No matter how educated of a guess you make, when it comes to something as complicated as real estate technology any predictions for the future are just that, guesses. Even still, some people have been able to guess correctly what kind of traction some of the new business models for how we transact real estate will have. One person that seems to have gotten at least one of his predictions right is Oxford Professor Andrew Baum. In his 2017 report Proptech 3.0 he described the U.K.-based flat-fee real estate brokerage Purplebricks as “relatively unadventurous” and “shockingly simple.”
In a recent conversation with Professor Baum he told me, “The Purplebricks model to me was never a particularly radical service and I don’t think it works in a high touch asset like houses.” Adding, “If you are selling you are going to do everything you can to use any sales channel that can get you the best possible price as fast as you can. Therefore, I don’t think that commission rates are a huge issue in real estate sales. If you cut the fee but can’t persuade people that they are selling houses quickly then it never gets accepted. For a lot of people, real estate is a large portion of their wealth so they want to have their hand held by an agent.” His categorization seems to be holding true as the company has reported struggles breaking into new markets and a recent change in leadership.
I wanted to know what other predictions he had for what might be coming down the road in PropTech. Luckily, he just released a new report that has a lot of intriguing possibilities. “One of the solutions that we think might be around the corner is the idea of property passports,” Baum explained. “We can see business to start to offer incentives to homeowners to provide data about the property that would make the property ready for sale.”
This could create transactions that are initiated by an offer to buy rather than a sales listing. He told me, “If I wanted to buy a property in a certain area I wouldn’t have to ask what is for sale I could just make an offer on any house I would like. I can already know the value and the character of the property.”
There are quite a few headwinds pushing us away from this type of real estate market. Baum said that, “This requires individuals to take a lot more responsibility for the data related to our homes. We are all going to get used to the idea that we need to keep these records in the cloud.” Professor Baum pointed to the idea in real estate contract law of “caveat emptor.” This principle makes the buyer responsible for inspecting the quality and suitability of a property before the purchase. “If these files were backed by some sort of insurance it would be able to create a lot of liquidity in what is an otherwise very illiquid property market.”
Property data has already started to aggregate. We have publicly accessible imagery, historical transaction and permit information. If property owners were incentivized to add to this information with interior conditions, floorplans and maintenance records it could create a powerful database that would allow properties to be more easily sold sign unseen. It might be a while before we see a world in which homeowners get purchase offers and property managers get lease requests out of the blue. But, if Professor Baum’s prediction starts gaining traction, it could easily happen in our lifetime.