5 Ways the Real Estate Industry Will Completely Transform Over the Next Decade
How safe are real estate agents’ jobs? Think it’s likely they’ll be replaced by artificial intelligence in the near future?
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A recent Oxford study on artificial intelligence forecasts a 97-99% likelihood that real estate agents’ jobs will be made obsolete by AI. And not in 30 years, either. Think the next decade.
As the global economy and job markets continue to evolve, we all have a choice. We can all cry and wail that the sky is falling, or we can become more flexible and continue to develop the skills we’ll need in tomorrow’s economy. No one’s crying that automobiles made blacksmiths obsolete — new career opportunities opened for mechanics, and travel became easier for everyone.
As the Internet and mobile and social technology have evolved alongside the sharing economy, old industries have seen massive disruption. Look no further than what Airbnb did to the hospitality industry. Or Uber’s impact on the taxi industry, what Apple did to the mobile phone industry with the first iPhone in 2007, or how Tesla’s sales model is disrupting the car dealership industry. And those are just the headline-grabbing, glaringly obvious examples.
But what about the real estate industry? It seems to still be plodding along in its old, comfortable 20th century model. Or is it?
Change is not only coming; it’s already starting to disrupt the industry. Here are five ways that the real estate industry is on the verge of disruption and the changes you should look out for over the next few years.
How are rents set? A landlord or property manager guesses what the market rent is and advertises it. But a given rental unit may be worth $900 to one person and $1,100 to another who would happily pay more to live two blocks from their work.
A South African startup launched a rental listing and management service that gives landlords the option to let prospective tenants bid on the rent. The landlord sets a reserve rent, and renters are all pre-screened when they sign up for the service.
Less desirable rental units will receive fewer and lower bids; high-demand rental units will generate more higher bids. The resulting rent will be the true market rent, rather than a landlord’s hunch or best guess.
It also ensures that the renter who moves in is the one most enthusiastic about living there.
Pretty nifty idea, eh?
Flat-Fee Online Real Estate Brokerages
Consider these questions: Does everyone need a real estate agent? Are the services that agents provide worth $10,000? How long are sellers going to continue spending that kind of money to list and sell a property?
Not much longer.
Services like Owners.com in the United States and Your Online Property Agent in the U.K. have started offering flat-fee services in the $400-1,000 range depending on how much extra attention and services you want. All services include an MLS listing, buyer funds verification and background check, property showings calendar and offer negotiation support. Premium services include local agent support, professionally written descriptions, sales contracts, and similar bells and whistles.
So what do sellers give up by using these services? The biggest difference is they would have to show the property themselves. But who can sell the house better than the people who live there?
Expect to see these online brokerages increasingly put the pressure on real estate agents.
More Long-Distance Real Estate Purchases with Virtual Reality
Buying real estate sight-unseen is too uncomfortable for most buyers to consider. But with high-resolution, interactive 3-D virtual reality, buyers will feel like they’re walking through the property in person.
And not just the way the house looked when it was mapped. Increasingly, virtual reality tours will allow viewers to see the natural light at different times of day and even different times of the year!
Buyers won’t even have to use their imagination to determine how their furniture will look in it. Virtual reality software will let them superimpose various pieces of furniture in the space.
Prospective buyers will be able to virtually walk through dozens of homes in an afternoon from the comfort of their real estate agent's office â or more likely, from their own home, with these virtual tours available through their online broker.
But virtual reality has the capacity to truly globalize real estate markets, making it far easier to confidently buy property anywhere in the world.
Rent Deducted from the Tenants’ Paycheck
High-risk rental applicants are simply turned away in today’s market, when the landlord has any other options available. That makes it pretty tough to find a quality home if your credit is tarnished.
But what if those applicants could virtually guarantee the rent to prospective landlords? SparkRental.com is developing a system to deduct tenants’ rent directly from their paycheck to alleviate the responsibility from renters.
It’s a win-win for both landlords and tenants. Landlords know they’ll get their rent on time every month and never have to hear the words “check’s in the mail” again. Tenants can be accepted for higher quality housing.
To sweeten the deal even more for renters, their on-time rent payments are reported to credit bureaus to help them rebuild their credit.
The Rise of Blockchain Technology in Real Estate Transactions
Most people who have heard of blockchain technology just think of bitcoin. But it’s not bitcoins that will disrupt transactions and the title industry, but rather the technology that enabled bitcoin in the first place.
If you’re not familiar with blockchain, the idea is that it can securely and transparently track transaction histories. For public records like real estate transactions, it’s the perfect solution.
Even lease histories could be logged, with more privacy, to keep clear records for landlords and tenants.
The primary purpose of title companies is to check title histories and record transactions. But what if both processes become completely automated by secure blockchain technology? There may always be a human element, but blockchain is coming one way or another to title companies.
Consider a recent study by Brickvest, in which 56% of real estate investors expect blockchain technology to become the dominant method for recording and tracking real estate transactions, including payments and title history.
Disruptions are on the horizon for title companies, real estate agents, property management, and everyone else in the real estate industry. Technology will change the industry, in ways that help consumers but not necessarily those who make their living from real estate. Be prepared to adapt because your job today may not be available in 10 years from now, and your job in 10 years from now may not exist yet today. Blacksmiths were out of work by 1920, but there were suddenly plenty of jobs for auto mechanics — make sure you’re on the right side of evolution!
[Editor’s Note: We are republishing this article to help out our newer readers.]
What disruptions do you see on the horizon for the real estate industry? How do you think the industry will change, and who will be the winners and losers?
Let’s discuss in the comments section below!