The real estate industry ready for disruption?
Everybody knows the current procedure for selling or buying a house. Let’s say you would like to sell your house. You’d go to a realtor and list your house. When there is someone interested in buying your house, he makes a bid to the realtor. The realtor notifies you about the bid. You have the choice to accept or to decline. Imagine you accept the bid and your house is sold. How does the real estate agent get paid? The real estate agent responsible for helping making the sale receives a commission of approximately 3% of the home’s price. This might not sound too much but this can actually be a lot of money if the agent helps selling an expensive house.
The real estate industry is a very traditional industry where technology does not really take an important role. The only technological aspect in the real estate industry is websites where all the properties of a real estate agency are listed.
I think that the real estate industry is ready for disruption. In my opinion people who want to buy or sell their house do not longer need a real estate agency as intermediary. Why aren’t houses being sold on online market places or panels? Cars are being sold on online market places so why not houses?
Imagine there is an online market place for selling and buying houses without an intermediating real estate agency. A seller creates an advertisement providing a detailed description of the house with information such as the number or rooms, number of square feet and number of bathrooms. In addition, the seller places photographs of the house in the advertisement. If people are interested in buying, they reach out to the seller to set a date for the inspection.
It is as easy as that and we no longer need real estate agents receiving ludicrous fees.
Hi Mees,
After reading your article I was actually amazed at how traditional the real estate industry still is. I searched a little bit and found that startups are popping up, mainly in the United States, that could disrupt the real estate industry. This article by Inman (http://www.inman.com/2015/06/25/new-crop-of-real-estate-innovators-out-to-disrupt-brokerage-business-model/) lists several startups with different brokerage models, such as a flat fee instead of a certain % commission (Redefy) and a platform to connect sellers with buyers (GoldenKey). I wonder how long it will take for a company to truly disrupt the industry, and how long it will take for this to happen in the Netherlands.
Luca
Dear Mees, interesting topic. We actually also did our technology of the week project on the real estate industry.
The current process in buying, selling or renting out real estate is very inefficient indeed.
Our prediction was that at the end, when we buy our first house we are likely to have a large degree of the purchase process happen online.
Especially bitcoin is a possible technology to enable contracts being processed online.
Dear Mees, interesting remarks on the real estate industry. I’ve could never thought that the real estate industry was so old-fashioned. This year I also tried to rent a place for this upcoming year, and I saw how difficult it is if you do not hire a real estate agent. It is almost impossible. However, I still found a very intelligent solution to this problem: Esteon.
The only thing you have to do is give your preferences and they do the rest. Their idea is an intelligent algorithm that scans all the available house/apartments to rent and you go through the options.
This helped me and my friends a lot when looking for a place to stay!
Source:
https://www.frankwatching.com/nieuws/esteon-com/
Hello Mees,
As you say the real estate industry is very traditional and lacks innovative processes. The reason of agent existence currently is that although an online platform could serve the need for the first contact or virtual viewing (as many platforms currently do), buyers want to experience a real time viewing of the property. Sellers may also lack the necessary selling skills or not even have the time to accommodate all the prospective buyers for a viewing. This is the true value of the agents, who are mostly paid for their market experience and facilitating the process.
I believe that technological disruptions will occur on the transaction phase and not the real estate marketing phase where agents are more relevant. During the transaction phase, middlemen will be removed. A possible disruption can occur, as Julius said , through blockchain technology, which would optimize the transaction processes through smart contracts and would reduce information asymmetries. More can be found here: http://www2.deloitte.com/nl/nl/pages/real-estate/articles/blockchain-the-next-game-changer-in-real-estate.html
I think you missed one small point on what a realtor means for sellers and buyers of a house. It is true that they cost a lot of money but there are also some advantages in hiring a realtor.
If you don’t hire a realtor, you will be spending a lot of time searching online or in real life for houses. Also, a realtor has a lot more experience in the real estate industry and thus knows what he should look for, in order to see if the house is in a good condition. If you move to a completely different neighborhood, a realtor can also give you more information on what area would work best for you. It is also less likely that you are buying from a fraud if you go to a realtor.
From the sellers point of view, I think you have a very valid point! A lot of houses are now already displayed on the internet by realtors, for example via Funda or Pararius in the Netherlands. It would absolutely be an option for sellers to put their houses on there. However on sites as Funda, realtors get a higher profile. This would be a big disadvantage for people selling their houses by themselves.
Very interesting post, and I also find it quite fascinating that the real estate industry has remained so traditional until now. Even though the whole industry can easily be changed by new technologies I still believe the real estate agents will remain a big part of the whole process. Not only do they aid the transaction process, but they also have an important role as marketers. I believe the biggest positive, in regards to using technology in real estate, is how one can search and be exposed to way more properties than before, as well as reach a broader market of sellers. However, for the actual selling and viewing of properties it will ne necessary for both seller and buyer to have an expert agent on board. I also believe that the client-agent relationship is highly important in this industry. Technology might be able to replace certain factors, but I believe the real estate industry will always be in need of ‘human touch’, as purchasing a house is usually the biggest investment one does during a life-time. More information about how technology might not disrupt this industry can be found here: http://tech.co/look-tech-changing-real-estate-market-2016-06.