The word “proptech” — an abbreviation of “property technology” — did not exist 10 years ago, yet it has now taken the venture capital world by storm. But what it means, and to whom, varies widely within both the tech and real estate sectors.
Proptech enabling brokers
In the past two or three years a new sort of proptech company has arisen: one whose goal is to enable rather than remove the broker.
This more recent group of entrepreneurs recognizes that, while some lower-priced sales and rental transactions can be handled with minimal agent involvement, most people who are making the biggest financial decision of their lives (and almost all the very rich who possess multiple homes) want an expert adviser with them to contextualize and troubleshoot the process.
In times of stress, most humans want insights and interactions from other humans.
A better agent-client relationship
This new generation of proptech creates tools that enrich the agent-client relationship. This may be as simple as facilitating an exchange of market data around a particular property or neighborhood or streamlining the process of generating a comparable report to aid in pricing.
Or it may be as complex as a platform that offers buyers deep data, real estate tax histories and block-by-block insights into a specific area’s benefits and drawbacks.
At the same time, a number of tech entrepreneurs have committed to creating systems that better enable search capabilities and data aggregation for both agents and consumers, while listing syndication makes comprehensive listing information available on an ever-growing number of online platforms.
Getting rid of the middleman
There are investors for whom proptech means the opportunity to disintermediate mortgage and real estate brokerage; they aspire to either knock out brokers altogether or vastly reduce their role by using technology algorithms to automate much of what listing agents and buyer’s agents currently do.
This was the original thinking behind proptech: minimize the agent’s role and let the consumers do it themselves. The disintermediation in the travel and stock brokerage industries were frequently cited as models.
Purplebricks and Redfin, companies that charge reduced fees to consumers in exchange for less day-to-day agent involvement and a more technology-heavy approach, exemplify the current face of this trend.
Enabled by the democratization of listing information (which is now publicly available everywhere), these companies and others with similar aspirations strive to remove “inefficiencies,” especially from lower-priced markets in which homes are more a commodity than a specialty item.
They attract hundreds of millions in investment dollars each year and capture a small but growing segment of the national marketplace.
Agents aren’t going anywhere
Like attorneys and personal wealth advisers, real estate agents are here to stay. We perform a vital function within the transactions we facilitate, providing guidance, market knowledge and judgment of a sort that even the most advanced tech algorithm cannot duplicate.
In the end, in high-value markets like New York, our tech enables us. It makes us faster and more efficient. But no amount of machine learning can reproduce the intuitive grasp of market subtleties that we offer our clients every day.
A graduate of Yale College with a Masters Degree from CUNY, Frederick Warburg Peters entered the real estate business as a residential agent in 1980. After working as a Sales Director at Albert B. Ashforth for a number of years, he acquired and renamed the 95-year old firm in 1991. Since that time, he has expanded the company from 40 to 130 agents and from one to three locations.