Over the last few years, companies like Zillow and Opendoor have revolutionized the real estate industry, demonstrating how technology can reshape how we buy and sell homes. During those early years, though, these companies just scratched the surface of what was possible.
But now, with the force of major investors behind them, these companies are showing their true potential. From listing automation to proptech that seeks to disrupt the mortgage and insurance industries, major changes are afoot.
Many of the first entries into the proptech markets were basic tools designed to facilitate connections between conventional real estate agents and potential buyers and to help buyers navigate available listings. This makes perfect sense – most people don’t feel comfortable buying a house without walking through it and real estate agents continue to play a key role in helping buyers and sellers alike understand the logistical issues behind the home sale process. With the growth of Opendoor, however, iBuying is on the horizon.
Opendoor was founded in 2014, and at first it was little more than a college student buying and managing properties while completing his degree. The company now directly purchases homes from buyers, and in 2019 the company received a $300 million investment that will position the company to buy up a huge number of new properties, which they can then show with their DIY open house system.
Opendoor’s goal is to shorten the time to sale for properties and eliminate many of the frustrations involved in buying and selling, pricing the property, arranging inspections, and essentially allowing anyone with a smartphone to view properties on an on-demand basis. It’s not a totally digital experience yet, since buyers still can visit – and are encouraged to visit – properties using Opendoor’s software, but it’s a step towards an agent-free, buyer-centered experience and with the addition of virtual walkthroughs, the company could go even more hands-off.
New Rental Opportunities
While companies like Opendoor may be making it easier for owners to sell their homes, another way that proptech has significantly changed the real estate industry is by opening up a wide range of new rental opportunities. This is particularly true when it comes to the short-term rental market. Now, when owners are deciding whether to sell or rent out their property, they have a much wider range of options.
Renting out a property as a source of income has always been a good way to earn some extra income, but as any property management professional can tell you, it’s also a lot of work. With the rise of companies like AirBnB, however, homeowners can test out the higher-profit short-term rental model, while proptech designed for property managers makes it easier for those with long-term investments to keep track of tenant needs, collect rent, and perform similar tasks.
Simplifying the rental process could make it much more appealing to those who might otherwise find the labor and technical logistics overwhelming, democratizing the real estate investment industry. With additional automation expected in coming years, rental-focused proptech is one of the fastest growing parts of the industry.
Proptech often focuses on sales and rentals, as these functions are at the core of the industry, but a growing number of companies are now focusing on ancillary services like insurance and mortgages. This is precisely what Lemonade, an AI-driven insurance company, has done for homeowner’s insurance.
Lemonade was founded in 2015, and has successfully slashed through the bureaucracy of the insurance industry to achieve 1000% growth year-over-year, all by centering the user experience. This includes building easy-to-understand UX, rewarding loyalty, and placing an emphasis on informative content. For a field that’s notoriously user-unfriendly, Lemonade manages to make insurance intuitive.
In addition to Lemonade’s disruption of the insurance market, real estate is also seeing changes to the conventional mortgage application process with the rise of direct lending. Companies like Better and Morty aim to provide the same kind of transparency in regard to mortgages that Lemonade offers for insurance. Better received a $160 million investment toward this end last year, while Morty, a newer entrant, earned $8.5 million in Series A funding.
Finally, in this world of ancillary services, homeowners and new buyers will find companies like Modus and JetClosing that have digitized the title and escrow processes, as well as less complex companies that handle digital documentation and signing. As these companies continue to make their mark on the real estate market, agents and lawyers will need to adapt their services to work alongside them in new ways.
With millennials well into adulthood and steadily purchasing their own homes and Gen Z beginning to dip their toes into the real estate market, proptech companies have reached an important crossroads. By digitizing every element of the home sales and rental process, including the supplementary financial services, startups are working to provide services that align with how these populations do business. It’s a new world out there, but one that should make real estate more accessible to everyone who wants to participate.