Digital transformation has swept through every industry, including real estate. As customer expectations change, no business wants to be left behind. 66% of customers want businesses to understand their specific expectations and needs. The real estate digital transformation has been moving at a slow pace but was kickstarted by the recent coronavirus pandemic.
The Covid-19 pandemic exposed lots of challenges in this sector. As people could no longer move about freely, other means had to be derived, ensuring that businesses ran smoothly to meet customers’ demands.
What’s The Meaning of Digital Transformation In The Real Estate Industry?
Digital transformation is a technology change that a company embraces to incorporate into its systems, processes, workflow, and culture. It usually involves rethinking the technologies, people, and processes that can bring about better customer satisfaction and increase revenue streams.
Digitalization is a broad transformation process that the whole organization embraces. This process engages all processes and employees. It is built on a different strategic vision about how the organization should act and react to the radical shift in the midset of the employees.
The mindset shift means integrating the latest technologies into the organization and how we deliver products. This change should impact how businesses interact with customers, manage data, and organize production processes. It is also bringing changes to the marketing strategy of companies.
The real estate industry is becoming increasingly competitive. That is why businesses adopt digital technologies to have a competitive advantage. It will help them better understand the needs and expectations of their customers. Other technologies can also assist the realtor to improve their operational efficiency and security.
Real estate businesses need to find the technology and strategy that work best for their commercial properties. To get the best tools, they have to first understand the needs of all their clients. This is one of the areas where digitalization is heavily used.
Digital transformation needs to add value to the operations of a real estate property. Those responsible for commercial properties should build plans to improve operations and how software can be useful. It would be counterproductive to integrate operations into a tool that doesn’t add value to the business.
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Importance Of Real Estate Digital Transformation
As it is often said, “necessity is the mother of invention”. And the statement holds in the real estate industry.
Digital transformation increases the use of applications, online marketplace, booking platforms, etc. It creates a place where people can communicate, solve operational issues, and manage companies remotely. So, customers do not need to leave the comfort of their houses to buy or rent a flat. Also, agents can do all their transactions and consultations remotely.
Even though this sector is lagging in adoption, the need to satisfy customer expectations is hastening digital transformation. Now, let’s see the importance of digital transformation in this sector:
Change In Customer Behavior And Expectations
In this digital age of big data, companies have easy access to enormous amounts of customer data. Up to 97% of people wanting to buy a house begin their search online. However, big data has also come at a steep price. Now, new customers are expecting more from businesses at every turn. Be it in terms of experience, pricing, personalization, etc.
Statistics show that about 80% of people would instead do business with a competitor after one bad experience.
So, to better understand customers’ behavior, needs, and expectations, businesses are turning to predictive analytics. It uses historical data and machine learning techniques to make predictions of future outcomes.
Humanity has gone through quite a technological shift from horse riding to self-driving cars. Every industry is moving towards automating tasks, and real estate is no different.
Real estate businesses have started automating repetitive tasks such as email workflows, lead collections, and notifications, giving team members more time to work on pressing issues. Sales automation increases productivity by 14.5% while decreasing the marketing cost by 12.2%.
Competitive Struggle For Customers
Customers would love to tour as many properties as possible before making a purchase. However, the lockdown laws due to the pandemic may restrict them. So, they are more likely to buy a new house using an online platform. This is making offline companies go out of business.
Also, the digital platform offers many more choices in a short period. For example, the buyer could tour only about 2 properties daily with an offline realtor. And it may take days to months before they make a purchase. However, with online platforms, buyers can tour thousands of buildings daily.
Once they have found what picks their interests, the paperwork required to acquire the property can be daunting. So, customers would prefer companies that have gone digital to avoid all the paperwork involved.
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8 Key Digital Transformation Technologies In Real Estate
Numerous technologies are already used in this industry. However, we will talk about eight key real estate digital technologies that are disrupting the industry:
As the winds of change blow over the real estate industry, companies need to stay afloat. Data has become the “new oil” of the 21st century. So, businesses that learn how to harness their power have become leaders. The global big data analytics market will reach over $68 billion by 2025, growing with a compound annual growth rate of about 30%.
Everything we do online leaves a digital footprint converted to data for businesses. Having the data will not be very useful if the company does not know how to use it or what it means.
Over the past decade, the real estate industry and insurance services have used data mainly for transactional purposes. It has also been used to determine the value of a commercial property. Today, it is different. Now, investors can use big data to get profound knowledge of a property’s potential return and risk.
