Although real estate relies on the buying and selling of physical property, it’s the digital world that’s arguably impacting this industry most. Technology, with its monumental effect on modern society, has transformed the real estate profession.
According to Internet Live Stats, the number of internet connections in the world has increased from less than 1% of the world population in 1995, to about 40% today. It only took around 20 years, since the infancy of the World Wide Web, for the number of internet users to reach over 3 billion. Today, most of us can’t imagine living without the internet.
From viewing properties to signing the deal, real estate business protocols are largely moving online. We’ll explore some of the ways the rapid growth of technology has affected the real estate industry, and what it all means for the future of real estate.
How Tech Has Changed the Environment
The days of faxing documents back and forth are gone. In fact, the latest generation of real estate professionals and buyers have probably never used a fax machine. Scanning classified ads in the newspaper have given way to browsing apps and websites as a way to find properties, for both buyers and renters.
The tech tools of modern society — in addition to the wide accessibility of the internet — have not only changed the way we conduct business; they’ve transformed the real estate environment as a whole.
The Rise of the Rental Market
Fueled by the recent mortgage crisis, rising home prices, and a younger generation that doesn’t have the funds or the sense of urgency to buy real estate, the demand for rentals is skyrocketing. A recent study by Harvard University found that the rental population is expected to grow by approximately 4.2 million between 2015 and 2025. At the same time, many major cities are experiencing low rental vacancy rates, with Manhattan at 1.75%, and Los Angeles at 2.75%.
More and more people are seeking to rent instead of buy, and in their search, the majority of renters turn to the internet. Consumer real estate apps and websites like Zillow, Rent.com, and Trulia make it easy for realtors to list properties, and for renters to find them. This move toward digital marketing has created the expectation of easy-to-use online interfaces, both in commercial real estate, as well as on the consumer side. Landlords who haven’t adapted to new technology are quickly finding they must compete with tech-savvy management firms, or risk being left out in the cold.
Older, analog ways of working are being increasingly replaced by new, cloud-based platforms that offer the latest tools for marketing, selling, and leasing real estate. Web services can now provide landlords and brokers with the ability to track inventory, run analytics on property performance, and syndicate listings on consumer sites.
Investors are taking this seriously. Real estate technology investments have reached record highs, hitting $1.7 billion in 2015 according to tech market intelligence platform provider, CB Insights. Growth is expected to rise, as investors take advantage of available opportunities for innovation in the real estate industry.
Advantages to Seniors
Advances in real estate technology have some specific advantages for the senior demographic. Seniors are often less mobile, making it difficult (or impossible) for them to drive to realtors, or look at multiple properties when they want to buy or rent. With many senior citizens drawn to the appeal of rightsizing — moving into a home that’s best suited to their needs — this demographic has turned heavily to technology to aid in the housing search.
While millennials are generally thought of as more tech-savvy than their elders, according to the Pew Research Center, 58% of people over 65 use the internet. This number was just 15% in 2000. Today’s retirees may have worked with computers for more than 30 years, and even the older seniors of today have taken to using smartphones and tablets. Technology allows this demographic to view listings from their homes, browse offers on a reverse mortgage, and free themselves from the need to make unnecessary trips.
Drones are Taking Off
This year, the Federal Aviation Administration (FAA) approved the use of drones for commercial purposes. Real estate agents are already using this new technology to show properties in a completely new way.
Drones can record video, allowing potential buyers to see a property from every angle, without having to be there in person. There’s even software that can use drone footage to build a 3D model that can be displayed online — or, printed with a 3D printer. These flying devices are also beneficial for examining the condition of a home’s roof, or for other inspections that would otherwise require the use of a ladder.
Currently, drones are primarily seen as a high-tech way to market high-end properties; but as these devices become more commonplace, less expensive, and easier to use, it won’t be long before drone imaging is a requisite marketing tool for even moderately priced homes.
The Appraisal Process
Technology has facilitated the process of appraising a property, which was once extremely labor intensive and involved a lot of monotonous paperwork. In the past, an appraiser had to physically measure a property — an arduous task that took hours to complete. Today, laser devices measure an entire room in the snap of a finger. Hard copies of measurements and appraisals have been largely replaced by apps, which include appraisal forms and the ability to compare similar properties.
Challenges of Tech in Real Estate
Through years of innovation in our society, we’ve learned that every technology has its pros and cons. While most of the technological advances discussed above benefit both buyers and sellers, some of the side effects of new tech have created challenges for real estate professionals.
Websites like Zillow allow anyone to easily find the value of a property, along with the value of neighboring properties — many buyers see this as a benefit, using the information to try to negotiate the best deal. The problem is, while the data on housing prices is easy to access, it isn’t always accurate. As a result, agents are dealing with buyers who may have unrealistic expectations and the misperception that they’re not being treated fairly.
Loss of Face-to-Face Relationships
The real estate business thrives on personal contact. Many real estate professionals feel the increase in online communication has caused them to lose touch with their customers. The personal relationship between agent and client is essential in the buying or selling process, and face-to-face meetings and phone calls are necessary to build those relationships.
With more and more consumers preferring to search and conduct business online, we see less of those face-to-face meetings occurring. Social media and email can help develop the personal connection, but the actual face-to-face contact cements it. While apps and websites can save time, real estate professionals strive to keep the focus on building personal relationships.
Real estate professionals looking to transition to using modern technology must consider the cost — there can be considerable expense involved in moving business operations to new systems. This may be the strongest factor holding some professionals back from stepping up to the latest tools, softwares, and digital processes. In addition, real estate companies should take into consideration that some older team members may need more training to learn the new technology.
Real Estate Going Forward
New technological developments are saving time and increasing efficiency across almost all industries, and real estate processes have grown in leaps and bounds thanks to tech tools. Moving forward, it will become even more important for professionals to keep up-to-date with the latest industry trends; those who are reluctant to embrace change and new ways of working quickly find themselves left behind. As a real estate professional, make a point to identify the strengths and weaknesses of any new technology, so you can take advantage of the positives and work around the negatives. In the end, you’ll work smarter, and your clients will benefit.