Technology and real estate have been interconnected for decades. Even in the early days of the Internet, digital MLS databases were made accessible to real estate professionals, brokers established websites, and listings were promoted online. The relationship grew to include 3D home tours, drone photography, and social media marketing. And then 2020 happened.
We all got a violent shove forward with the 2020 outbreak of COVID-19. Suddenly, adopting technology into the real estate industry was no longer optional. Technology became the difference between staying in business and closing up shop. According to a recent survey, nearly all real estate agents (96%) agree that PropTech was essential in keeping their businesses afloat during the pandemic.
So the PropTech trend, which had been quietly growing for years, suddenly exploded in popularity. But what exactly does PropTech mean? How is it shaping the future of real estate? And is it more of a threat or an opportunity for agents?
Here’s your ultimate guide to PropTech and what it means for you as a real estate professional.
What is Proptech?
You know how people love to create word mashups? Well, that’s how the term PropTech came about. It’s a mash-up of the words property and technology.
At its most basic, PropTech is the utilization of technology to overcome challenges and provide solutions specific to the real estate industry. The goal of PropTech is to leverage tech-based tools to make services more efficient and effective.
And it doesn’t just apply to real estate sales. PropTech is also used to build smart homes, streamline real estate development, overhaul real estate investing, and revamp property management.
PropTech experiences lots of crossover with other emerging technologies, including:
RETech (real estate technology),
CRETech (commercial real estate technology),
FinTech (financial technology), and
ConTech (construction technology).
Although these real estate sectors are very different from one another, PropTech encompasses all of them. As long as it solves an industry problem or is made for people working in the real estate industry it’s considered PropTech.
James Dearsley, a PropTech thought leader in the U.K., notes: “The idea of PropTech is all-encompassing. It includes residential and commercial real estate as well as building, home design, property management, and even city planning. And it isn’t just a U.S. concept. PropTech is a global phenomenon that’s impacting markets across the world.”
Examples of PropTech in the Early 2020s
With PropTech being such a far-reaching term, there are hundreds of examples of PropTech working in the early 2020s. PropTech describes everything from real estate crowdfunding to raise money for real estate investments to the Internet of Things (IoT) to build “smart homes” in which all your home’s systems are digitally connected.
But let’s focus on five key ways real estate agents are using PropTech today.
1. Virtual Showings
“Virtual showings'' is the general term for any home tour done remotely. Virtual showings can be 3D scans of a home for buyers to interact with at their convenience. They can be pre-recorded video tours that are published online and shared on social media. They can be live, private virtual showings via video chat apps like Zoom, Skype, or Facebook Messenger. Or they can even be immersive virtual reality tours to be accessed via VR headsets.
Thanks to PropTech, 6 in 10 prospective homebuyers were able to participate in a virtual, video, or remote home showing during the COVID-19 pandemic. Without the tech in place, these buyers would likely have been forced to put their purchase on hold until in-person tours were deemed safe again.
Even better, buyers love virtual showings! 74% of buyers who toured properties virtually during the pandemic said this will be their preferred method of viewing homes even post-pandemic.
And buyers are confident enough after a virtual showing to take action. 63% of homebuyers who participated in a virtual showing made an offer on a home they had never seen in person! Can you imagine such a large percentage of buyers purchasing without an in-person tour in a pre-pandemic world?
Thankfully, buyers’ decisiveness paid off. 72% of those who bought a home without an in-person tour were so happy with the results that they would do it again in the future.
2. Augmented Reality Staging
Augmented reality is when you digitally enhance the real world. And it’s a perfect tool for home staging. Augmented reality staging takes photos of real-world homes and inserts digital renders of furnishings and accessories to show online buyers what a home would look like furnished.
Staging matters. The National Association of Realtors® reported that the average increase in home value due to staging is more than 8%. But you might need to physically stage the property. You just need buyers to see the photos of the staged home online to generate buzz around your listing.
48% of agents surveyed said they used virtual or augmented reality house staging applications. And this digital staging saved big bucks compared to physical staging. On average, real estate agents estimate saving their brokerage $12,857 per listing thanks to PropTech’s augmented reality staging.
3. Virtual Brokerages
Virtual brokerage is the general term for any brokerage that operates without a brick-and-mortar office building. You might also hear them called “cloud-based brokerages.”
It’s easy to see why virtual brokerages are so popular today. Agents have always done a large share of their work “in the field,” showing homes, signing disclosures in the seller’s home, and writing up contracts in their cars. Even before the pandemic, only 47% of agents were working from a physical office.
