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The 5 Megatrends of Real Estate Tech in 2021

WRITTEN BY SAUL KLEIN POSTED ON MONDAY, 01 FEBRUARY 2021

The following is a review of the presentation made by Michael DelPrete at Inman Connect 2021. Mike is a global real estate tech strategist, and a scholar-in-residence at the University of Colorado Boulder.

Trend #1 – Portals are moving closer to the transaction

Trend #2 – Agents as Employees

Trend #3 – New Models are here to stay

Trend #4 – The battle for adjacent (ancillary) services

Trend #5 – Asymmetric Disruption – Many disruptors are playing by a different set of rules.

Michael begins by telling us that the material he is presenting is his opinion which he arrived at by being a student of the industry (my words), and is his attempt to “connect the dots.”

He goes on to say that Zillow lost 600 Million Dollars in the last 2 years (just in its home buying program)…and, just as 2019 and 2020, the real estate industry moves very slowly, and, at the same time, it has never moved this fast.

If you haven’t attended an Inman Connect, it is a real estate learning experience that is worth your money, and more importantly, your time. I always walk away from a Connect Conference with something new.

Trend #1 – Portals are moving closer to the transaction

All portals are moving closer to the transaction, because that is how they can generate new and huge revenue streams to justify the giant spends and company valuations. There is a lot of evidence for this trend:

• Zillow purchased a mortgage company and is an IBuyer.
• Lead generation is changing to lead qualification, evident with Zillow’s Flex program and REALTOR dot com’s Opcity, as portals work to move closer to the transaction and the consumer.
• Increased use of “call centers” to qualify leads for “hand offs” to agents.
• Zillow is hiring its own agents because it makes sense for its iBuyer initiative. It puts Zillow on parity with the other iBuyers, OpenDoor and OfferPad. Is this a precursor of things to come? Only Zillow can control whether or not it extends it agent hiring practices to its general model and compete with agents (Zillow’s customers) to expand revenue streams in the future.
• Axel Springer, the largest media company in Europe and is also the owner of a number of high ranking real estate portals. It also has invested in brokerage companies. Getting closer to the transaction and competing with its broker customers. It is tappig into markets beyond listings to participate in the commission pool.

Trend #2 – Agents as Employees

While the independent contractor model is entrepreneurial, I have been saying for years that it is inefficient, and is a major reason for much of the lack of professionalism and the great disparity a consumer may experience from one agent or broker to another. Hiring agents as employees allows for:

  • Control and provide consistency to the customer experience
  • Standardize the process and the customer experience
  • Better economics

Trend #3 – New Models are here to stay

Companies like Zillow, Redfin, and the iBuyer concept. Why, they have the capital to stay.

Trend #4 – The battle for adjacent (ancillary) services

“Adjacent services are hard.”

It starts with title, because title is a very generic product that consumers are not aware of, and of which they have none to little brand loyalty.

The next step is the mortgage side and that is where the big money is. (my note: big changes coming to the mortgage world, including the possibility of disintermediation of many current mortgage brokers).

Part of the appeal of iBuying is an opportunity to lock down the adjacent services. At the same time, not everyone wants an instant sale, so iBuyers like OpenDoor are getting into the listing side as well.

Trend #5 – Asymmetric Disruption – Many disruptors are playing by a different set of rules.

The capital flowing into the real estate industry is unprecedented. Everyone wants to disrupt the industry, or at least prove out their business model. Because of this, the new players can lose money for a long time (as evidenced by Zillow). Michael refers to this as:

Sustainable unprofitability. This is a real challenge to the current way of doing business, and it will continue.

If you ever have an opportunity to listen to Michael, I highly recommend him.