Information on buildings like traffic counts and demographics reports can be fed into ML models. The results will help potential buyers know their return on investments from the start. Accurately measuring the property’s physical attributes using ML gives buyers the confidence to make purchases.
Virtual Property View And Online Walkthrough
The dynamics of the real estate industry are changing due to the pandemic. Buyers typically use the online-first strategy. That is why virtual tours are increasingly becoming familiar with online listings. Virtual tours increase the rate at which potential buyers interact with the listing.
For example, some businesses have implemented virtual tours because of the coronavirus as a marketing approach. Now, they can gain customers who want to limit human contact. It ensured that their business process was not interrupted by the pandemic. This gave them an edge over competitors and kept the clients happy.
In 2021, renters were more likely to interact with an interactive 3D tour. They stated that it was crucial to decide which property to rent (28% in 2021, 23% in 2020).
Virtual tours and video media also increase the property’s ranking on major search engines like Google, Zillow, Redfin, and realtor.com. Furthermore, buildings with 3D tours have 87% more views than those without. And up to 54% of customers do not even interact with listings that don’t have virtual tours.
Many more people have become comfortable searching and buying properties online using only 3D tours and video media. The number will only continue to increase as millennials flock into the market.
Real-time Tracking of Transactions, eSignatures, and Smart Contracts
A major challenge faced by commercial realtors is keeping track of their transactions. Much of it was due to a lack of seamless communication and integration between various departments.
However, experts predict that realtors will have access to real-time data by the end of 2022 using real estate CRMs and cloud-based platforms.
Realtors and insurance services can use real-time industry data to increase customer satisfaction and brand recognition.
There are many steps, documents, and people involved when closing a deal. It is a time-consuming and exhausting process, especially for busy people or first-time buyers. That is why smart contracts have become popular.
Transactions tracking, eSignatures, and smart contracts help decrease the time to close deals. This is because everything is done digitally.
eSignatures and smart contracts also totally eliminate the paperwork involved when closing a transaction. Document management and processing become seamless and less laborious. These new tools would provide transparency between the buyer and seller. It helps them gain valuable insights into market conditions with the aid of predictive analytics.
Blockchain technology has caused waves across industries, and real estate did not escape unscratched. In the past, most transactions were done face-to-face or offline. Nowadays, blockchain is disrupting that practice. It has brought about ways to securely carry out transactions by providing automation.
Realtors and buyers can carry out speedy and safe transactions using blockchain technology. It significantly reduces the risk of fraud and the need for middlemen. It makes data transmission safe and simple enabling deals to the closed faster.
Blockchain can also help people review the properties’ status and history. Now, it is constantly made available to everyone.
During and after the pandemic, buyers wanted minimal or no human interactions to reduce their chances of catching the virus. It led to an increase in the use of AI chatbots, especially among millennials, who make up about 43% of property buyers in the US.
AI chatbots are heavily used in customer service for ultra-fast and personalized responses. When the AI chatbot is integrated into a listing business’s website, it can help clients with various tasks, such as:
- searching for properties
- answering frequently asked questions
- solving some specific problems.
Chatbots give the website 24-hour support, reducing the number of lost leads and optimizing marketing efforts. Also, new studies show that up to 63% of clients are likely to return to a website that provides live chat support.
Advanced AI chatbots use machine learning algorithms to understand the behavioral patterns of customers. The information gotten from ML is used to provide personalized services. AI Chatbots search through massive databases and match the customers with the most suitable property. Additionally, AI chatbots automatically send follow-up emails to leads reminding them of planned activities.
Real Estate Crowdfunding
Real estate crowdfunding allows developers to attract many potential investors, using social networks on technology platforms. The crowdfunding process has the potential to increase the amount of capital that can be raised.
Many real estate companies are already using crowdfunding because of the low risks involved when accessing the US market. They can break down their capital into smaller chunks and spread it across numerous investments. This process gives them more diversification.
Even though real estate crowdfunding has been around for years, not many people have practiced it. Its popularity began to rise with increased online crowdfunding opportunities and tools. To have a successful crowdfunding, good crowdfunding tools are critical.
Real estate crowdfunding help investors access a wider market with only small amounts of money. It is helpful for startups interested in commercial property investments but does not have funds.
Personalized Customer Experience
In this day and age, providing personalized customer services is an essential requirement to compete as a business in any industry. 75% of customers stated that they are more likely to buy from companies that provide personalized digital services.
