A new US-based technology is threatening to disintermediate traditional real estate practitioners, and as Real Estate Business’ US correspondent Aleks Vickovich learns, Australian agents aren’t immune from its impact.
Speaking at the REinnovate conference earlier this year, Deloitte’s Peter Williams offered attendees a stark warning. ‘Uberisation’ of the real estate industry is coming, the big accounting firm’s long-haired ‘chief edge officer’ proclaimed.
Agents have been hearing about digital disruption for some time, and the industry has already adapted – successfully it could be added – to the emergence of online listings websites and other internet-age changes. But a new type of technology is beginning to poke its head above the surface of development phase and provide a compelling proposition to consumers that could cut agents out of the real estate transaction process altogether.
“Opendoor.com is a massive disruptive threat to the real estate industry, akin to Uber,” Mr Williams said, offering a disruptive analogy that taxi drivers will tell you is no laughing matter.
“For buyers, buying a house is now like buying a can of soup from a supermarket, because it is simple and transparent.”
Officially launched in March 2013, Opendoor.com aims to provide the “most accurate home valuations and offers, so homeowners can sell with confidence the minute they’re ready” – all by utilising mobile technology and minimising the need for intermediaries such as agents.
The company was founded by data analytics entrepreneur Eric Wu and former PayPal exec Keith Rabois, and has a small and specialised staff of 33 with resumes revealing disruptive giants like Twitter, Facebook, Yammer and Y Combinator.
The technology allows consumers to request an offer online on a property they wish to sell. The boffins at Opendoor will provide an offer based on a “comparative market analysis and [the] home’s unique story”, according to the company’s marketing materials. Should the seller accept the offer, a physical home inspection will then be arranged and – subject to approval – a moving-out date will then be agreed and Opendoor will “take care of the rest”, providing final payment directly into the seller’s account.
Aside from speed – the request process takes “less than three minutes”, the website suggests – for Mr Williams, this new technology addresses one of the real estate industry’s biggest problems.
“What kills real estate in [Australia] is lack of transparency on price – and it drives me nuts,” Mr Williams told the REinnovate conference.
What kills real estate is lack of transparency on price – and it drives me nuts
“I tried to buy the property that I lived next door to seven or eight years ago and I had no idea what the value was,” he said.
Mr Williams illustrated his point with an account of a hypothetical visit to the supermarket:
Customer: How much is a can of soup?
Customer: But $2 plus what?
Cashier: It’s hard to say what the market will pay – you can’t accurately predict that stuff.
Mr Williams didn’t hide his scepticism at the conference. “Don’t give me ‘Oh, but you can’t really tell,’” he told attendees.
Speaking exclusively to REB, a spokesperson at Opendoor’s Phoenix HQ listed transparency as one of the key benefits and features. The spokesperson was also unabashed about the tech start-up’s aims to disrupt the status quo in real estate sales.
“We are excited about transforming the entire process of homebuying and selling,” she said. “We have a really talented team who fundamentally are on a path to change the traditional real estate transaction and transform it into a fantastic customer experience that also delivers certainty and speed.”
We are excited about transforming the entire process of homebuying and selling
However, while Opendoor is confident it is leading the charge to a new future in real estate, America’s agents are not so convinced their fate is sealed.
High touch and high tech can go hand in hand
Since 1908, the National Association of Realtors has been a powerful force in Washington, navigating the real estate professional industry through countless political wars and regulatory challenges. Its current president, Chris Polychron, is watching Opendoor closely but doesn't anticipate any real threat to his membership.
“Technology has transformed the way realtors do business, but in real estate, high tech doesn't come at the expense of high touch,” the Arkansan realtor and lobbyist tells REB.
“Nothing beats a real person who can tell a buyer about their prospective new neighbours, the best nearby community events and how to sign their child up for the local soccer league.
“More than ever before, homebuyers and sellers are looking for realtors for real insights and support to handle what is likely their most important financial transaction.”
