Is Real Estate Going Virtual?

It may seem counterintuitive, but even as lockdowns and restrictions prevented people from leaving their homes for most of 2020, according to a CNBC report existing home sales in 2020 hit their highest point since 2006. Buyers did not want to leave their homes, and sellers cringed at the thought of hoards of strangers tracking through their homes while the pandemic raged on, yet the market exploded with new sales.  Who could have ever imagined purchasing a new home without ever setting foot in it?  Like most things in life, something that seemed unthinkable 10 years ago, became possible thanks to technology. 

As with any sales motion you can improve the velocity of the deal by improving one or more of:

• number of opportunities 

• average deal value

• win rate

• length of sale’s cycle

Prior to the popularity of real estate aggregators and websites tied to the MLS, a prospective homebuyer would check listings in the local newspaper and then visit their local real estate office whereby they would provide their agent with search criteria (price range, bedrooms/bathrooms, and ideal location).  The agent would help narrow down the options, create viewing schedules, and provide tours to their clients through the properties of interest. Oftentimes, multiple follow up visits were made before finalizing a decision to submit an offer.

The Real Estate aggregators (Zillow, StreetEasy, Trulia) changed this and by extension significantly improved sales velocity by adding easily accessible choices to buyers.  Instead of relying on information that was closely guarded by brokers, clients would only engage an agent after they narrowed down the properties of interest on their own.  Now these huge changes rarely come about. Generally, improvements to a team’s sales velocity comes through continuous process improvement, automation and coaching. Virtual tours, similar to online search, represent another opportunity for a seismic shift.

Virtual tours are not new.  I can still remember the day in early 2015 when I was attending a luxury estate conference.  The presenter pulled up a Matterport 3D tour:

This was a game changer.  By the end of the conference the Matterport 3D tour was the only thing that everyone was talking about.  We left that day believing that the industry had suddenly changed forever.  However, by the next day reality set in that little actually changed.  For starters, a Matterport 3D tour was expensive, so they were primarily used for the very high end homes.  The bigger issue was that the technology did very little to actually sell homes because almost no websites actually supported the format.  Where Matterport made an impact was on a listing presentation.  When an agent showed a home seller a demo of the product, and promised to include one if the seller listed with them, it was a very powerful closing tool to win the listing.  Winning more listings is the name of the game for agents and Matterport did wonders in that regard. But, since someone always wins the listing, this technology did very little to move the industry forward.  

Over time, the technology continued to improve, competitors came into the market which drove down prices, and websites began to support 3D virtual tours.  Buyers started to get the benefit of truly touring a home from the comfort of their own living rooms, but sales still almost exclusively required in person tours of multiple properties with the accompaniment of an agent.

First Signs of a Change

From a personal standpoint, I began to see the tide change in April of 2020 (on the Commercial side of the business).  I was the chief sales officer at a flexible real estate company where we leased out commercial office space.  Our sales team started to receive requests from clients for video tours.  Since we didn’t have video tours at the time, we came up with the next best thing.  Our sales team would head to the office which we were leasing out, FaceTime with their client, and “tour” the client through the space with their iPhone.  Within weeks, our sales team was doing dozens of FaceTime tours, and then clients actually started signing deals for offices that they never stepped foot in.  Even when a client did tour in-person, they typically only sent one company representative, while the rest of the decision makers relied on the phone tours.  Contract generation/e-signature companies like PandaDoc, and payment companies like Stripe allowed the entire transaction to take place virtually.

Leaders in the Space

One of the companies that benefited from the shift in behavior over the past year is Realync.  Below, Matt Weirich, Co-Founder and CEO of Realync shares his view on the future of virtual leasing.

"2020 was a huge year for the adoption of virtual leasing. However, virtual leasing wasn't unheard of prior to the COVID-19 pandemic. Leasing professionals who had implemented virtual leasing efforts prior to the pandemic saw the need for technology in their leasing offices. Virtual leasing allows for leasing professionals to do their job more effectively and efficiently, saving both the prospective resident and leasing professional time and energy. But not all leasing professionals had heard of this concept or yet saw the need for it, that was until the pandemic hit. 

