As we head further into the fourth quarter of the year — a year that has seen rampant inventory shortages, rising mortgage rates and sellers bombarded with offers within hours of listing — we are beginning to experience the usual winter season cool-down. So this is a perfect time to look ahead, and I find myself reflecting every day on what the real estate industry will look like in the years to come. For an industry that has historically remained stagnant, the pace at which technology is evolving will expedite change at an unprecedented rate. As such, this is an exciting time for consumers and agents alike, but we need to adjust our mentality and approach to real estate transactions accordingly.
You’ve likely heard of the four C’s of buying a diamond. Well, in order to directly address consumer demands, we as an industry need to modernize real estate by embracing three pillars: certainty, convenience and cost-effectiveness — our own three C’s, if you will.
Until now, most aspects of a real estate transaction have involved a high level of subjectivity. Consumers find this frustrating because they aren’t familiar with the process and want concrete answers, and agents are challenged by the lack of consistency. Some websites offer a wide swath of information for consumers, but they lack depth. Today we have the power of data science at our fingertips — this is a game-changer.
For example, my data science team has developed algorithms that take into account hundreds of data points, including list prices, interior features like marble countertops, historical sales transactions and individual agents’ track records, and then apply machine learning to rank the quality of each listing price. When real estate companies use this kind of information, it empowers consumers with insights they can trust. But perhaps more importantly for everyone involved, it reduces time and friction by adding a level of transparency that reduces the high-emotion subjectivity involved in the traditional process. When sellers and buyers have a more accurate and realistic point of view heading into a deal, there will be less need for negotiating and price drops that extend days on market.
The insights of local, on-the-ground experts will remain important, but when paired with this kind of data, the combination of high-tech and high-touch gives you the recipe for certainty.
The selling side of real estate functions essentially the same way it did in 2008, or even in 1998 — almost entirely paper-based, laborious and opaque. In a world of Ubers, Airbnbs and Carvanas where instant gratification is status quo, that’s just crazy.
Consumers are increasingly showing interest in — and will soon demand — a digital transformation of the transaction of home buying and selling that is more simplistic, transparent and consistent. A digital real estate marketplace has started to take shape over the past several years, with companies facilitating transactions online and agents bidding for clients, for example. Some sites and apps take a step back from the transaction to help consumers find the right neighborhood first. And new players have begun the transformation of the buy side, providing the convenience and instant gratification many consumers desire. However, none of these models solve for the 360-degree problem. I believe the ultimate way to provide that is by facilitating an end-to-end marketplace that considers the customers’ needs for selling and buying over the course of their entire homeownership life cycle.
Overall, it is essential that the modern real estate process is consumer-centric, which can only happen when it is grounded in data and the correct balance of technology and human insight.
As I look at other global markets, what jumps out at me is their ability to offer the same services to their clients at a lower commission rate. For example, average commissions in some regions of Australia can be as low as 2%, and even lower in the U.K., where they average about 1.5%, compared to the typical 6% here in the U.S. In some instances I see commissions around 4.5%, but not consistently enough.
Working toward a future where homebuying and selling is more affordable to consumers is advantageous for everyone. Agents will benefit from an influx of buyers and sellers, consumers will save their hard-earned dollars and we’ll see increased fluidity in the overall market. Eventually, I envision a sort of real estate dating service, where consumers are matched with agents based on preferences, budgets and more, ultimately lowering commission rates. But with no one real estate company — or even type of company, for that matter — dominating the industry at this point, it is nearly impossible to see quick and impactful change.
If we are going to truly evolve and improve the transaction as a whole, transforming the standard commission structure as a collective industry will be a turning point, and it’s one of our biggest opportunities. By finding the right combination of tech and human touch for each consumer’s unique needs and budget, we can both bring down the average cost of homebuying and selling and deliver a more premium service to those who want it.
I believe these three C’s have the potential to double market momentum in the U.S. If certainty, convenience and cost-effectiveness are optimized simultaneously, the number of homes bought and sold every year could double at a time when inventory shortages are only being alleviated at a slow rate and buyers are increasingly frustrated. For consumers, I consider these the keys to unlocking a process that eliminates much of the stress, frustration and opacity often associated with real estate transactions.
After all, the home is most people’s largest asset, and they deserve the same level of innovation they’ve come to expect from so many other industries. The sale of one home and purchase of a new home is a momentous occasion that should be enjoyed, and it is our job to deliver that for consumers.
*This article originally appeared on Forbes