In this slightly left-of-centre post, Siva Gounder (pictured below), the business development manager at digital agency Engaging.io, says the robots are coming and, he argues, the real estate industry would be the best place of any to start with their robot wizardry…
Humans have a natural need for trust – we want to be trusted and to trust others. It’s a survival instinct stemming back to our tribal days and safety in numbers. Similarly, we have an abhorrence for deceit; there are few feelings worse than feeling cheated or stolen from.
Real estate is an industry that has unfortunately earned itself a reputation for low trust, questionable sales tactics and coercive behaviour. Couple this with the sheer time investment required to transact, the high associated stress and costs and it’s easy to see why it’s one of the least trusted professions in Australia. Given most of us will at some stage buy, sell or rent property, it’s worth exploring how a lack of trust is driving innovation in the real estate industry.
My prediction is that we will, in the future be buying homes from robots – why? Because we’ll trust them more than our local real estate agent.
Let’s for a moment take a look at another industry where massive levels of deceit and a lack of trust has driven innovation – the financial industry.
As awful as the GFC was, it really did spawn a lot of great innovation. The most well-known is Bitcoin which was the genesis of blockchain technology – a trustless digital transaction network where no centralised authority was in power. While still in its infancy, this technology has the potential to replace banks and completely change the way we transact and transfer value.
Another post-GFC innovation was the introduction of ’Robo-Advisors’, a very simple form of artificial intelligence. They use algorithms to provide financial advice and portfolio management with minimal to no human intervention. This was advisory work that, up until the GFC was being done manually by trusted human financial advisors. Unfortunately for them, the breakdown in trust drove the innovation of robo-advisors.
Mainstream adoption of robo-advisors has boomed and subsequently the quality of advice rapidly improved with complex algorithms driving higher levels of intelligence and ultimately better quality investments. It’s forecasted that by 2022, robo-advisors will manage around $4.6 trillion of investor funds. While their human counterparts will have a role in the foreseeable future, the introduction of robo-advisors has been a game-changer for the financial investment industry because they offer speed, cost efficiencies and importantly trust to their clients.
So back to the real estate industry. How can technology help bridge the trust gap? The process of buying and selling real estate really hasn’t changed much in the last 100 years and technological innovations have been sparse at best. The transition from offline to online property marketing has had the biggest impact but it’s hardly a game-changer.
When you take the emotion out of real estate, it is an investment the same as the financial markets. There are objective pieces of data such as land size, council rates, average rental yields and distance to transport and there is subjective data such as ‘livability scores’ and ‘family friendliness’. However, the borders between the two are increasingly becoming blurred.
Future robo-advisors with complex algorithmic modelling will be able to use big data to determine human emotions, desires and needs to make intelligent objective decisions on their behalf.
For property buyers, these ‘robo-agents’ will have the capability to survey and accurately profile a person and determine factors like financial viability, proximity to things of value and even make suggestions based on past consumer behaviour. A future conversation with your robo-agent may look like this:
ROBO-AGENT: This property is a 90 per cent match against your buying criteria. It is highly likely to sell within your pre-approved finance range and its in a suburb with good historical capital growth and a very low crime rate. There are 2 schools that match Sally’s learning profile and your budget for school fees. There are 3 sports fields, a swimming pool, 2 playgrounds, a dog-friendly park and a shopping mall within a 10km radius. Your travel time to work by car is 25 mins or 16 mins by bus. Your gym is within 2km and there are 5 cafes and 2 pubs within a 5km radius. Your mother’s home is 22 mins by car.
Click here to virtually walk through the property. The contract is non-standard and has 2 special conditions that you should review. Click here to view.
The online auction is only seven days away. Would you like me to book in a pest and building inspection and commence the eConveyancing process for you?
Currently buyers do all of this exhaustive due diligence themselves. Multiply that by 10 properties plus the time taken to physically inspect each and you can begin to appreciate the kind of value a robo advisor could deliver. These robo-agents would tirelessly crunch big data and canvas available property, rate them for you and even go to the extent of bidding at auctions, handling the legal exchange process and settlement. All you would have to do is authorise the transactions.
For property vendors, robo-advisors would review historical and comparable sales to construct highly effective real estate campaigns with leading marketing strategies (remember they have data on what buyers want). They would run the campaign and even greet prospective buyers as they virtually walk through homes. Your robo-agent would then run the digital auction process and take care of the legal side of things – all with minimal human interaction.
Additionally, emerging tech such as cryptocurrencies and blockchain technology would enable instant secure transfer of funds and instant transfer of digital property titles without a 60 day settlement period or a single blob of ink on paper. While this seems like a brave new world, this reality is inevitable.