In the not-too-distant future, you could close on the sale of your home in just a few days by using a smartphone app without ever even meeting another human being.
A wave of new real estate technology backed by billions of investment dollars is spreading across the U.S., threatening to disrupt a sedate industry the way ride-sharing and online short-term rentals did to the taxi and hotel businesses. New ways of processing data are speeding up sales, better analyzing market rates and changing home financing.
Despite Maine’s self-identification as a high-tech backwater, it will be here sooner than we think, said Dava Davin, principal broker with Portside Real Estate.
“Is it going to take over the world and change it? No, but the amount of money that these venture capitalists are putting into these platforms says something,” Davin said. “They are seeing an opportunity in an industry that has not seen a lot of change.”
But real estate, based on personal interactions and trust, is positioned to weather tech disruption. Most homebuyers are making the biggest investment of their lives, a transaction they want a real person, not an algorithm, to help them through, said Lawrence Yun, chief economist for the National Association of Realtors.
“A real estate transaction is really different from buying an airline ticket,” Yun said. “There is a lot of information online, but buyers still want to make sure they are making the right purchase. People need to feel very comfortable buying a home.”
Mike LePage, a Portside broker, agrees. Buying and selling a home is such a huge decision that people will still turn to a Realtor, he said, even with the assistance of sophisticated software.
“It is not like Uber,” Le- Page said. “This is one of the most important financial decisions anyone will ever make. It is such a personal thing.”
In the last two years, more than $20 billion has flowed into real estate technology, sometimes called “proptech” or “CRE tech.” That’s a remarkable amount given how young the startup cycle is, said Michael Beckerman, CEO of CREtech, a research and analysis firm in New York City. Most investment is from major industry stakeholders adopting technology to improve efficiency and speed, he added.
“It’s an industry that has had an extraordinary bull run over the past eight years and so tech was never a high priority in a climate of extraordinary prosperity,” Beckerman said.
Even as startups focusing on real estate multiply, concerns that innovations will upend the real estate profession are likely overblown, he added. At a presentation Davin gave on home-buying trends at a recent real estate conference, she mentioned that residential brokers in the U.S. get about $100 billion a year in commissions.
“Tech won’t be the apocalyptic job killer people fear; it will actually be a job creator as tens of thousands of new types of jobs will be added, such as data scientists,” Beckerman said.
The most visible, and flashy, tech innovation is iBuying – selling a home directly to an online real estate company, rather than to the next occupant of your house. The concept, pioneered by companies like Opendoor, Offerpad and Knock, allows a homebuyer to get an online quote and schedule a sale within a few days. Once the real estate company owns the property, it makes some upgrades and puts the house back on the market with a local Realtor.
Opendoor, one of the quickest-growing platforms, started in 2014 and is now active in 22 markets. It has worked with 31,000 clients, said spokeswoman Lyndsay Roach, a tiny fraction of the more than 600,000 national home transactions last year. The company plans to expand to 50 markets by 2020, but not in Maine, she added.
IBuying is attractive to people who need to sell quickly or don’t want to deal with lengthy sales negotiations.
“Opendoor eliminates all those issues by providing a competitive offer on a home, allowing a homeowner to choose their own timeline,” Roach said.
Zillow, the popular online real estate search site, launched its own iBuying platform last April. As of the end of the third quarter, 20,000 homeowners have requested a quote, about $6.4 billion worth of real estate, said spokeswoman Jordyn Lee. The company bought 168 homes in Phoenix and Las Vegas in the third quarter of 2018, she added. Zillow plans to be in 14 markets by the end of the year.
IBuying is expanding quickly, but won’t get to Maine for a while. Housing markets with active iBuyers are big metropolitan areas with similar home prices, ages and styles, Lee said. It is easier for a remote agent to calculate a fair market sale price in that market than in Maine, which has an older, more varied inventory. Before tackling those challenges, Zillow and other companies want to make sure their platforms work.
“I definitely believe it can work everywhere, and when we do move to Portland, we want to give the best experience possible to customers,” she said.
Although it might not be just around the corner, the future is on its way, pushed in part by millennial homebuyers. People in their late 20s and early 30s do lots of their own research, want instant information and advice, and rely on online reviews, said Davin, of Portside. Some national trade groups expect about 25 percent of home purchases next year will be to millennials.
But even with new innovations, buying or selling a home will remain the domain of real people, said Andrew Michaud, a loan officer with Retail Mortgage Services in South Portland.
The mortgage market is facing its own disruption from online loan services, like Rocket Mortgage, that target millennials.
Traditional companies like RMS are countering those programs with technology of their own, but their real advantage is customer service, he said.
“People love the ease of all the technology tools out there, but at the end of the day they want to speak to a professional,” Michaud said.
“They want the assurance, they want the guidance, they want someone on the ground they can trust to get everything done.”