Uncharted Territory in Digital Transformation
Ready or Not, Be Prepared to Change and Adapt to New and Evolving Ideas
By Mark Wai
For years, prognosticators have been saying that virtually every aspect of the residential real estate industry, including real estate investment, is poised to be dramatically reshaped by emerging technologies. You’ve heard the buzzwords a million times: Artificial Intelligence (AI), Machine Learning (ML), Blockchain.
What you’ve probably heard less of is an answer to a basic question: How much of this talk is hype, and how much is reality?
As you might imagine, the truth is a bit of both. What follows is a brief overview of which promising technologies every real estate investor should be keeping an eye on and what you can expect to see on the real estate technology horizon in the years to come. Let’s talk about the failures, the successes, and the uncharted territory we are approaching in the digital transformation of our industry.
The Failures
First and foremost, let’s be honest: they’re called buzzwords for a reason. It sounds snazzy to say “AI” or “Blockchain” in a press release—but doing so doesn’t necessarily mean you’re putting those technologies to good use. And too many companies have exaggerated what they say about their tech in order to create buzz and good PR.
You can understand why that has happened, because these technologies are easy to get going, and appealing to talk about, but incredibly hard to get right. That’s true for everyone in the industry, from sole-practitioner property investors to the biggest players in the game. There are plenty of AI, ML, and Blockchain vendors and off-the-shelves packages in the market today that are eager to help companies start their AI projects — for a fee, of course.
One of the biggest tech companies in the real estate space recently disbanded its AI/ML-based home buying business because its algorithms could not accurately predict the right price-points of a property — both in buying and selling. Despite investing millions of dollars and hiring the best and brightest data scientists, the reality simply didn’t match up with the buzz. Millions of dollars were wasted, and huge opportunity costs were lost.
Examples like this demonstrate that despite what you might have heard from the hype machine, the industry is still learning how to implement these technologies effectively and efficiently. If one looks at the history, each major technology takes time to mature, especially in the real estate industry which involves so many different use cases and participants, coupled with a high level of complexity and a lack of existing technology standards.
The Successes
Make no mistake, though: extremely useful applications of emerging technologies are already being deployed throughout the industry. Below is a snapshot of some of the more interesting and relevant tech innovations to enter the market in recent years. Investors who stay on top of developments like these will have a major competitive advantage in the years to come.
Artificial Intelligence to determine the condition of a house.
A discipline of AI called computer vision, which underpins technologies like driverless cars and your phone’s facial recognition functionality, is driving major change throughout the real estate industry. By analyzing and gleaning insights from real estate listing photos on a massive scale, computer vision can help a wide variety of real estate market participants save time and make better, more informed decisions. The applications of this technology are numerous, from facilitating faster and more accurate valuations, to better home search experience, and to providing investors with actionable intelligence on the state of their portfolios.
Blockchain to secure highly sensitive financial data.
Blockchains are permanent digital records that cannot be deleted or changed, which makes them incredibly useful for storing and transmitting data without third-party involvement. For real estate investors, that means removing intermediaries between contracting parties, establishing reliable records of ownership, reducing turn-time, and substantially reducing transaction risks. Blockchain can also expedite the contracting process and reduce costs.
Innovative solutions to reduce home-buying friction points.
Creative new applications have greatly enhanced the efficiency of many elements of the home buying process, from scheduling showings to notarizing documents. These may seem like minor advancements, but when you reduce the time and friction involved in something that happens millions of times per year, the entire industry benefits.
The Uncharted Future
Looking towards the future of what is possible, technological developments in the real estate industry will fall into either of two major categories: atomic innovations and holistic innovations.
Atomic innovations refer to standalone products or applications that are designed to solve a specific problem, like notarization, showing a listing, underwriting, decisioning, document digitization, e-closing, e-signing, computer vision, biometric authentication, and so on. Holistic innovations are changes that affect the entire end-to-end user experience as a starting point of design.
In the next few years, we will likely continue to see many atomic-level innovations, especially because that is what the structure of the venture capital industry most readily supports. This will typically mean individual startups creating discrete new products, rather than wholesale transformations. Holistic innovations, on the other hand, will be much harder, further off, and mostly reserved for larger companies that can support major long-term investments. These are difficult and costly—but when they happen, they will be transformational.
The bottom line is, we must be prepared to change and adapt to new and evolving new ideas, because they are on their way to disrupt our industry whether we are ready or not. The past two years have showed us that a once-in-a-lifetime event like the COVID-19 pandemic can also play a very big role in changing and accelerating the use of technologies in real estate. Those who are ready and willing to embrace new innovations will benefit from them the most.
