Like many industries, technology has disrupted the real estate industry.
Let’s stipulate from the start that the Internet is not only the biggest real estate tech innovation of the millennium, and probably of all time, but it and its closely allied technologies, including Wi-Fi, smartphone and GPS, also create the context for just about all the specific innovations we discuss in this article. Though the Internet was alive and kicking prior to 2000, that was the year when it really started to come into its own, with the increasing power and ubiquity of apps, better communications and the earliest hints of social media.
When we consider different types of real estate tech innovations, some deal with facilitating transactions, and others with the nature of properties on the market. In all cases, these innovations have made a substantial contribution to the real estate industry and to the lifestyles of owners and renters.
- Real Estate Transaction Standard (RETS). Technically dating from 1999, we had to include RETS, because it became the backbone for data exchange across the Multiple Listing Service (MLS). In the bad old pre-RETS days, brokers had to deal with an inefficient system called FTP protocol that hampered queries and data transfer. The RETS protocol solved these problems and made it easy to formulate pinpoint queries and gather detailed information. While other industries use a variety of data transfer control schemes, RETS is the common language of realty in North America.
- MLS-Lite for Non-Brokers. The MLS used to be paper-based and phone intensive. It, of course, was revolutionized by the Internet to become immensely more powerful and timely, but its main audience is the realtor community. The advent of lite versions of MLS – sites such as Realtor.com and ZipRealty.com – opened up to the general public much of the valuable MLS information. The apps not only help you research, identify, buy and sell properties, they guide you through the process of getting pre-approvals, setting up house tours, even making an offer. Operations such as Zillow and Trulia use broker information rather than the MLS, so they may have unique information not available on Realtor.com.
- Home Automation and the Internet of Things. Early versions of the automated house as we think of it today started appearing in the 1990’s. The Integer Millennium House of 1998 was a showcase for automation of HVAC, irrigation, security, lighting and communication technologies. However, in recent years, home automation has gone from gee whiz to commonplace, thanks to plummeting costs, more powerful technology, integration of systems and remote control through computers and smartphones. A home equipped with integrated automation can sell for a premium because it elevates the lifestyle of its owners. As you leave the office in the evening, you can access an app that will turn on your oven, prepare a DVD, configure lighting and security, maybe even draw a hot bath, with just a few taps on the app. Security is enhanced with items such as cameras, fire detectors, audio monitoring and other important devices that keep a home safe, efficient and comfortable. As new generations of homebuyers start entering the real estate market, you can bet that a great preponderance will insist on homes with the latest automation features, possibly creating a bifurcated market within the same neighborhood.
- Smartphones and Smartwatches.
- The advent of GPS certainly revolutionized navigation, but it was the smartphone (and now smartwatches) that made it portable and commonplace. This has enormous implications for real estate. First, it makes it easy for buyers to actually find a house for inspection. But it also supports important research data, such as what are the stores and restaurants, roads and mass-transit facilities available in a neighborhood. Internet connections via the phone let you access the apps we mentioned earlier to enable field research. You can use the camera on your phone to photograph a property for sale and upload it to the MLS or social media. Maybe in the future, real estate closings will be conducted over the phone with nothing more than a thumbprint.
- Crowdfunding. The idea of real estate investors jointly investing in property is nothing new – we’ve discussed TIC investments before. Using the internet to solicit investments, though, was illegal until the passage of the JOBS Act in 2012. Slowly, the SEC has rolled out enabling regulations that allow buyers and sellers to invest in assets via equity crowdfunding, including real estate. The latest piece of the crowdfunding puzzle will fall into place next year, allowing everyone –not just accredited investors — to buy and sell private securities and property through online crowdfunding portals. The real estate crowdfunding model streamlines the investment process and makes it available to investors who want to spend as little as $5,000. Investors peruse the properties on offer at the crowdfunding portal, check out the sponsors and ask for more information. If they decide to proceed, they purchase equity shares in the property that entitles them to a portion of rent income and/or the proceeds from disposition of the property, all without any personal involvement in the management of the property. In effect, you can be a landlord without any of the responsibilities a landlord encounters. When real estate crowdfunding becomes available in 2016 to non-accredited investors, the potential exists for an explosive growth in real estate capital available for investment.
While a tech savvy individual might have been able to predict several of these innovations 15 years ago (smartphones, for instance), few people would have been able to predict the impact that this technology would have on real estate. What’s notable is that none of these innovations were necessarily intended to be “real estate technology.” Rather, these are larger technical shifts that have massively disrupted the real estate industry. We won’t venture a guess about what new tech innovations will impact the real estate business over the next 15 years, but one thing is for certain: the industry will look very different in 2030 than it does in 2015.