Real Solutions for the User Experience

This post is a continuation of the Mobile Age of Real Estate series. Click here to start reading from the beginning.

The Mobile Age of Real Estate has come into affect with one purpose in mind: to improve the real estate experience. And although over the course of this series we have discussed some of the challenges in the real estate process, and the technological solutions aiming to solve them. We haven’t put as much time into what this realistically means for consumers. Will transactions really be smoother? How will more information affect the decisions of buyers and sellers? What effect will new technologies have on home/rental prices, if any? It’s almost like were left with more questions than answers.

What I have been discussing in this series is digitizing the real estate industry. In theory it sounds great. A transparent marketplace featuring all available information on the product and environment, how to seamlessly go about acquiring the product, and professional guidance available at a whim, all on the user’s terms. It’s all great in theory, but its practical application depends on user adoption. Home buyers really could see better access to affordable housing through more developers adopting modular/manufactured home building. Enhanced transparency, including tools to help consumers better interpret information, can both improve decision making in the market and the services offered by real estate professionals.

We live in a market economy, where the marketplace determines whether a product or service has value. Adoption of new real estate technologies, both by industry professionals and consumers, will show us how close we are to a digital real estate market. It’s fun to tour a home using VR but can that experience spark enough of an emotion in enough people for it to become the norm of real estate showings? The real estate process is an emotional experience and sometimes buyers need to see the physical property before any decision can be made. VR wouldn’t interest this group, but maybe a showings on-demand alternative can. How about if a buyer wants more control over the negotiation process? They’ve got the option of using the Reali app to place their offer and have it reviewed by a professional before it’s sent out, or can go to On The Block Realty and start using their auction platform to bid on qualified homes for sale. Whatever works for them!

And that’s a huge plus of the Mobile Age of Real Estate. It caters to different markets of buyers and sellers, renters and landlords, investors and even nosy neighbours. It’s about convenience and getting what you want, when you want. The mobile age will improve the experience of all parties involved in transactions and those just looking to get in the market. Shorter learning curbs, and more educated consumers, will force realtors to offer more value or risk obsolescence. An agent can’t just reduce their commission or offer “free home evaluations” as an incentive for people to reach out. Real value needs to be offered by professionals because the mobile age will expose those just looking to make a quick buck as a realtor. It helps to level the playing field.

There will be a lot of hits and misses during this transition in the real estate industry, and I for one will be loving every second of it! I founded House of Trade™ for the purpose of keeping consumers informed as to what is happening in the world of real estate and especially in the Greater Toronto Area.

Everyday brings a new opportunity to cover something exciting happening in the industry. The Mobile Age of Real Estate is here, and we’ll be bringing you the goings on within the industry as it happens… that’s Real Estate in Real Time!

How to Scale Affordable Housing?

This post is a continuation of the Mobile Age of Real Estate series. Click here to start reading from the beginning.

The biggest problem in GTA real estate over the last few years has been the lack of housing supply. You probably thought I was going to say housing affordability, didn’t you? Well let me explain why I know the problem is specifically the lack of housing supply, with the affordability of homes currently on the market being a direct result of that problem.

Now as someone that has never taken an ECON 101 class, it’s obvious to me that basic supply and demand is at play here. The demand for real estate in the region has been insane, with the Greater Toronto Area seeing an increase in sales every year from the year 2012 (85,496) to the year 2016 (113,133). This trend would have continued in 2017 if not for some interference by the Ontario government, coming in the form of a foreign buyer’s tax, rules around rent control and a few other policies unhelpful to property owners. Either way, sales in 2017 were still around 2014 levels (92,286), with home prices rising from $497,130 in 2012 to $822,580 in 2017. But, according to data from the Ontario Home Builders Association, housing starts (that’s new homes built) in 2018 had dropped by 5.2% from their levels in 2015. Supply has not kept up with demand and, as a result, home prices (and yes rental prices as well) have skyrocketed. The challenge of affordability is a result of the lack of housing supply.

Demand for housing has affected home builders too, with labour and construction costs having increased along with demand. This makes building homes on site too expensive for some home builders and adds to our problem of low housing supply. We need a solution! My proposal is simple… start building indoors. One way to bring more housing supply to market is to reduce the costs for home builders to produce the homes consumers want and need. On site building becomes expensive when you must deal with variable costs outside of one’s control (i.e. the weather). Skyrocketing costs and a reduction in housing starts make this a great opportunity to discuss different, and more efficient, ways of building homes. Modular and manufactured homes are two method that have been proven to work.