Today’s brokers have a harder time justifying the expense of brick and mortar offices now that we’ve all seen how effective working from home can be. Virtual brokerages give agents the freedom to work from wherever. And they help brokers cut unnecessary costs.
4. AI Chatbots
You can’t be expected to be available 24/7 (even if your clients want you to be). Luckily, today’s agents can use artificial intelligence chatbots to respond to inquiries immediately.
The most interesting thing about AI tech is that it learns on its own. The more data we feed AI chatbots, the better they’ll be at responding to our clients with relevant, useful information. Today, most agents are using something super basic, like Facebook’s autoresponder for Messenger, just to let clients know that their message has been received and that they can get more information online while they wait for a personal reply.
But as the tech gets more sophisticated, chatbots will be able to respond to your clients in the exact way you would, saving you tons of time and making your life easier. Business Insider reports that consumers will spend $142 billion via chatbots worldwide by 2024, up from just $2.8 billion in 2019. So you can bet that PropTech companies are investing in this technology.
5. Big Data and Predictive Analytics for Informed Decisions
MLS systems have been great for disseminating information to local real estate professionals. But with the househunting giants of today (think Zillow, Trulia, Redfin, and Realtor.com), this data is now available to everyone. This gives local buyers (and not-so-local buyers) valuable information to help with their home search.
Predictive analytics are also being introduced to the public, offering insights on potential industry growth, value trends, and market shifts. The goal is to educate and inform residents so they can make smart real estate decisions.
Companies like PropStream are taking this a step further, cross-referencing county records with MLS data and unique filters to give real estate investors a path to finding off-market deals. Investors can now find homes in distress due to divorce, bankruptcy, or liens, and reach out to the owners directly through built-in skip-tracing. You could stay a step ahead of other agents with this type of service, helping your buyers find deals before they hit the market.
How Is PropTech Shaping the Future of Real Estate?
There is no stopping PropTech at this point.
9 in 10 real estate agents report that they have already invested in digital tools since the onset of the pandemic. And 82% of real estate agents agree that they need to incorporate PropTech into their business strategy to stay relevant going forward, even after the pandemic ends.
According to the leading PropTech venture capital firm, MetaProp, the Global PropTech Investor Confidence Index reached an all-time high in the second half of 2020, reaching 9.2 out of 10 (up from the previous high of 8.8 in mid-2019).
Since venture capitalists are willing to supply billions of dollars to fuel PropTech startups, PropTech growth will continue increasing. The US housing market alone hit a value of $36.2 trillion in late 2020, and with an industry this valuable, and the seemingly limitless PropTech opportunities, you can bet investors will continue to support PropTech development.
Let’s look at some specific ways PropTech is shaping the future of real estate.
Empowering Buyers and Sellers
Buyers and sellers are loving the growth of PropTech. 85% of buyers and sellers who responded to our survey said that the explosion of new PropTech makes them feel empowered.
Not only are buyers getting access to more data to help them make informed decisions, but they’re also able to act more quickly thanks to PropTech, which is critical in a competitive seller’s market. 84% of buyers appreciate that virtual showings allow them to tour more homes in less time, so they can be ready to make an offer quickly when they see the right home.
And what if a buyer wants to move out-of-area? PropTech enables them to. 87% of buyers surveyed prefer remote showings because they can easily shop outside their local market.
Giving Real Estate Professionals More Flexibility
Virtual brokerages will become the norm. As of 2021, only 11% of real estate agents work in an office daily, and all but 1% have plans to go virtual.
PropTech is also allowing real estate agents to reach out-of-area buyers. Through drone tours, agents can help out-of-area buyers understand the layout and feel of a neighborhood (81% of buyers are interested in neighborhood drone tours, by the way). And since showings can be conducted virtually and closings can be done remotely, real estate agents can sell to buyers without ever meeting them in person.
Enabling iBuyers
iBuyers, like OpenDoor, Zillow, and Offerpad, are real estate companies that buy homes directly from sellers. In most cases, the homes are immediately resold on the open market. Sellers get a guaranteed buyer immediately, so they don’t have to prepare their homes for the market or work their schedules around showings. However, they will likely get less for their home than they would on the open market, and they’ll pay a fee to the iBuyer for their service (typically slightly less than the average real estate agent commission).
