Tech News: Automated real estate agents
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By Professor Louis Fourie
ONE OF the major effects of digital transformation on our society is the automation of many tasks, functions and even complete businesses.
In the past few years, significant progress has been made with automation in the form of self-driving cars and trucks that are increasingly replacing truck and taxi drivers.
As a result of Covid-19, many fast-food businesses have automated their operations to replace workers and to limit the spread of the virus. Due to the remarkable progress made by artificial intelligence (AI) and the automation of the writing of news articles, even some journalists have been replaced.
And according to technology researchers, some social workers, lawyers and medical professionals could be replaced in the near future. Technically, any knowledge worker could be replaced by an intelligent machine or robot in the future.
The real estate industry has also not been spared by the wave of automation, and the traditionally stale real estate industry is beginning to evolve due to technological advancements in automation, AI and blockchain. These new technologies address the well-known inefficiencies of the real estate sector.
Home buyers and sellers have grown accustomed to the fast, on-demand delivery of services and goods as a result of the progressions in technology, and they expect no less from the real estate marketplace. Consumers, and particularly millennials, are typically driven by “immediacy” or “on-demand fulfilment” expectations. Unfortunately, the current real-estate business in South Africa is very far from meeting these expectations.
Initially, the trend among real estate companies was very much about internet-enabled businesses. For a number of years, people who are looking to purchase a new home have been using the internet to sell their home or search for a suitable home to buy. Several real estate websites in South Africa are used by potential home buyers, sellers and renters to research a particular neighbourhood, obtain property values, renting and selling prices and choose a real estate agent.
Automated back-end transactions
However, all of these websites have been focusing mostly on the front end of the transaction, while the huge back-end opportunity was untouched - namely, the property sales process (for example, financing and home insurance). But over the past five years, this has changed, and companies have started to focus on the automation of the back end and the real estate transaction process itself, making it possible for real estate to participate in true e-commerce in future.
One online real estate company, for instance, offers the management of renovations in their listing fee. The agents work with the homeowners to effect improvements that will increase the value of the property. The company finances all upfront costs with zero-interest loans and collects payment only when the property is sold. In collaboration with a bank, they also offer financing to new homeowners. The innovative business model led to a significant growth in their business.
But it is the automation of transactions in real estate that added real value and made the life of prospective buyers much easier through an increase in transactional efficiency. In the US, e-signatures have become the industry norm, and e-recording and e-notarisation are new industry standards. The ideal is for the payment and the ownership transfer of high-value assets, such as real estate, to occur simultaneously, thus eliminating the need for a trust layer in the e-commerce marketplace. Automated exchange is possible in the case of real estate, because ownership is denoted by a document and not the asset itself, as in the case of normal e-commerce acquisitions. Unfortunately, South Africa with its archaic systems, is still a long way from this level of automation.
Smart contracts and blockchain
New developments in the field of AI and, in particular, machine learning and smart contracts reinvented real estate transactions. Automated real estate transactions are fast becoming the industry standard, resulting in improved consumer ease and security. Automation has also, to a large extent, reduced the workload of the estate agent.
The automation of the real estate industry to create a “retail” experience for the consumer builds on a number of innovative technologies, such as blockchain, that makes smart contracts possible and ensures that the necessary connections take place between the digitised paperwork, electronic payment and transfer of ownership. Without doubt, blockchain will play an important role in the real estate industry in future. Together with automation, distributed ledgers will bring remarkable change to the roles of all agents in the property buying and selling process.
With smart contracts, all processes will be automated, and all key data will be stored with blockchain in a secure location, thus eliminating the need to copy the data and pass it back and forth multiple times between the buyer, seller and agent. It would be ideal if real estate agents could verify transactions and the immutable authenticity of deeds in real time with the Deeds Office. Although this is already possible overseas, it is doubtful if it will soon become a reality in South Africa. It could certainly help with the current long delays at South African Deed Offices.
But transaction automation is a complex process that involves much more than blockchain technology. It also involves other technologies, such as e-signatures, e-notarisation and cloud solutions, that make the automation of all steps within the real estate property closing process possible.
Due to automation and processes that are enhanced by advanced technology, buying a property can become an easy and pleasant experience. Although many real estate companies are investing in proprietary technology, the automated solution that will be successful in the future will most likely be estate agent and financial institution agnostic.
Real estate platform Zillow
An excellent example of automation is Zillow – claimed to be the most trafficked real estate website in the world and also available in South Africa.
The Seattle-based online real estate giant has extended its advertising, real estate information, direct home sales and back-end services to include mortgage origination, interactive floor plans, and buying homes for renovation and selling. AI is used in the 3D Home app to guess the size of a house, as well as to beef up virtual touring.
Zillow is following the examples of Amazon and Uber that have created the famous “one click, magic happens” expectation among consumers. Just as Uber integrated payments into Uber, Zillow integrated simplified mortgages into the buying of a house. They eventually want to get into every aspect of home buying to change the way people buy and sell houses and to solve the headaches people experience in this regard. With their seamless transaction experience, Zillow succeeded in reimagining real estate to make it easier to move from one home to the next.
Covid-19 has forced people to interact virtually instead of in person. Home-buyers are now more comfortable with buying homes based on virtual tours with faceless guides, thus changing home-buying into another pick-and-click affair, which fits perfectly with the new real estate business model.
Although some (older) people are not ready for these dramatic changes in the buying and selling of homes, this will probably change due to the ease of automated online buying, selling and renting.
To be fair, estate agents often complain that large platforms such as Zillow contain numerous outdated listings of houses that have been sold or where the prices have changed. But this is hopefully only part of these companies’ transformation from marketing and advertising companies to offering the full spectrum of seamlessly integrated end-to-end services.
Due to the automation of real estate services, many prospective buyers and sellers are asking themselves whether the current amount of work done by estate agents is really worth the high commissions of up to 7 percent.
It is still unclear whether real estate companies and agents will be replaced by automated computers. However, one thing is certain: many traditional real estate service providers will not look the same way that they look today. The real estate industry is becoming more technology-intensive rather than labour-intensive. Technology and automation will change the face of real estate business. Real estate agents will have to adapt by changing their digital business models and the role of agents, or they may be left behind.
Professor Louis CH Fourie is a technology strategist.
*The views expressed here are not necessarily those of IOL or of title sites.