Technological advancements have revolutionised many aspects of our lives, with the real estate sector witnessing significant transformations.
Over the last 25 years these changes have significantly altered the traditional mechanisms of property marketing and transactions.
So have these changes been beneficial to everyone or do they need to be viewed with a healthy sense of scepticism, or even in some instances, given a very wide berth.
Positive shifts
Digital transformation in property marketing
The rise of the internet has been a game-changer for the real estate industry. Websites like realestate.com.au and domain.com.au have become central in the Australian property market, serving as crucial platforms for property listings and transactions. Basically, if you’re looking to sell your home or apartment, and you’re not on the real estate websites, you may as well be selling off market, because that’s where 95% of buyers are coming across your property.
Online platforms provide buyers with an abundance of information. When I first entered the industry, print advertising dominated. You’d receive a brief description, perhaps a facade photo or one interior photo, and that was about it.
Nowadays, real estate websites offer much more. You can expect at least eight photos, but often 15 to 20, along with floor plans, detailed property information in the description (which is no longer just a two-line paragraph), location maps, and in Victoria, the Statement of Information. This statement includes specific sales evidence, a legally required quote, and agent details. It’s a substantial amount of information that buyers can access, unlike before when you had to physically inspect a property to gather such details.
Enhanced location analysis with Google Maps
Google Maps has transformed how potential buyers evaluate the location and surroundings of properties. Providing detailed views and information about proximity to schools, workplaces, public amenities, and transport links, this tool aids buyers in assessing the livability and strategic value of properties, influencing informed purchasing decisions.
Data-driven insights through CRM systems
Another crucial development, not just in real estate but in business in general, is the CRM system. In real estate, it has progressed significantly in terms of information gathering. From a seller and vendor’s perspective, it puts them in a strong position to analyse buyers and their activities.
The CRM system collects vast amounts of data through information gathering, feedback, and conversations with prospective buyers during inspections. This enables sellers to determine which other properties buyers might be considering within the same agency, their level of interest, whether they’ve made bids or offers on other properties, and at what price points. Agents can then gain a clear picture of buyers’ preferences, their budget constraints, and potential flexibility.
This wealth of information provides vendors with insights into buyers’ thoughts and positions them, along with their agents, to assess whether a buyer is the right fit for their property. This has significantly benefited vendors in their selling process over recent years.
Remote viewing and online auctions
Another important tool is video conferencing and video calls, as they enable virtual walkthroughs of properties that were previously inaccessible to buyers, especially those interested in investments. Whether you’re located interstate or overseas and considering a move to a different city, video calls allow you to gain a comprehensive understanding of a property. Whether it’s through a buyer’s advocate, a friend or family member, or even the sales agent, conducting a virtual tour via video call provides a glimpse into the property’s features and condition.
While it doesn’t replace physically walking through a property and experiencing it firsthand, it does offer valuable insights into whether a property merits further consideration. Additionally, it can save a significant amount of money and time on travel expenses. Although it’s advisable, particularly for a home purchase, to physically inspect the property if possible, virtual tours can serve as an excellent initial step. This is especially true for investment properties where emotional attachment may not be a factor, providing a more objective assessment of the property.
Another significant development, particularly accelerated by COVID-19, is the rise of online bidding services. Apps like Gavl or Anywhere Auctions, among many others, offer buyers the opportunity to bid at auctions remotely, without physically being present at the site or relying on someone else to bid on their behalf.
While being physically present at an auction is always preferable, these online services provide a valuable substitute. They allow you to watch the auction, observe the auctioneer, hear bids, and control your bidding at your own pace. Although they may not offer the complete experience of being on-site, they do offer convenience and flexibility for remote bidding.
Streamlined transactions with digital tools
One of my favourite developments these days is the use of digital contracts and digital signatures. It’s astonishing how much this has transformed the process. In the past, after bidding at an auction, there would be multiple paper contracts waiting to be filled out. The agents would need to complete all the details in each contract, have the buyer sign and initial them, then repeat the process with the vendor.
Subsequently, they would have to mail the paperwork to both the vendor’s and buyer’s solicitors by Monday. This was a time-consuming task, often taking an hour on the Saturday itself and additional time afterward.
Nowadays, with the use of iPads, iPhones, and other digital devices, both parties can execute contracts swiftly. Within half an hour of an auction starting, all relevant parties – vendor, buyer, solicitors, and agent – can have signed and executed contracts, thanks to digital technology.
Additionally, the ability to pay deposits via online transfers has become much easier. For instance, Macquarie Bank’s Direct Electronic Funds Transfer (DEFT) software has been a fantastic addition. Previously, some agencies in Melbourne, as recent as five years ago, required cash or cheques for deposits at auctions, which was quite outdated.
The real estate industry’s adoption of digital contracts, electronic signatures, and online transfers has been long overdue but has significantly progressed, especially with the challenges posed by COVID-19. Programs like DEFT allow for seamless electronic fund transfers on Saturdays, eliminating concerns about daily transfer limits and facilitating smoother transactions in the industry.
Areas of caution
Transparency vs. privacy in real estate transactions
It’s crucial to consider the other side of the coin regarding information gathering through CRM systems used by vendors and agents.
This can pose challenges from a buyer’s standpoint as agents have access to a wealth of information about you. Buyers often tread cautiously when it comes to sharing too much with agents, especially considering that agents can glean significant details from the properties you view, your preferred price range, and the condition of the properties you’re interested in. Agents accumulate a considerable amount of information, and buyers must be mindful of what they disclose.
However, striking a delicate balance is necessary because withholding information could mean missing out on opportunities, such as off-market properties. It’s vital to approach this situation with a healthy level of scepticism and be mindful of how much information you share with agents. The data gathered by CRMs is extensive, and buyers should proceed with caution.
Real estate valuation websites – science and art
These platforms often give users unrealistic expectations regarding a property’s value, whether for buying or evaluating their own home.
This issue arises because these websites heavily rely on statistical analysis, which can be effective but sometimes overlooks key aspects considered in property valuation.
In our conversations with clients and discussions on the podcast, we emphasise that assessing a property’s value involves both science and art. While statistical analysis forms the scientific part, the art of interpretation is equally crucial. These websites tend to focus primarily on the scientific aspect, lacking the interpretive skills of a human evaluator. Consequently, they can be significantly off-base.
The art of valuation involves interpreting sales evidence, considering factors like the nature of the sale (e.g., arm’s length), recent renovations, surrounding developments, and other contextual elements.
These nuances are often overlooked in statistical analysis, leading to wide-ranging and sometimes inaccurate assessments. This can mislead both buyers and vendors, creating a false perception of a property’s actual value.
Take home message
Technological advancements have greatly enhanced the property transaction process, offering tools that improve efficiency, accessibility, and decision-making.
However, it is vital to use these tools judiciously, ensuring that they aid, rather than override, the expert judgement and personal interaction that form the core of successful property transactions and long term investment.