They oversee showing the property themselves. Hardly a catastrophic burden to should.
3. Rent Pulled from Tenants’ Paychecks
No landlord wants to lease to high-risk renters. But what if they could collect the rent directly from the tenant’s employer?
Spark Rental is in the process of building such a system, to collect rent directly from tenants’ paychecks. It’s a win-win: high-risk renters will be accepted in higher-quality housing, and landlords can sleep at night knowing they’ll receive rent payments.
In high-default neighborhoods in particular, the service will reassure landlords who constantly hear the words “Yeah yeah, the check’s in the mail.”
And before you ask, yes it will also work for renters on welfare and other public subsidies.
4. Virtual Reality to Buy Anywhere in the World
Sure, seeing photos in a listing is nice, but you can’t walk through, see how the natural light looks, get a real sense for the space. You can look at a layout schematic, but it’s not the same as strolling through yourself.
This makes it very challenging for out-of-state (or international) buyers to feel confident enough to buy a property sight-unseen.
But what if you could walk through properties in high-resolution, interactive virtual reality? Open closet doors and peer inside? Open the cabinets and drawers? See every detail in the house in lifelike three-dimensions?
It’s coming, and sooner than you think.
But it doesn’t stop at simply seeing the property as it looks in that moment. Virtual reality will allow buyers to see how the natural light looks at different times of day, and even different times of year.
Want to see what it looks like furnished, perhaps with your own furniture? You’ll be able to superimpose furniture to see exactly what it will look like.
It will make real estate agents’ lives easier, starting buyers with virtual reality tours in the comfort of their office without having to drive all over town. Buyers can then go out and physically see properties they find promising.
Or not – long-distance buyers may well buy sight-unseen, confident that they know what they’re buying. Virtual reality will truly globalize real estate markets, adding a level of comfort not yet seen in long-distance buying.
5. Blockchain Technology for Payments & Titles
You may love or hate the idea of bitcoin, but the currency itself is not what’s revolutionary. The technology that enabled it, blockchain, is what will make a lasting splash.
A recent study by Brickvest found that over half (56%) of real estate investors believe blockchain will be adopted to record transactions and streamline renting and buying properties.
The short explanation is that blockchain technology keeps secure, permanent records of past transactions, and can do so with varying degrees of privacy. Title records, for example, could be logged using blockchain to streamline title histories and minimize all the paper-pushing and delays.
Lease agreements could be logged by owners, keeping a clear (and private) record of properties’ leasing histories.
Rent or home purchase payments can be made and logged electronically, based on blockchain technology, without all the current baggage of cryptocurrencies.
In other words, title companies are in for some serious disruptions.
The world is rapidly changing place, and the real estate industry will no longer sit idly by while other sectors turn upside down. You can lament and try to stop the tide of change, but you’d just as easily stop the tide of the ocean. And hey, disruptive change can be exciting – just look at how green homes and smart homes are merging to become the house of tomorrow. Let’s instead try to sculpt the change, to improve efficiency and transparency. Let’s make the buying, leasing and selling processes cheaper and easier for everyone involved.♦
Where do you think the real estate industry is headed? Opinions welcome (for once)!