Introduction to Home Real Estate
Buying a home nowadays looks very different than when your grandparents bought their first house. You probably start your search online and get pre-approved online. You might even view the home and close online. The COVID-19 pandemic has aided the real estate industry’s adoption of technology. Here are seven ways technology has impacted home real estate and how it might help shape it in the future.
Figuring out how much a home is worth can be hard. Really hard. That’s why in the past it was left to appraisers and real estate agents to decide. Sites like Zillow and Redfin eliminate some of the guesswork and use data to give a rough estimate on the value of a home. Here, Zillow outlines their price valuation, or Zestimate. Zillow uses various data including number of bedrooms, bathrooms, square footage, zip code, market trends and many other factors to spit out an estimate. It even accounts for seasonal influences to home value. Real estate agents may sometimes be wary of the word Zestimate. They’ll cite tales of clients with unrealistic expectations and shattered dreams. However, Zillow aggregates all of this data to form an incredibly accurate estimate. Zillow claims a median error rate for on-market homes of 1.9%.
Buyers and sellers are better informed than ever to make reasonable offers and list homes for reasonable amounts respectively. That’s why 95% of home buyers start their searches online.
Closing on a home was once a full day event. Coordination was difficult between buyers, sellers, agents and lenders. Now you can close on a home in California while hitting the links in Florida. Companies like DocuSign and Dotloop allow for quick closings remotely from anywhere. Dotloop has even found a niche specifically in real estate document software.
If Saturdays are for college football, then Sundays are for open houses. More and more realtors are ditching the “cookie scent in a can” for drone house showings. The trend of viewing houses online through virtual walkthroughs may not be entirely new, but the COVID-19 pandemic solidified the trend’s place. Redfin reported that in 2020, 63% of homebuyers bought their homes without seeing them in person. Especially as homes are selling above asking price and people buy homes out of state, the need for quick and efficient showings is clear.
Getting a mortgage can be a long, complicated process. From picking a mortgage type, to picking a lender and getting approved, there are a lot of choices. Now, it’s easier than ever. Getting pre approved can be as simple as a few clicks. Easier loan approval means more buyers in the market and more bidding wars. Don’t expect this seller’s market to go away anytime soon.
5. Online Investment
Fin tech hasn’t only claimed the mortgage process. Companies are now offering real estate investment vehicles online too. From an institutional standpoint, Robinhood offers fractional ownership in REITs. Other companies have popped up offering alternative investment options in specific properties. Some require investors to be accredited while others do not.
6. Smart Home Technology
Technology isn’t just changing how you buy a home. It’s also changing what homes look like inside. The IoT (internet of things) is revolutionizing everything about the home experience from smart locks to smart toasters. Real estate developers are integrating smart home technology in their new constructions. Smart thermostats and smart locks are the most common tech to include. Buyers of these new developments appreciate lower utility costs and property managers appreciate ease of entry and exit to properties without worrying about physical keys.
7. New Rental Avenues
The traditional real estate model was always the same: buy property and rent it out. The internet has brought about new ways of generating revenue. Airbnb wasn’t first to the short term rental space, but they certainly dominate it now. The global short term rental market is estimated at $87 Billion. Especially with COVID restrictions being lifted, that market needs servicing. A lot of servicing. Airbnb CEO Brian Chesky told CNBC his platform will need millions more hosts in the coming months to meet the demand.
What Does the Future Hold for Home Real Estate?
Virtual showings and online closings will not fade with the pandemic. Instead, expect technology to keep changing the industry. Blockchain technology is one area that has the potential to have massive impacts on real estate. Cryptocurrencies are at times already being accepted as payment for homes which could expand in the future. Blockchain also has the potential to be utilized for documentation software because of its inherent security features. Technology is shaping real estate’s future, so be sure to stay ahead of the curve.
Published first in Forbes.