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Get ready Inmanville — 2021 is going to be an “insane year” for innovation in real estate.
That was the initial message of real estate tech strategist and coveted industry consultant Mike DelPrete when he took to Inman Connect’s virtual stage to share his “Five Megatrends of Real Estate Tech.”
DelPrete is no stranger to Inman event attendees or to most of proptech’s top brands. The entrepreneur-turned-tech-trends barometer led off his presentation with something he’s said before but insists is more pertinent than ever: “The industry is moving very slowly, but it’s never moved this fast.” Here are DelPrete’s top five megatrends.
1. Portals moving closer to the transaction
Every fear that’s been growling under a large portion of the industry’s bed for years is finally letting its tentacles ooze into the light.
In an effort to uncover new revenue pools, companies such as Zillow and realtor.com (the most popular U.S.-based portals) ultimately have no choice but to continue to move closer to the deal, as evidenced by the launch of iBuyer services, hiring of agents and acquisition of mortgage providers.
DelPrete also stated that portals’ new closer relationship with consumers, thus serving as lead qualifiers, further confirms their expanding role in the real estate transaction.
In Europe, media conglomerate Axel Springer, has invested in Germany’s Homeday and Britain’s Purple Bricks (which crumbled in the United States), two companies enacting strategies to compete directly with agents, who largely make up the core of their customer base.
2. Agents as employees
Redfin has already shown this can work, so naturally, others are going to follow. After all, this is real estate, no trendsetter stands alone for long.
“It’s all about control,” DelPrete said. “Hiring these folks as employees gives the company a higher degree of control in the whole transaction; they can standardize the customer experience and get better economics.”
Advantages to W-2 employment models are threefold: a consistent customer experience, operational efficiencies and improved financials.
3. New models (iBuyers) are here to stay
“In the midst of the pandemic and 2020, if you asked me if iBuyers were going to stick around or have a viable business model, I would say ‘I don’t know, kind of fifty-fifty,'” DelPrete said. “But right now, I think it’s super clear these new models are here to stay.”
DelPrete said that Compass’ and Opendoor’s public offerings further demonstrate that entities once met with doubt about long-term solvency are further proof that consumers are open to innovation.
Even though the volume of iBuyer deals sank considerably during 2020 (down 50 percent from 2019) after three years of consistent growth, their survival through the pandemic indicates solid fundamentals for the model, as does the ongoing introduction of competitors.
4. The battle for adjacent services
It’s true that Opendoor and Zillow have lost hundreds of millions each, but they each plan to compensate by launching “adjacent services,” according to DelPrete.
Those services are emerging as consumer mortgage and title. But “selling adjacent services is hard,” DelPrete said.
DelPrete sees Opendoor’s move to listing services as an additional adjacent service to make up for a very low mortgage attach rate.
“On the one hand, this is kind of ironic and amusing if you’re watching this because it represents this full circle,” he said. “Saying you’re going to disrupt the industry is easy. But at the end of the day, psychology plays a big part, and not everybody is comfortable selling to an iBuyer, and [some sellers] actually want to bring their home to market.”
The iBuyers, Zillow especially, are buying a small percentage of the homes they’re offered by consumers, according to DelPrete.
“They’re trying to offer people everything, ‘OK, if you don’t buy your home, that’s fine, we’ll list it for you. We can do everything.'”
IBuying then, DelPrete said, is really a great source of lead generation. “The new Zestimate is iBuying.”
5. Asymmetric disruption
“I think this is the biggest trend we’ll see flowing into this year,” DelPrete said.
Organizations from outside the industry have been moving into real estate slowly over the past couple of years, some proven (incumbents), others unproven (dirsuptors), but the next couple of years should see them flourish. However, a lot of disruption is coming from within.
For example, the idea that Zillow could lose $600 million and continue to have such a powerful industry presence indicates that the rules are different for some players.
“Many disruptors are playing by a different set of rules, it’s like playing baseball against a team that gets 100 outs per inning,” DelPrete said.
The amount of investment dollars flowing into real estate tech will push unprofitable and unproven models into positions of market share.
“That sets the trend, that’s what you’re competing against, a company that doesn’t have to make money.”