Big data and machine learning algorithms provide real estate companies with almost every possible data about a client needed to close a deal. That is why customers are now demanding better experiences. As people interact with your digital platform, they want to be treated as unique individual customers with needs that should be satisfied.
Sometimes visitors may not even realize that they are looking for a house yet. However, personalizing the building portal will match supply with demand and spark customer interest, which will bring about an increase in demand.
Space as a Service (SPaaS)
Normally, businesses build offices or spaces to contain their workers as a capital investment. However, companies evolve and may outgrow the space or need a structural re-organization. It will eventually lead to the use of funds to rearrange the office to fit the business needs, which is not very economical.
However, with space as a service, office spaces are created with the mindset that the company will grow or change structurally. So, it can be upgraded and changed with relative ease. The space as a service model provides a space or office that can be used as a coworking workplace for individuals and corporate clients.
There is constant pressure on corporate executives to reduce costs while increasing productivity. That is why they have no choice but to turn to the SPaaS model. It offers a lower cost as customers pay only for the space they use.
In the SPaaS model, companies will not spend time looking for a suitable office space. They can just find a property that offers SPaaS and occupy it with minimal changes and costs.
Apart from square meters, location, cap rates, and ROI, the value of a real estate that offers SPaaS is also based on the property’s ability to generate income from different sources.
Real Estate Digital Transformation Benefits and Drawbacks
Now that we have discussed eight real estate digital transformation trends let’s look at the benefits or disadvantages they bring to the table.
For the most part, technological advancements are for the betterment of human society. However, it also comes at a cost.
Advantages of Real Estate Digital Transformation
Technology can significantly cut unnecessary costs and help companies manage their budget with ease. Real estate project management tools serve as a central hub for all information. The data is made readily available for all departments. It provides the necessary data for better decision-making, thereby reducing costs.
Automation of repetitive tasks decreases errors and increases the efficiency of real estate business processes.
Better Data Security
The use of cloud computing to host sensitive information has significantly increased security. It has also decreased costs because businesses need to pay only for their services.
Companies can access their information from any part of the world. And even if one server crashes, the data is not lost because it is stored in the cloud at multiple locations.
Improved Customer Experience
The availability of big data analytics has given real estate companies enough information to personalize their services and provide a better customer experience.
Faster Response Time and Deal Closing
Real estate businesses can use AI chatbots for faster response. They also use predictive analytics and machine learning to quickly match customers with suitable properties. It thereby increases the chances of closing deals.
Immediate Evaluation and Analysis
Technology has provided businesses with the tools to perform fast evaluation and analysis of properties. It provides historical data on each building used to accurately calculate ROI before making purchases.
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Potential Disadvantages of Real Estate Digital Transformation
Loss Of Job
Digitalization in real estate brings about a rise in smart technologies such as automation. However, it can potentially take over the jobs of some employees. However, that is not always the case. Employees can channel these workers to concentrate on more important tasks requiring human intervention.
Slow Technology Adoption
Even with all the benefits that technology brings to the business world, some people will always be slow adopters. This can often hinder the growth of the company.
Digital Transformation Examples from Global Companies
Zillow Main Page
This platform uses big data and machine learning to disrupt the industry. Zillow is one of the world’s most popular real estate businesses.
In 2006, they introduced Zestimate, which uses AI algorithms to accurately estimate a property’s value. The information is available to customers and realtors, making transactions transparent.
In 2006, the Zillow platform had about 43 million listings. To get the value of these properties, terabytes of data were fed to over 34 thousand statistical models, and the results were compared to the valuation they had done previously. At that time, the models had a 14% accuracy rate.
As technology advanced and the number of listing on the platform increased from 43 to 110 million, the accuracy of the models also grew to 5%. It was possible to triple the accuracy rate because the company collected enormous data and used much more sophisticated machine learning models.
Zestimate has made the Zillow platform a two-sided marketplace. On one side, we have the consumers looking for listings. On the other hand, we have agents and lenders willing to help consumers with their issues.
Redfin Main Page
In the past, building AI-based algorithms was cost-prohibitive. However, with the rise of Amazon Web Services, this process has become cheap and easy.
Using Artificial intelligence and data is crucial to match sellers with buyers in a short time. Redfin used data analytics to monitor listings their users are interacting with. This is done to create an accurate recommendation engine for their platform.
To make Redfin’s recommendation engine more accurate, the company constantly compares the AI-driving recommendations with listing that show up under buyers’ selected criteria.