During the early days of the pandemic, iBuyers were especially attractive because sellers wanted to limit the risk of contamination through multiple in-person showings. 38% of those surveyed said they sold their home to an iBuyer. Another 40% said that they would be open to doing so in the future.
But this was exactly the moment iBuyers pulled back, suspending homebuying due to economic uncertainty. As a result, Opendoor reported a 45% revenue decrease in 2020 compared to 2019. Then the housing market boomed, and suddenly, homes were selling for far more than the asking price in just days on the open market, making iBuyers a far less attractive option.
But when the market slows, iBuyers will make a comeback.
Creating Smart Homes
“Smart” homes have been a trend for some time. 75% of homeowners have plans to invest in more “smart home” or Internet of Things (IoT) technology for their homes in the future.
Because IoT tech is high on the priority list for consumers, PropTech companies will continue to invest their time and energy into saving energy at home and increasing connectivity.
But it’s not only about a lifestyle of convenience. IoT has greater implications for the housing market in a broader sense. 62% of those surveyed believe that, with enough smart home functionality, aggregate reports from this tech could take the place of traditional home inspections. Millennials were disproportionately more likely to say this than older generations by a factor of 26%.
Efficient use of space and “smart” building will also be a focus in the future as we find a happy medium between the too-small-for-quarantine homes and the McMansions of the previous generation. Home design changes will have a ripple effect for home builders and agents in terms of marketing homes.
Is PropTech More of a Threat or an Opportunity for Real Estate Agents?
For those that remember the early beginnings of the Internet, you may recall people were very concerned about how the World Wide Web would disrupt the real estate industry. Of course, today the Internet is seen as an essential tool for real estate agents. In all likelihood, the same will be said about PropTech in coming years.
Some real estate agents are livid at the rise of PropTech companies that seem hellbent on disrupting the industry and their livelihoods. Others see many of the PropTech startups as potentially beneficial partners that can make their job easier.
Some experts believe that true PropTech isn’t about the tech world disrupting the real estate industry - it’s just the opposite. It’s technological tools that genuinely help real estate professionals and their clients while protecting against harmful disruption.
It largely depends on the PropTech company and what it’s offering. PropTech companies can fit into one of two categories, which can affect whether they’re helping or hindering agents.
Endogenous PropTech. Endogenous PropTech is developed by companies within the real estate industry. Companies that are already part of the industry tend to be more inclined to focus on innovation to improve the current processes.
Exogenous PropTech. Exogenous PropTech is developed by companies that are outside of the real estate industry. These are the companies that are more likely to take a disruptive mindset and want to really shake up the real estate industry.
The overall goal of PropTech isn’t necessarily to replace agents. The goal for most companies is to innovate the real estate industry through technology. But this naturally brings both threats and opportunities to existing real estate professionals.
The Threats of PropTech for Real Estate Agents
24% of agents surveyed confessed to being worried that the rise of PropTech would render them obsolete. This fear is especially pronounced among agents over 40 years, who were 55% more likely to be concerned than younger agents.
For decades, much of the general public thought real estate agents would be replaced by the Internet. And some people still do. They think agents are middlemen who become unnecessary when buyers and sellers can find one another in an online marketplace.
But if big data has taught us anything, it’s how important real estate agents are, not as middlemen, but as advocates. Buyers might be able to find a house on their own. But they don’t know enough about the buying process to make such a unique purchase on their own. They need a real estate professional to guide them through the process, determine a fair market value, negotiate on their behalf, explain the paperwork, and counsel them through the inspection and appraisal.
In fact, there are more active REALTORS® today than ever before. Here’s what you can do for your clients that big data can’t:
Use human intuition to separate what your clients need from what they think they want.
Calculate the fair market value of a home (big data will improve in this area, but it will be decades before it can be as accurate as a finger-on-the-pulse agent).
Negotiate on your client’s behalf.
Express empathy and offer emotional support for clients struggling with a transition. Buying and selling real estate is an emotional process and benefits from a personal touch.
So big data really isn’t a threat. The main threat comes from iBuyers who are attempting to circumvent at least part of the agent equation.
This presents a threat to real estate agents because many sellers may be willing to take a lower price to guarantee a quick and secure sale. In fact, our survey data confirms this. Six in ten respondents said they would be willing to sell their homes at a slightly reduced price in order to sell their homes more quickly.
For many sellers, the lower profit is financially worth it because they might not have the funds available to get the house in market-ready shape to maximize their profits anyway. And sellers seem happy with the tradeoff. Impressively, eight in ten of those who sold their homes to an iBuyer reported that it was a positive experience.