The sudden installments of social distancing and remote work put in place due to the COVID-19 pandemic in 2020 left many leasing professionals questioning how they were going to do their jobs. However, leasing professionals responded quickly. Leasing teams pivoted to virtual leasing and remote management almost instantly by leveraging Realync, and thus started the incredible growth for Realync in 2020. In just four months, Realync’s user base tripled and the volume of live video tours hosted on the Realync platform increased 11,000%. As a result, our team grew 4X in just 6 months. Check out the numbers here.

Now for 2021, the question is whether teams should go back to how they performed before the pandemic -- that is, forgoing technology. Besides flat out saying "no they shouldn't", let us explain why. During the pandemic, leasing teams learned just how impactful technology-led virtual leasing efforts on streamlining and enhancing their leasing processes really were and continue to be. Leasing teams were able to close leases faster, market their communities more effectively through video, and ultimately streamline processes to save time and energy away from the traditional way of leasing operations. Leasing leaders that are looking to be competitive moving forward into this new season of multifamily leasing and management need to ensure their teams are equipped to compete. This means adopting the right tools and technology for virtual leasing."

Even as competitors have emerged and have challenged Matterport’s technology, Matterport continues to reign supreme in the 3D tour industry.  Sebastian Bedea, Matterport’s Director of Business Development Real Estate, and Travel & Hospitality, shared his view on the industry and the benefits of Matterport below:

“Whether you're a real estate agent, broker or property manager, Matterport helps you reach a wider audience and close on properties faster, which can ultimately increase commissions. Matterport’s 3D platform gives you an all-in-one media solution (3D tours, photos, floorplans) that can be delivered at scale, across all your locations with high-quality and consistent outputs. This not only gives you a way to differentiate as a tech-forward agent, but also draws engagement online and creates efficiency in the search and viewing process, saving your clients time and money. Enabling your clients to experience properties virtually in 3D provides an immersive experience that is not possible with photos or 360 tours. For residential real estate, touring homes virtually has become increasingly important since the coronavirus outbreak. Seven months into the pandemic, 78% of home buyers said they were viewing more properties virtually with 3D tours because of safety concerns. Matterport also helps Commercial Real Estate professionals create 3D virtual tours for any type of space, allowing them to navigate every step of the digital property life cycle – from the leasing/acquisition phase, to facilities management, to safety and COVID-compliance. While convenient 3D virtual tours have been essential for social distancing, now they will likely become a standard expectation for buyers and sellers in the future.”

Predictions

Video tours and virtual showings will streamline the buying process and significantly reduce the number of times a buyer needs to physically tour homes of interest.  However, I don’t see physical tours going away completely (I still would never buy a home without walking through it at least once). My prediction is that the majority of the physical tours in the future will be self-guided.  This is already starting to take place where companies are utilizing access-readers on the front door of a home that allow prospects to unlock the door with their cell phone during a designated time.  Opendoor has rolled out their Opendoor Self Tours:

Although this self tour is a huge advance, this solution was designed for vacant homes. Most people do not want strangers walking though their homes alone with unfettered access to their worldly possessions.  That is where Amazon come in:

Home tours require a tremendous amount of coordination (schedules need to align for buyer, seller, buyer’s agent, and seller’s agent).  According to CMG Financial  NAR estimates that the average buyer tours 10 homes before they make a decision.  That number doesn’t take into account the multiple repeat tours that are customary with the homes that make the shortlist.  Self-guided tours that allow all parties to monitor the buyer in real time through a video feed removes much of the necessary coordination while mitigating risk of an unsupervised stranger in your home.  There may be no better way to monitor a visitor though your house then with a drone that costs less than $300.

Real Estate transactions are consequential and the choices that a buyer/renter make have life changing effects such as where you are going to raise your family or start your business.  Shopping online has gone from a convenience to a necessity in the age of COVID, but the ramifications of purchasing the wrong sneakers on Zappos is far different than purchasing a home that doesn’t meet your needs.  Real estate transactions have become way more efficient with the ability to search, tour, and sign online, and although the number of times that you need to leave your home for a real estate traction will decline, I still believe that the majority of people will choose to visit in person at least once before submitting an offer.