Suzanne De Marais from 10 Square Real Estate says she has never heard of Opendoor but that it makes sense that tech entrepreneurs are sizing up her professional space.
However, like Mr Polychron, Ms De Marais believes people-to-people real estate transactions are not going anywhere.
“I believe that residential real estate is a business that touches people’s lives emotionally, financially and represents significant transition in a family or individual’s life,” she says. “For these reasons, I see the continued need for experienced professionals to guide buyers and sellers through the sales process.”
I see the continued need for experienced professionals to guide buyers and sellers through the sales process
A web-based app, regardless of its alleged speed and transparency benefits, can’t offer the local knowledge, empathy and consultative services of a human agent, according to Ms De Marais.
In her city of Washington DC, for example, Ms De Marais says there are huge variations in property demand and quality within blocks – knowledge of which is crucial to the negotiation process.
But Opendoor is seemingly aware of the traditional real estate industry’s strengths as well as perceived flaws – or “room for improvement” as the Opendoor spokesperson describes.
Currently, the service is only available to buyers and sellers in Phoenix, for precisely the reasons of local knowledge that the agents have mentioned. “We haven’t had any sight-unseen purchases,” the spokesperson explains. “We have a great 24/7 text-to-enter feature where you can text to get entry to any of our homes, any time.”
Despite its confinement to a city of just 1.5 million residents, Opendoor claims it is selling two homes every day on average, indicating it has already taken a not-insignificant market share away from Arizona agents.
The website will soon open its own doors in the lucrative property market of Dallas, Texas, and would not rule out a broader expansion, including even Australia or the Asia-Pacific.
“The most sensible thing I’ve seen in real estate”
While some US agents are unfazed by the emergence of Opendoor – or, at least, believe they can survive it – they are still largely preparing for the inevitable disruption nonetheless.
The National Association of Realtors believes agents have been at the forefront of embracing technology, meaning they are well equipped for any new developments the future may bring.
“Embracing technology and online resources is an integral part of how realtors identify, market and sell homes and ensure they are meeting the needs of their clients,” Mr Polychron says.
“Over the years, realtors have invested a lot of time and millions of dollars in building online real estate technologies, and as a result, most consumers use the internet to learn about homes for sale. A majority of realtors use technology to market their services and effectively communicate with clients [and] have been able to branch out to better reach new clients.”
Online listings were once seen as a potential threat but are now an essential part of the process for most agents and brokers, Mr Polychron explains. In fact, 90 per cent of consumers who used an online search to commence their property purchase process used an agent, according to NAR research – significantly more than those that did not use the internet.
Ms De Marais from 10 Square Real Estate agrees that agents have been upping their tech game for some time, pointing to the use of digital technology for house inspection, documents and writing offers.
“Technology has allowed agents to go paperless and keep transactions moving more quickly,” she says. “In terms of fighting against disruptive trends, I think the agents are becoming more sophisticated in terms of marketing and running strategic businesses.”
To be clear, Opendoor’s mission is not to do away with agents.
“We work with realtors who also love our service since we make it super simple to view the homes, as well having homes that show really well,” the spokesperson says.
Just as agents have incorporated online listings sites into their practice, there is also an opportunity for more forward-thinking professionals to embrace and work with technologies like Opendoor, even though they seem on face value to be an either-or proposition.
Having said that, the company won’t be going out of its way to ensure the survival of human agents either.
“We just care about the customer experience,” the spokesperson says – a statement that speaks volumes not just about the direction of real estate transactions but the American commitment to free market economics and top customer service.
For those agents who think using something like Opendoor might be a bridge too far, what is not an option, it seems, is to stick one’s head in the sand.
There is a portion of the customer market – potentially a very large portion – that is naturally attracted to the transparent, open and user-friendly nature of web-based sales tools.
For one particular customer that fits this description, the message is clear.
“Watch [Opendoor],” Mr Williams advises Australian agents. “Because that, to me, is the most sensible thing I’ve seen in real estate – ever.”