Technology has been one of the biggest focal points over the last half-century as businesses look to implement new ways to innovate, cut costs, and engage consumers. Some industries have openly embraced technological advancements, while others have been slow to adopt digitization.
Historically, the real estate industry has been a slow adopter of new technologies. However, over the last decade, and especially with the COVID-19 pandemic still relevant, several market drivers have led to rapid changes in how real estate segments have traditionally conducted business.
In fact, several new technologies have already started to, or will soon be, disrupting the industry as a whole. From virtual and augmented reality to machine learning, here are a few ways technology is reshaping the real estate industry.
1. Automated Valuation Models (AVMs)
One of the most dated and time-consuming processes throughout the real estate is having a property appraised. Lenders often require verification of the property’s value pledged as collateral before lending money to a borrower.
However, appraisal reports are costly, ranging anywhere from $300 to $800 for a standard single-family dwelling, depending on the area you live in1. They can also take up to two or three weeks to be delivered.
Furthermore, the number of appraisers in business has slowly been decreasing. For example, the Appraisal Institute noted that in 2018, the number of active appraisers decreased by 5% from 20172.
New automated systems have started to implement data-driven approaches to address these deficiencies in the collateral valuation process.
Most notably, mortgage aggregators Fannie Mae and Fannie Mac have revamped their collateral underwriting systems to leverage appraisal databases and enable them to confidently issue appraisal waivers for files that meet essential eligibility criteria.
Using automated valuation models in this manner will increase operational efficiencies, cut down on origination times, and reduce costs3. It will provide representation and warranty relief to lenders who elect to use an appraisal waiver granted.
2. Virtual Reality Appraisals and Staging
Some may think that virtual reality is only for video games. However, it can have some real practical applications in real estate as well.
It is becoming common amongst real estate professionals to integrate 3-D models and virtual tours with their listings. Matterport, based out of San Francisco, is notorious for providing agents and brokers quality cloud-based walkthroughs that clients can access through their phone, tablet, or other smart devices.
But one of the many hyper disruptive applications to virtual reality is its use in the appraisal and staging processes. Appraisals, in particular, could benefit by eliminating the need for physical inspections for homes that may not receive an appraisal waiver.
Similarly, virtual staging can be a more cost-effective way to show a property fully furnished for those looking to sell a vacant property. Rather than purchase furniture and decor, virtual staging uses a high resolution, 3-D rendered images to fill the subject space, giving it the appearance of what it could look like fully furnished.
According to the National Association of Realtors, staged properties will sell for roughly 17% more4. Some of the more popular virtual home staging platforms include BoxBrownie, VRX Staging, and Real Tour Vision. If you are looking for a mobile app, check out RoOomy or iStaging.
3. All-In-One Integrated Solutions
As technology enables traditional processes to become fully digitized, more proprietary platforms are becoming available to allow for a fully integrated buying or sales experience. These platforms have had a particularly impactful effect on the mortgage industry.
Today, new loan origination systems (LOS) such as Finastra’s Mortgagebot and Ellie Mae’s Encompass attempt to consolidate the back-end mortgage lending processes while integrating with a customer-friendly interface for borrowers.
Previously, services such as ordering a verification of employment or requesting personal tax transcripts required faxing or emailing physical written requests. Today’s systems now take advantage of integrated technologies through verification providers such as Equifax’s The Work Number, which allows ordering necessary verifications from one centralized platform.
But all-in-one integrated solutions are not restricted exclusively to the mortgage industry. Terrakan’s leading platform disrupts the industry and empowers developers by offering a one-stop multi-tiered portal geared to consolidate all the tools needed to manage your real estate development business. The system allows you to do everything from generating in-depth property reports to forecast costs and pitfalls that will enable you to better adapt to market changes.
For years, real estate investors were using outdated tools to help manage their portfolios of both residential and commercial properties. As technology has evolved, so has the software.
Companies like Yardi provide an all-inclusive platform that allows users to manage and monitor various property types more efficiently. It also has a built-in customer relationship management (CRM) to automate maintenance requests, invoicing, and other routine tasks5.
Also, Yari offers users the ability to screen tenants comprehensively, further digitizing the entire leasing process5. Similarly, it can further assist with risk management by pulling in essential market research and insights to empower users to make smarter business decisions5.
5. Investing and Fractional Ownership
New proptech companies, like Roofstock, have really taken over the industry in the last few years, forever changing the way people invest in real estate.
Investing in real estate used to be highly capital intensive, requiring a sizable upfront investment to acquire properties outright. Alternatively, companies like Roofstock utilize a fractional ownership investing model, which allows you to invest in real estate but at a lower up-front cost.
The main difference is that you own a percentage of the property instead of holding the whole property outright6. In many ways, it works similar to investing in REITs, except that these platforms further empower you, as the investor, by providing the choice for the specific property types you want to stake their investment in6
Sources
1. Chang, E. (2021, January 11). How Much Does A Home Appraisal Cost? Retrieved March 30, 2021, from https://www.bankrate.com/mortgages/how-much-does-an-appraisal-cost/
2. Appraisal Institute. (2018, December 31). U.S. Valuation Profession Fact Sheet Q1 2019. Retrieved March 30, 2021, from Appraisal Institute website: https://www.appraisalinstitute.org/file.aspx?DocumentId=2342
3. Fannie Mae. (2018, December 04). Appraisal Waivers Fact Sheet. Retrieved March 30, 2021, from Fannie Mae website: https://singlefamily.fanniemae.com/media/5916/display
4. McGrady, V. (2020, July 15). 7 Pro Tips To Help Your Home Sell Faster, For More Money. Retrieved March 30, 2021, from https://www.forbes.com/sites/vanessamcgrady/2015/11/04/staging/?sh=6855522150c9
5. Property Management Software & Asset Management Solutions. (2021, March 15). Retrieved March 30, 2021, from https://www.yardi.com/
6. Katz, L. (2021, February 04). Fractional Ownership in Real Estate. Retrieved March 30, 2021, from https://www.fool.com/millionacres/real-estate-basics/fractional-ownership-real-estate/