How Traditional Real Estate Trends Are Being Disrupted by Technology

By Tara Mastroeni

These days, technology is causing the world to change at a rapid pace. Industries across the board are trying to adapt to the ways in which advancements in tech are changing traditional business practices. It shouldn’t come as a surprise that the real estate market is one of the sectors that’s undergoing a massive shift.

Below are some of the biggest technology disruptors that have recently changed how the real estate industry functions. Keep reading to get a sense of where the industry came from in terms of its traditional methods, where it stands now, and where it’s headed in the future.

Online tools—especially mobile apps—are changing the way that buyers find their homes and agents connect with their clients

There’s no getting around the fact that the advent of the internet has been a significant player in changing the way in which most industries function—and real estate is no exception. In particular, it’s radically changed the way in which people search for—and ultimately find—their new homes. 

According to a 2019 report by the National Association of Realtors (NAR), in 1981, 22% of buyers used newspaper ads to find their new home while an additional 8% used friends as a source of information for potential listings. These days, those methods aren’t even on the radar. In 2019, 44% of all buyers used online methods to search for homes for sale. 

It’s important to note that this data affected by generational preferences. While a whopping 98% of older millennials—those born between 1980 and 1989—searched for their home online, 89% of older boomers born between 1946 and 1954 did the same. Additionally, only 72% of the Silent Generation used online methods at all.

The differences between the generations are even more stark when you look at whether those online tools were accessed via a mobile app. While 76% of all buyers surveyed ultimately found their home via a mobile device, older boomers used a mobile device at half the rate of both younger (born between 1990 and 1998) and older millennials. 

Going forward, the use of mobile apps seems to be the fastest-growing technological trend. According to a 2017 NAR report, only 38% of buyers admitted to searching for a home via a mobile device. In addition, the percentages of those who used mobile applications were lower across all generations. For example, only 56% of millenials found their home on a mobile device compared to the 81% of millennials today.   

Mobile apps have an impact on the agent’s side of the equation as well. According to the 2019 NAR report, a smartphone with email and internet capabilities was listed as the top tool utilized by agents in 2019, with 95% of respondents admitting to using one for their business practices. The same was true in the 2017 NAR report, where 94% of the agents surveyed responded that they used a smartphone to communicate with their clients nearly every day.

Certain tools are streamlining the mortgage process through digitization and automation 

When talking about technology and real estate, it’s impossible not to mention how some advancements are also impacting the mortgage process. According to NAR’s 2019 Profile of Home Buyers and Sellers, 88% of buyers financed their home purchase with a mortgage. 

Similar to how buyers are getting more comfortable searching for homes on their mobile devices, they’re also more familiar with getting pre-qualified for a loan. New data from Fiserv, a leader in the financial technology industry, found that 41% of consumers applied for their loan using a mobile device in 2019, up from just 29% last year. The data also showed similarities in how people paid for their loans: mobile app use nearly doubled, primarily due to the frequency of mobile app use among millennials.

When asked how their consumers’ desire for mobile technology is impacting the mortgage industry, Craig Evans, vice president of operations at Fiserv, said: 

“A lot of the consumers today, especially younger consumers, are tech-savvy. We have to engage with people where they are. They want to apply for a loan through their mobile device and transmit the collection of data that way as well. They want a decision immediately.

Technology has allowed us to bring in their information—the asset information, credit information, income information—digitally from aggregators, which then allows the decision [on their loan application] to be made by an automated underwriting system. We can get someone from an application to a firm decision, all on a mobile device in a matter of minutes.” 

As for where this technology is set to go, Andrew Ivankovich, senior vice president and general manager of digital lending and account origination products at Fiserv, shared the company’s vision for where this lending technology is headed in the future.

“Our vision is that the bank will tell you how much you qualify for based on data from your direct deposits and what’s in your checking and savings accounts [rather than you having to apply for a loan]…that most of [the underwriting process] will be automated and you’ll be able to do your part through the dashboard on your mobile bank account.”

Both Evans and Ivankovich agree that the biggest advantage to this technology for those who are in the market for a new home is clear: it saves a tremendous amount of time.

“There will be no more waiting,” said Ivankovich. “When you’re ready to buy, you’ll have [your loan paperwork] in the palm of your hand. The sellers and your real estate agent will know that you have a bank standing behind you.”

Virtual and augmented reality are tools agents can use to show homes at their best and let buyers view listings with ease

Beyond mobile apps, virtual and augmented reality are tools that real estate agents can use to show their listings and buyers can use to make their home search process even easier.

The top application for these technologies in real estate is virtual staging. The data is clear: staging sells homes. According to a NAR 2019 Profile of Home Staging, 83% of the real estate agents surveyed felt that proper staging had an effect on how most buyers viewed the home. 

Additionally, 22% reported an increase in the amount of money offered for a property after staging and 28% reported a decrease in time on market. But, with a median spend of $400 per property staged, most agents felt that having an interior designer come in to do the work could get very costly.

With virtual staging, agents can save a substantial amount of money. In fact, according to VHT Studios, a real estate photography and image management brand, virtual staging can run as little as $39 per photograph.

Virtual home tours are another application buyers can use. Not only can this technology potentially free up buyers from having to spend hours touring various listings, it opens up the possibility of producing interest among out-of-state buyers. 

For their part, buyers seem ready to embrace this technology. Of the 2,000 consumers surveyed by Bank of America in their Fall 2019 Homebuyer Report, 36% of respondents said they would be comfortable attending an open house using virtual or augmented reality.

Plus, experts forecast that this industry is one that will continue to grow going forward. Goldman Sachs Global Investment Research projects that the virtual and augmented reality market within the real estate sector could be worth upward of 2.6 billion dollars by the year 2025. 

Buyers are changing the way people buy and sell their homes, along with their expectations of the real estate process

Traditionally, when an individual wants to sell their home, their first call would be to a local real estate agent, who would then market the property for sale. These days, an increasing percentage of all sellers—9.6% in 2018, up from just 3.9% of the market share in 2016—are using iBuyers to cut out the middleman and make their buying and selling process easier.

Ibuyers work similarly to how their name suggests. Each iBuyer has a slightly different business model, but they work by making sellers an instant offer on their home, which the sellers are free to accept or reject. If the seller accepts the offer, the iBuyer fixes up the home, relists it, and sells it to an interested buyer for a profit.

However, that convenience does come at a price. These companies charge fees similar to what you would see with a real estate agent’s commission. Their offered sale price, which is figured out via an algorithm, is often lower than what the sellers might have received if they had marketed the property themselves.

An investigation by MarketWatch found that iBuyers offered 11% less than market value, on average. However, some sellers are willing to take the lower sale price in exchange for the convenience of not having to accommodate showings and the ability to set their own closing timeline. 

When asked why they got into the iBuying space, Zillow CEO Richard Barton said, “We are doing this as a service to sellers because sellers are telling us they are frustrated. They are telling us they want [selling their home to be] simpler.”

On the buying end of the transaction, convenience is also at the top of the list of benefits that an iBuyer can offer. For one, iBuyers do repairs before they relist a home for sale, meaning that buyers are guaranteed a home that’s in move-in ready condition. Additionally, most iBuyers are striving to streamline the buying process by offering home loans, which would create a one-stop shop experience for users.

For now, the ability to work with an iBuyer is limited to certain cities, but the list is continuing to expand. As of October 2019, Opendoor, the top-seated iBuying company, is operating in 21 metro areas across the United States.With plans to expand into Boise, St. Louis, and Salt Lake City by early 2020, one can see that it’s only a matter of time before working with an iBuyer becomes a viable option for buyers and sellers nationwide.

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