Real estate tech made great strides in 2018, landing squarely in the crosshairs of the world’s biggest investors.
Some startups with the potential to upend the industry grew at a break-neck pace, drawing on eye-popping investment rounds nearly unheard of in the real estate industry. Meanwhile, a number of market incumbents, aware that change is afoot, debuted muscular technology initiatives
Here’s a rundown of the biggest stories in real estate tech this year.
The SoftBank Vision Fund, a $93 billion venture-capital fund and startup kingmaker, hurled $400 million pots of cash to both Opendoor, a so-called iBuyer that uses technology to quickly buy and resell homes, and to real estate brokerage Compass. In something of a declaration of war on the real estate status quo, it announced both investments on the same day.
Sources familiar with SoftBank’s real estate investment strategy told Inman that the startups represent the leading representatives of the two dominant brokerage models of the future: the iBuyer (Opendoor), which caters best to the mid-market range, and the tech-powered, full-commission brokerage (Compass), which is often the ideal fit for pricier transactions. Notably, SoftBank doesn’t believe low-fee brokerages have the potential to gain meaningful marketshare in the near future, those sources said. The SoftBank Vision Fund’s drive into real estate has unnerved some, particularly in light of the fact that half of its money comes from Saudi Arabia’s sovereign wealth fund.
In April, Zillow Group launched its own iBuyer to compete with the likes of Opendoor and OfferPad, called Zillow Offers. The move showed Zillow wants to venture far beyond its core competency, rattling investors.
It also validated the iBuyer as a formidable alternative for sellers to using a listing agent. By referring sellers who decline offers from Zillow Offers to the firm’s agent advertisers, Zillow is trying to walk a fine line between staying at the center of industry innovation while remaining in the good graces of its customers. Zillow Offers is already operating in Phoenix, Las Vegas, Atlanta and Denver and has announced plans to expand to Charlotte, Raleigh and Houston.
EXp World Holdings, the parent company of virtual brokerage eXp Realty, achieved more than a $1 billion market cap on its first day of trading on Nasdaq. EXp Realty is a cloud-based brokerage that has built a virtual world where brokers create avatars to attend classes and network. The company’s practice of paying stock options and sharing revenue generated by new recruits with those agents that bring them on board has helped fuel its growth.
At times, recruiting come-ons from eXp agents on social media seem to have reached an even higher pitch than those from agents at Keller Williams Realty, a franchisor that popularized rewarding agents who find recruits with a portion of the new recruits’ commission earnings.
Keller Williams Realty debuted an artificial intelligence-based virtual assistant named Kelle, as part of the real estate franchisor’s plan to become a technology company first, and, as co-founder Gary Keller has said, “not a real estate company anymore.” Agents can issue voice commands to the mobile app to pull up their business goals, check the status of referrals, add contacts to their database and view training videos and appointments, among many other tasks.
Kelle debuted with the sophistication of a “two-year-old,” but Keller Williams Realty plans to teach the app new skills, in part by drawing on the massive amount of real estate data that Keller Williams rakes in from its army of agents.
Mirroring the move by Keller Williams Realty, RE/MAX also took a big step towards developing proprietary business software — rather than licensing tools through third-party providers — by purchasing booj, a developer of websites, mobile apps, predictive analytics and lead generation systems for the real estate industry
Building on its existing products, booj is developing a platform for RE/MAX that will include a customer relationship management system, agent office and team websites, lead cultivation tools, marketing resources and social media capabilities, RE/MAX CEO Adam Contos said in the firm’s second-quarter earnings call.
In June, Compass announced plans to sell some of the firm’s purportedly top-shelf technology to other brokerages. But the brokerage’s first stab at this new line of business missed the mark. Compass pulled out of a deal to license its search tools, marketing center, collections and insights to Massachusetts brokerage Leading Edge Real Estate after Compass agents balked at the idea that Compass was giving away its technology.
Opendoor bolted a discount buyer’s brokerage onto its home sale platform, title service and mortgage brokerage when the iBuyer snapped up discount brokerage and referral platform Open Listings in September.
Touting a 50-percent commission refund to buyers, Open Listings pairs a personalized online home search platform with assistance that comes largely from agents at other brokerages (though the company does have some in-house agents) to help buyers find, see and purchase homes.
“By integrating Open Listings with Opendoor’s mortgage, title and home services, the company will make it as easy to buy, sell or trade-in a home as it is to hail a ride, book a flight, or shop online,” Opendoor said in a press release announcing the deal.
By the way, Opendoor CEO Eric Wu also revealed the startup’s long-term goal is to make buying and selling a home “free.”
After relentless media coverage of Amazon’s search for a second headquarters, the e-commerce giant finally announced it would split its “HQ2” between Long Island City, in Queens, and the Crystal City area of Arlington County, Virginia, with both new campuses expected to create 25,000 jobs a piece.
Local activists concerned about the impact of the planned campuses on housing affordability, as well as the government subsidies promised to the firm, have mobilized to either block its arrival or pressure the company to make new commitments.
Meanwhile, real estate investors are swarming the neighborhoods of the two sites, with Zillow reporting that local listing searches have gone through the roof. A group of brokerages has even created a website that caters to Amazon employees looking for housing in the two new locations.