With interest rates near all-time lows, the real estate and mortgage industries are booming. In January 2021, U.S. existing-home sales reached their highest level since 2006. And in the previous 12 months, one in 10 Americans moved either by choice or by circumstance, according to a Zillow survey released this past April.
While this is an exciting time for homebuyers, sellers, real estate agents and mortgage originators, the recent homebuying surge also presents challenges. To keep up with consumer demand, industry stakeholders are adopting technology faster than ever to scale their business while continuing to deliver a first-class experience for the homebuyer.
Real estate is a fundamentally people-driven business as it’s almost always the most expensive purchase in people’s lives. Technology should live up to the magnitude of this purchase. Homebuyers will use technology to find and close on their dream homes while the best agents, originators and lenders will use it to establish a delightful and smooth experience for their clients — creating raving fans and generating even more business.
The U.S. faces a severe shortage in available and affordable housing. Although some of this has to do with the recent boom in demand, there also are issues within the construction industry that impact the speed at which homes can be built. This includes increased lumber prices, limited lot supplies, supply-chain issues and more.
Because of this, homebuyers are limited to a small number of houses to choose from, causing heated competition when bids are submitted. A March 2021 report from the National Association of Realtors showed that properties typically remained on the market for 18 days, down from 20 days in the prior month and down from 29 days in March 2020. Eighty-three percent of homes sold this past March were on the market for less than a month.
In such a fast-paced market, technology is helping homebuyers make informed decisions more quickly, even if they can’t see the home in person. One example is virtual tours. Previously, homebuyers would have to schedule a tour or wait for an open house to see a home. Although virtual tours were previously in use, the COVID-19 pandemic accelerated their popularity among homebuyers. Now, home shoppers can take 3D tours of the properties they’re interested in, saving time on scheduling tours or driving from house to house.
In addition to virtual home tours, homebuyers can work with real estate agents who leverage technology to speed up the offer submission process. Using solutions that incorporate automation can help speed up tasks and get homebuyer offers in the door faster while competing agents work through copious amounts of paperwork.
Because there are so many potential homebuyers out there, real estate agents have to differentiate themselves from other agents as well as financial institutions and so-called “ibuyers” — companies that use technology to instantly make offers on new listings — that are looking to take advantage of the current real estate market. Similar to their clients, the limited housing market is causing agents to go into overdrive when looking for homes.
To help ease the various daily challenges, Realtors are turning to technology to help improve their clients’ overall experience and gain insights on what makes for a winning offer. New property-technology solutions, also known as proptech, help agents automate paperwork, but the real advantage of these tools is to provide agents with speed. Many homes on the market are receiving multiple offers. For homebuyers, putting in a strong offer as soon as possible is essential. Using a proptech solution can help achieve this.
Outside of speed, proptech solutions provide agents with the insights they need to understand what makes a strong offer. By having access to data that shows where the market is headed, a Realtor can know, for example, whether they need to add in a flexible closing date or offer more in earnest money deposits. Finally, some proptech solutions actually will give homebuyers the ability to make an all-cash offer, making their bid more competitive.
Although mortgage professionals understand the impact of the housing market on buyers, originators and lenders also are experiencing challenges due the recent surge in buyer demand. The multiple offers on many homes have led to an increase in borrower demands, including expectations of faster turnaround times to beat out other offers.
Even though lenders are issuing a significant amount of preapprovals, a majority of these buyers are not winning their offers, meaning lenders don’t get paid. On the occasion that the buyer wins, the mortgage originator is notified at the last minute that they need to close as soon as possible. This sets unrealistic expectations and creates problematic situations.
Similar to agents, technology is helping lenders and originators increase efficiency by providing funds faster, reducing opportunity for error, and providing data and insights on market trends. As the housing market continues to boom, lenders and originators will start to pair up with proptech solutions to secure a closing guarantee.
By doing so, their clients can make an all-cash-offer that greatly increases the odds of acceptance. By taking this approach, mortgage lenders and originators also can give themselves the necessary time to close on loans.
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To survive in today’s real estate market, homebuyers, agents and lenders must find ways to differentiate themselves from the competition. While technology helps with efficiency, its true advantage lies in giving all parties the key insights for making a winning offer. Finding solutions that work for professional partnerships — rather than against them — is what will help everyone succeed in today’s wild housing market. ●