Real Estate’s Slow Change Leaves Opportunity for Startup Innovation
BSV frequently hosts invite-only dinner discussions with leaders and innovators in a given industry; recently, we held a dinner that gathered entrepreneurs and innovators from the real estate tech sector to discuss the shared challenges and potential opportunities across the space. This post is a select recap of some of that conversation.
Shared challenges mean opportunity for innovation
One of the first pain points discussed was the home closing process, which can involve upwards of 15 stakeholders over the transaction lifecycle. Communication and coordination between these parties can be a hassle, presenting an opportunity for tech companies that can integrate or streamline the process. Title insurance, a necessary step in securing a home mortgage, requires labor-intensive and often delayed searches of public records. This is the sort of function that is ripe for automation and could be a strategic entry point for startups to deliver immediate value before expanding to other parts of the transaction.
Another major pain point in the real estate market is navigating off-market listings. Many sellers don’t want to solicit significant buyer interest if they haven’t yet zeroed in on what they are seeking in a transaction, but this presents challenges to the seller’s agent. Some companies are experimenting with new platforms for seller’s agents to share off-market listings with fellow agents, but there’s still plenty of opportunity to explore novel solutions.
Understanding selling vs. buying perspectives
For agents involved in the transaction, it’s historically been preferable to represent sellers vs buyers. On the sell-side, there’s a clear and near term intent to transact, while buy-side engagements can drag on for months and require retention across discovery periods. In addition, 65% of home buyers in the U.S. simply use the first real estate agent they find, without comparing prices. This makes devoting resources to having a discovery presence a critical factor for buying agents. Tools that allow easier agent comparison would be a potential benefit to consumers and might present a way for high quality agents to differentiate themselves and improve discoverability.
Entities that control the buyer relationship are starting to take advantage of additional revenue generation opportunities, such as offering buyers bundled home services, like security systems and house cleaning, that can be layered on top of the transaction. This is a potentially attractive source of increased profit for brokerages with large agent overhead and newer iBuyer players that have been operating on thin margins.
The insights and perspectives conveyed by those who attended the real estate tech dinner was exciting; there are clearly countless opportunities for startups to solve pain points faced across the industry. If your company is addressing one of these pain points, or has a different take on how to solve challenges that could make a material impact on the real estate industry, we’d love to hear from you.
Authored by Reid Callaway, investor at Basis Set Ventures