When the market slows, agents will need to convince sellers that it’s worth the wait to find a buyer on the open market. Be ready to compare income and expense projects for iBuyers and the open market to show your sellers how much they’d be losing by going with an iBuyer.
The Opportunities of PropTech for Real Estate Agents
Most PropTech is focused on creating tools that agents can use. The goal isn’t to replace real estate agents, but to help them work more efficiently. The PropTech companies creating these tools benefit when there are more agents selling homes.
Drones are a great example. Drone technology has been catapulted forward by real estate agents. Aerial shots that were once reserved for multi-million dollar estates are now possible for virtually any property. Now there are tech companies that specialize in real estate drone photography and services.
And we’ve already discussed tools that enable real estate agents to conduct virtual tours, publish interactive tours online, create augmented reality images, work remotely, and respond to client inquiries immediately.
But there are many more opportunities as well...
Social media companies, for example, didn’t intend to help real estate agents specifically, but many of today’s agents are getting a solid ROI from their money spent on social media ad campaigns. In fact, agents can generate leads for free on social media!
Even website hosts and professional website design theme creators are providing valuable tools to real estate agents. A decade ago, agents had to spend a small fortune to hire professional website builders. But today, there are tons of tools available to help real estate agents build their own professional websites for a fraction of the cost! Not only does this give new agents instant credibility, but it also gives agents a chance to be found by buyers and sellers using search engines like Google to learn more about real estate or about a certain area.
75% of real estate agents surveyed report feeling empowered by PropTech to better serve their clients. Agents have been taking advantage of virtual showings, augmented reality staging, and virtual brokerages for years, and the COVID pandemic forced agents who were on the fence about PropTech to get comfortable with it quickly. 81% of agents surveyed agree that PropTech has made their job easier.
Virtual showings in particular have been great for agents. You can show more homes to a wider audience in less time. It’s a win-win-win! An impressive 95% of real estate agents agree that they prefer virtual showings.
The truth of the matter is, PropTech companies are exploring all facets of the real estate industry, and some of them don’t care if they move in on agents’ business. But, by and large, many of the PropTech innovations are supportive rather than competitive. There are hundreds of PropTech companies, and very few are attempting to reinvent the industry as a whole in a way that cuts agents out of the deal.
So you can relax and embrace PropTech!
How Can Real Estate Agents Embrace PropTech?
If you were in the industry during the peak of the pandemic, you’ve probably been forced to embrace PropTech already. And your business is probably stronger for it! 73% of agents say they will keep using the PropTech they adopted during COVID long after the pandemic is over.
But if you’re new to the industry or you’ve been resisting the PropTech revolution, it’s time to get onboard. History tells us that agents who don’t embrace innovation quickly get left behind. Don’t let yourself and your business get left behind.
So, how can you fully embrace PropTech? Here are a few ideas:
1. Stay up-to-date on the latest innovations. It’s important to be at the forefront rather than running behind, especially when you have clients that may be familiar with PropTech themselves. Agents need to understand not just PropTech but the Digital Transformation at large that feeds into real estate technological changes. Doing so will give you a better idea of what’s on the horizon, help you field questions from clients, and better meet their needs.
2. Use PropTech tools. As mentioned above, many PropTech companies aim to help make an agent’s job easier and more productive. Start exploring some of the latest tools to see if they are something that makes sense for your business. There is no better way to embrace PropTech than to start using it.
3. Focus on client-centered PropTech. Focus on the PropTech tools that enhance client services and make the home buying/selling process easier for clients. This will help to counteract the advantages of PropTech companies that are looking to replace agents.
4. Talk with other PropTech adopters. Ask the tech-savvy agents in your office what they think of PropTech tools, startups, and innovations. They can give you another perspective and help you decide which tools are worth trying.
5. Hit on the human factor. At the end of the day, real estate is an emotional industry. Algorithms and online tools may make things easier for home buyers and sellers, but they can’t replace the human element that agents bring to the table. PropTech that helps you communicate with clients and manage the emotional elements of the process are a definite benefit for agents.
PropTech can’t simply be ignored. It’s here, and it’s here to stay. Being complacent or trying to act as if PropTech isn’t a factor could end up being the most costly mistake for agents.
Innovation is ingrained in the real estate industry. Agents who accept this reality and leverage PropTech rather than fight it will enjoy business growth.
*This article was updated on 6/24/2021