How Will You Stay Relevant to Consumers in 2020?
December 2, 2019
iBuyers, data security threats, MLS vulnerabilities, and venture capital growth are poised to shake up the housing industry over the next two years, according to the 2020 Swanepoel Trends Report. The 200-page report, which was released Monday by real estate consulting and research firm T3 Sixty, is in its 15th year and is closely watched for insights into the key issues affecting the industry.
The real estate business, historically dominated by fragmented independent contractors and mom-and-pop brokerages, is becoming more comprised of larger companies armed with artificial intelligence platforms that are hyper-focused on enhancing the consumer experience, the report notes. “The industry is changing at what appears to be an unprecedented pace,” writes Stefan Swanepoel, chairman and CEO of T3 Sixty. “The industry feels chaotic. Perhaps more than ever, residential real estate brokerage leaders struggle to answer the all-important questions: How do I determine what is important, and where do I get a thorough analysis of the topics, trends, innovations, business models, and companies rapidly pushing the industry into the future?”
The report highlights some of the following issues impacting the industry over the next 18 to 24 months:
- Growth of iBuyers. This business model enables homeowners to accept instant offers on their properties, leading to a quicker sale and bypassing the traditional selling approach. Several real estate brokerages have stepped into the game with their own versions of iBuying services to compete with Wall Street–backed iBuyers such as Opendoor. “New companies are offering an increasing number of twists on the model,” the report notes. For example, Opendoor has partnering with homebuilders for a trade-in type of experience, which enables sellers to instantly sell their home and then buy new.
- Data security vulnerabilities. About 30% of real estate websites do not run on a recently patched web platform, the T3 Sixty report finds. “Outdated systems can be more vulnerable to hacks that serve malware to website visitors,” the report notes. In 2018, more than 11,000 real estate data crime victims lost $150 million in total, according to FBI data. Wire fraud is proving one of the biggest security threats to real estate transactions. Hackers are gaining access to the email accounts of parties involved in a transaction, including agents and brokers, and forging fraudulent wiring instructions to home buyers. You can learn how to thwart these attacks.
- Post-transaction services. Brokerages are paying more attention to how they keep in touch with clients after a transaction. Concierge services may not be a totally new concept for brokers, but the T3 Sixty report predicts they are likely to grow as transactions become more digital. Many recent home buyers require services such as movers, insurance, utilities, home security, and home improvements. The average consumer spends $10,000 on these services within the first six weeks of a home purchase, according to the National Association of Home Builders. Brokerages are using third-party vendors to offer these services, which helps real estate companies build a referral base and improve their competitive edge.
- MLS disputes. MLSs have long been the cornerstone of the real estate market, but they’re facing many challenges that have forced them into consolidation. The report highlights several challenges for MLSs: lower and incomplete for-sale inventory in their databases, an increase in off-MLS listings, expanding iBuyer markets, and the growth and consolidation of brokerages and data vendors into national entities. “MLSs—and the brokers who rely on them—face a clear reality: They need to change and adapt now,” the report notes. “Many MLSs are just not providing the services brokers need and are not moving fast or smart enough to help them compete with rapidly moving newcomers.” The report cautions, however, against the loss of the MLS system—which would then require the development of an entirely new cooperating and compensation structure for the industry.
- Venture capitalists foster high-tech. The growth of venture capitalists is a driving force behind real estate’s major transformation, the report notes. Venture-backed startups seek to bring streamlined housing searches, simplified and speedier transactions, and artificial intelligence to the market. Second Century Ventures, a strategic investment arm of the National Association of REALTORS®, is one that operates an accelerator program called Reach, which supports tech startups and helps to boost their presence within the industry. SoftBank’s $100 billion Vision Fund is the largest venture capital fund on record and has made several notable investments in real estate companies, such as Compass and Opendoor. “The VC ecosystem can appear to be a financially reckless lottery with a small probability of success,” the T3 Sixty report notes. “However, by breaking down the economics reasoning at each step, a sound investment thesis and strategy emerge. This means that VC’s larger role in the real estate space is not a temporary gamble but a calculated investment that will have consequences for years to come.”
Updated: July 10, 2020