Buying and selling a house is a huge transaction with hundreds of small, moving parts. Real estate tech outfits are trying to make those small parts of the transaction process easier.
Why Real Estate S-L-O-W in Adopting Technology
Last year’s confluence of low rates and pent-up demand sprouted the hottest housing market on record BUT some may remember 2021 as being the year that some of the industry’s biggest players badly stumbled.
Zillow got out of iBuying due to huge losses from faulty algorithms and not enough labor/material to “fix” its homes fast enough to make profits off them when reselling them. Tech-driven Compass watched its stock shares take a nosedive of -50%. The online mortgage company Better dumped 9% of its staff.
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The problem? Each home sale involves hundreds of thousands, if not millions, of dollars and no two homes are the exactly same.
According to Stefan Swanepoel, founder and CEO of the real estate consulting company T3 Sixty, “The real estate transaction won’t be unscathed by the impact of automation… it’s arguably the most complex, fragmented, and localized of all transactions (unlike purchasing a sweater or pair of pants online). It’s not a transition that will take place quickly.”
Real Estate Is a Big Pie
Typically, some $2T worth of homes are bought and sold in one year. Additionally, more than $90B in brokerage commissions, tens of billions in mortgage origination fees and substantial dollars for title, appraisal and inspection services are also generated in real estate transactions in one year.
Obviously, the stakes involved in housing are huge and technology firms want a slice or two of that real estate pie.
According to Pitchbook, more than $12B in venture capital was invested in real estate tech during 2021 while similar companies outside the US did the same. Brynne McNulty Rojas, co-founder of Bogota-based Habi, a Zillow wanna-be in Latin America, said, “You have peer-to-peer transactions of significant assets with very little transparency and trust.”
Tech Trends
Thomvest Ventures, a firm that tracks 240 real estate tech companies in several main categories (search, digital lenders, alternative financing companies, appraisals, loan servicing, mortgage application processing, etc.), identified one emerging trend in real estate tech as being a hand-holding service that human agents and advisers used to provide to clients…hand holding such as Landis Technologies, a rent-to-own outfit, adding a coaching layer to its product to help renters save for a down payment.
Another trend is for real estate companies that have been successful with one product (home search, for example) to add other services. A good example here is Redfin’s recent $135M acquisition of an online mortgage lending company. EXp Realty did the same in 2021.
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The goal, as Eric Wu, co-founder of Opendoor, articulated some years ago, is to create a seamless, one-stop-shopping transaction for customers interesting in buying and selling homes.
It’s this one-stop-shop part that’s the tricky part.
Thanks to Bloomberg.
