$12,000,000,000 – Just in 2017
Brian Buffini, founder of Buffini and Company reported in his podcast called Bold Predictions on December 4, 2018 that venture capital money invested in our industry has grown from $30 Million in 2010 to $12 Billion in 2017. There seems to be no end to investors who want to piggyback and make money from our industry.
Some Ventures May Actually Succeed
A few of the newer real estate related ventures have, and, will likely continue to succeed. For instance, AirBNB is an incredible tool for part-time and professional investors alike. It has never been easier for a home owner to earn additional income by renting all or part of their homes out to short term guests on a full or part-time basis.
WeWork has a market cap that in my opinion is insane, but the idea of shared co-working spaces is catching on all over the country. My personal office in Columbus is located in a small co-working space called The Perch. There are 20 or so desks that are leased by individual entrepreneurs and all of the standard office amenities are included.
Artificial Intelligence and Predictive Analytics
Artificial Intelligence (AI) will continue to slowly inform all of our activities on the internet and beyond. There is a huge buzz in the industry about ‘predictive analytics’. There are several start-ups applying AI and super computing power to predict who in a given market is likely to sell their home in the future. This information is sold to Realtors who can then market to these addresses.
Color me unconvinced. I do not believe AI alone can out-perform a real estate professional engaged in their market and with their sphere of influence. This business is, and always will be, about relationships. I do believe that AI driven technology will create additional advantages for the best in our business, but it will never be a substitute for committing to doing the work.
Virtual Reality
Virtual Reality (VR) will continue to make inroads just as 3d self-directed videos of homes for sale have. VR promises to make it possible for a buyer anywhere in the world to ‘walk’ through a home and make an informed decision to purchase– without physically stepping foot in the property. I expect we will see more and more VR products and services in the year ahead.
Zillow and the Rest
Money is also going into start-ups that mirror Zillow’s marketing plan. I could do an entire post on Zillow and its effect on our profession but for now I’ll stick to the basics. Zillow and the rest exist to generate, and sell back to us, what they call ‘leads’ but are at best ‘inquiries’, using information we Realtors supply for free to the MLS.
There are real estate professionals who have built their entire business models on buying leads from companies like Zillow. They spend in some cases tens of thousands of dollars a month with these companies. The 2017 NAR Member Profile reported that approximately 17 million Zillow ‘leads’ resulted in 270,000 transactions which is a 1.5 to 1.6 conversion rate. I for one refuse to outsource my lead generation activities – and if I did – I’d want a far better return.
Virtual Brokerages
New capital is propping up an array of new brokerage models as well. Generally, these are discount or fee for service companies that always come and go with fluctuations in the market. They generally have some sort of technological gimmick that attracts new and inexperienced agents. The big thing right now is using VR technology to create virtual real estate offices with training and meetings held remotely using avatars.
I think it is important to point out that it took RE/MAX 40 years to go public. They only did so with a proven track record of success. I cannot fathom how a virtual office is going to make me a more effective professional. However, it is kind of cool, like a video game is cool.
The Shiny Object Syndrome
The danger to the real estate community is The Shiny Object Syndrome. When an agent is distracted by the next new thing, he or she tends to shy away from the basics of building a relationship based business.
There is no question technology has empowered legions of home buyers to find their dream homes. However, these same buyers and sellers count on their agents for assigning fair value, advice for making an offer that will be accepted, negotiating price and terms, managing the paperwork, and getting to the closing table.
We all need to remain open to new ideas and technology, but not at the expense of what made us successful in the first place.
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