Proptech: the accelerator of change for real estate

This article focuses on the history of property technology and its impact on the client-agent relationship.

The COVID-19 pandemic has served as an accelerator of sorts for American industry. Online streaming services went from eating movie theaters’ lunch money to replacing them entirely. While many of these stopgaps will revert once the pandemic response subsides, some of these changes will be more permanent.

For real estate professionals, this dynamic is nothing new; property technology (proptech) companies have long threatened to disrupt the industry through automation. It begs the question: who holds the most power in the homebuying process, and how is that power shifting?

Fuel meets fire

Like gasoline poured over a roaring fire, proptech companies have become the accelerant fueling Americans’ demand for power and information in the housing market.

Most recently, proptech has stepped up to make homebuying and selling feasible during the pandemic. Many have taken advantage of virtual reality technology to show homes while complying with California’s stay-at-home orders. Some agent-focused services even pull notifications, progress tracking, messaging and document management into a single app. These proptech innovations steer licensees toward a more virtual brokerage.

The younger generations who make up the first-time homebuyer demographic are steering in the same direction as well. Millennials and members of Generation (Gen) Z are behind a growing preference for proptech solutions in the homebuying process.

Zillow’s 2019 Consumer Housing Trends report highlights this shift. In a survey of over 10,000 market participants, over a quarter of respondents preferred 3D tours to in-person viewing, with Millennials and Gen Z leading the charge. An even larger 46% of respondents wished more listings had 3D tours available, again led by the same cohorts.

The new normal is virtual

The shift illustrated in Zillow’s report underscores that younger homebuyers sought intimate market knowledge well before lockdowns made proptech indispensable.

Sound familiar? Agents active before the advent of the World Wide Web may yet still remember the unique delight of “book day,” the day their offices received a shipment of multiple listing service (MLS) books. These were bound paper books, not unlike a phonebook, that contained the latest home listings in a local Association of Realtors (AOR) board’s network. They featured no photos, no virtual tours and because they took weeks to publish and distribute, listings out of date as soon as released.

Each catalog was exclusive to its publishing AOR board. While it afforded homebuyers more listings, the MLS books and the information in them were secreted away, keeping power in the hands of the AOR.

It wasn’t until the late 80s and early 90s that fully online MLS databases gained traction across the country, attempting to wrench power from trade unions such as the California Association of Realtors (CAR). This story of technological upheaval features CAR as the luddite. In its ferocious defense of exclusivity through AORs, CAR slept on what would eventually culminate into the proptech space.

In 1995, three of the Los Angeles area’s largest real estate agencies — Fred Sands, Jon Douglas and Prudential California — swooped in to fill the vacuum left by CAR. Together, they formed the California Listing Service (CLS) to compete with the patchwork of smaller networks that existed in the same regions.

While the CLS and other online MLS databases popping up across the country were a proto-proptech innovation, the basic tenet of hoarding MLS data remained. Just like the MLS books, the new online MLS gave homebuyers more power — but only through their local AOR-affiliated agent.

Successful agents adapt

Proptech companies such as Zillow let the cat out of the bag in the mid-2000s by circumventing brokerages and offering precious MLS information directly to consumers. This shattered the local MLS stature of withholding information — and the rest is history. Now CAR is playing catch-up against Zillow in a space they might have dominated, and agents have yet another hat to wear: arbiter of the Zestimate.

Still more important than the shift from paper to PC is the acknowledgement that the law stands with the public’s social needs in homebuying, not CAR’s control over MLS information. After all, a buyer or their agent may not consider material facts unknown to them when negotiating a price. [Jue v. Smiser (1994) 23 CA4th 312]

Technology can’t replicate agent expertise, but that doesn’t mean agents can swear it off. Just like agents who shunned the online MLS and held fast to their MLS books until the final edition, those who fail to adapt will quickly be left behind.

Meet the new boss, same as the old boss: Homebuyers

Increasingly, consumers hold the power — and proptech is giving them the tools they already want. Rather than fighting an uphill battle against proptech, forward-looking agents will learn to adapt and embrace new technologies wherever they see an opening to make the homebuying and selling process more efficient and less stressful.

Nevertheless, the job of real estate professionals working directly with clients remains the same: separate the wheat from the chaff to get your client into a new home. Whether dealing with Zestimates or just plain cold feet, the agent is the client’s lifeline. No artificial intelligence can change that.

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