Real Estate is Flagged for Digital Disruption Within the Next Decade

By Mac Christian

Mac Christian Chief marketing officer of National Land Realty, a real estate land brokerage

As the transport truck pulls away with your old car loaded up, your new automobile sits in your driveway, ready to drive. This transaction was driven by an industry worth $51.04 billion in 2021, which is slated to grow to $204.94 billion by 2028 (according to Fortune Business Insights). Nowadays, people can merely download an app, enter information to value their current car, select their automobile of choice, click a few buttons and an exchange transaction for a new car has been initiated. The question we keep hearing in the real estate industry is, “When can I buy my house this way?”

We first saw disruption in the service industry through the financial sector. E-Trade, founded in 1982, was one of the first companies of its kind to take hold of the financial industry. At first, this business model seemed to be something of a novelty, but that opinion quickly changed. Today, nearly all investments and bank transactions can occur online without interaction with a banker or financial advisor. Even the act of portfolio balancing has been automated with robo-bankers introduced into the mix. This is just one small piece of the “digital transformation,” a phrase that has turned into a catchall for this type of disruption, and real estate is squarely in the crosshairs.

The reason that real estate is such a hot topic in the world of e-commerce is easy to see. Real estate, much like the financial and automobile industries, relies on service professionals to facilitate the purchase of a product. These professionals act as consultants who traditionally take a commission for their part in the process. Service professionals are relied upon to have a depth of knowledge regarding the product they work with that the general public does not.

In the past, this knowledge was a guarded secret that was as opaque as the paint on your walls. Consumers were forced into a position of trust that left many feeling fleeced or kept in the dark. Commissions in the auto, financial and real estate industries have traditionally been challenging to understand. Service professionals have been flagged as notorious because of a few bad actors. Finally, the answer has been apparent: eliminate the middleman, remove high commissions for the consumer

and make the product easier to purchase.

The Path Toward Real Estate Digital Transformation

The complexity of the product is one of the most common defenses against digital transformation in the real estate industry. This is a valid defense because real estate is enormously complex and is often the most important purchase people can make during their lifetimes. Shopping is stressful. Inspections must be performed, negotiations must take place and it is often difficult to assess the quality of real estate until you walk inside for a first-hand view. However, one does not have to reach very far to see the same defense of the auto industry just a few years ago, and companies like Vroom, Carvana Co., CarMax and Autotrader have had a thunderous reply to that defense.

The messaging inside the real estate industry has been a unified front against digital transformation. Most people desire to offload the stress of property purchases and sales onto an agent. There is so much paperwork involved that it would be difficult for even the savviest consumers to understand. Combine this with the details of finding a loan, and you have an intimidating transaction for nearly everybody. Nevertheless, the future is here, and you can see that reflected by the most prominent players in the industry who are attempting to simplify this process.

Zillow’s recent failed gamble into buying and selling homes is a perfect example of the long-term direction of the real estate industry, and it is not the only one. CoStar Group, which started primarily as a data company, has been on an acquisition rampage of $2.03 billion, purchasing technology, IT and real estate-specific companies. Zillow’s recent venture may have failed, but do not let that fool you. That is more a result of market unpredictability. These innovators are far from retired, and they will eventually find a solution.

How Digital Transformation Looks Today

Many pieces are currently in place for a digital transformation of real estate, accelerated by the COVID-19 pandemic. 3D photography allows consumers to tour a home on the other side of the globe. You no longer need step foot into a house to walk through it, and buyers can even complete the inspection process from a distance. Undeveloped land can also be toured with technology such as National Land Realty’s LandTour360. Aggregator websites now show real estate listings, interest rates and loans from hundreds of lenders all in one place. Market prices of homes are becoming increasingly automated and accurate as data-centric companies compile home sales prices for reference comparables.

The human touch will probably always be needed to purchase and sell real estate, but that does not mean it will exist as it traditionally has. Salaried employees can facilitate inspections or walkthroughs of properties from a central home base, while others may facilitate the loan process. The transaction process will continually change as it is simplified. The role of a sales agent may diminish as the industry evolves and consumers steadily seek to reduce high commission fees or eliminate the risk of a negative experience with an agent.

Are There Exceptions to the Rule?

Real estate is not limited to home transactions. There are several different real estate sectors, and some are highly insulated against digital transformation. For example, the commercial and rural land sectors have proven very difficult to automate compared to the residential sector. Commercial real estate agents must have a high aptitude to assess competitor businesses in specific geographic locations, tax laws, traffic patterns and land values. There are opportunities for disruption here and industry leaders in the commercial sector, such as CoStar Group and Crexi, are making moves in technology, but there has been very little in terms of a viable automated solution.

Rural land has also proven to be highly insulated from automation. One might need to find hunting parcels, ranches, farms, timber investments or simply land for recreational use in this sector. Rural land is so complex, site-specific and specialized that it would be decades before any AI-enabled system could satisfy this niche sector.

Consumers must find an agent qualified in the specific land type and geography where they are considering buying or selling in this sector. Site indexing for timber yield, assessing water or mineral rights on a state or county level, auditing access road quality or homesite locations can only be done with “boots on the ground.”

There are many great arguments that real estate will not follow industries like the auto industry. Similar statements have been made for banking, investments and website design. Highly creative fields such as graphic design have been disrupted with platforms like Canva, and a pattern is emerging throughout all business sectors that nobody is above automation and disruption. The auto industry is undergoing a massive paradigm shift, but until we find ourselves looking at purchase kiosks in car lots, the age of the salesperson is not yet dead. Some consumers like the human touch in their transactions, which will protect the real estate industry over the next decade. However, as technology has proven consistently, few industries are immune to disruption and real estate is no exception.