Where site-built homes are, as its name states, homes 100% completed on the construction site, modular homes are homes built in sections, within a factory. Sections are transported to the building site and joined together on site. The sections are placed on your typical basement or crawl space foundation. Vinyl siding is mostly used for modular homes, versus brick as the preference for site-built homes; as 85-95% of the home is completed in factory and vinyl offers more affordability and is lighter in weight than brick. Manufactured homes are like modular homes in that they are 98% completed in a factory before being transported on site. Where they differ is on the foundation the home sits on. It’s not always a permanent foundation, like a basement, but often block tiers that are designed to make the home capable of being moved from site to site. Also, the preferred siding for manufactured homes are either vinyl or aluminum siding; aluminum being the most used home siding. This makes manufactured homes far less expensive to build, and buy, versus conventional site-built homes and modular homes.

A report by NAHB Research Center was prepared on behalf of the US Department of Housing and Urban Development back in 1996, and it details the following regarding costs of site-built vs modular vs manufactured homes, that are to sit on the same conventional foundation (basement or crawl space), and constructed to be the same square footage (2,000 sqft):

· There are much lower overall costs associated with building modular and manufactured homes; 50% reduction in time to build, lower labour costs, fewer materials needed

· The average 2,000 sqft modular home is 11% cheaper to purchase than a site-built home; manufactured homes are 26% cheaper

· Structure represents one of the largest cost savings; 17% for modular vs conventional and 43% for manufactured vs conventional

· Each type of building method had overhead costs—administration, marketing expenses, construction and inventory financing costs—make up a similar percentage of the final sale price (22.3%)

· Construction costs were the biggest difference in final sales price

Looking at some of these facts you would be right to wonder why site-built homes still dominate the market. If you can afford to build at a lower cost, you can afford to sell at a lower price. Items such as aluminum siding and block tier foundations are not as valued as brick (or even vinyl) siding and conventional foundations. Because site-built and modular homes are built on permanent foundations, they face far fewer land restrictions and are appraised at much higher values than manufactured homes. But this does not change the fact that modular home building still offers more attractive scalability than even conventional homes. If you can build more homes at a lower cost than you can make more money while cornering a section of the market. Seems like good logic to me! And companies like Quality Homes are working to prove just that. Quality Homes has been a modular home builder in Ontario, since 1987, that aims to scale this process. They offer assistance from beginning to end, with help in lot selection and purchase, to site excavation, to home design and finishes, to assembly and installation.

In my opinion, this is the way to build in the Mobile Age of Real Estate. We need more housing and more affordable housing at that. There are ways the government can help. One is by basically just staying away from the private sector altogether as involvement by the public sector rarely helps private businesses or consumers. Or, if they are hell bent on “helping” as the government usually is, an effort can be made to speed up the process of acquiring building permits (a problem for another day). But this is a solution where those directly involved in home building can implement their knowledge to solve a real problem. A home builder may have to sell their finished product at below market value but may also have an opportunity to corner a segment of the market desperate for housing. The end user will thank them for it…

The Realtor Shift

This post is a continuation of the Mobile Age of Real Estate series. Click here to start reading from the beginning.

The shift towards the Mobile Age of Real Estate has poised many to ask the question, “What does this all mean for agents? Will realtors still exist 15 to 20 years from now?” In my opinion, the answer is both yes and no to the second question. Yes, real estate agents will exist decades from now, just maybe not in their current form. People often point to improvements in technology leading to the death of many travel agent jobs (i.e. as an example of this trend continuing. An article on even asks whether realtors will be made obsolete by 2025, and points to our past position as “gatekeepers” in the industry fading with the growth of the internet and new technologies. They’ve literally predicted the death of my career to be 5 years from now… That’s insane! It’s true that the internet has stripped us of that responsibility as gatekeepers, and I believe that’s for the better. More transparency leads to a more educated and confident buyer, and that leads to better decision making in the market. But 2025? Geez that’s bold… The mobile age doesn’t wipe out all real estate agents like some kind of natural disaster. It offers professionals an opportunity to transition their business to appeal to, and serve, a new generation of educated consumers.

It’s been said repeatedly that real estate is the largest financial asset most individuals (and families) will purchase in their lifetime. There is a lot of value that an experienced real estate professional delivers to their clients. From helping them save/make money on their purchases to offering a memorable client experience during a very emotional process. The mobile age puts us in a position to improve our value proposition at very low cost to ourselves. We can easily pair human intuition, our experience in the field, and advances in technology to improve our services. For example, I mention in Part 5 of the series (Showings On-Demand) that I offer video tours to many of my clients. Understanding that people live busy lives, I often find myself using my phone camera to record showings, with minor commentary, for my clients before I forward them the video, and listing itself, via WhatsApp. In this they receive many useful benefits: 1) a full walkthrough of the property that they can review on demand and compare to its listing details, 2) a professional interpretation of all necessary information to make an educated decision, and 3) the convenience of not having to trade time out of their day for hours of home viewings.

It’s something so simple but can deliver huge value to the right clientele. This has helped me position myself as a realtor that carters to young professionals. In 2018, I began working with many young people studying law. Some were doing their articling at law firms in Toronto, while others had just graduated and were looking to get their careers started in the city. I was glad to help them transition in their lives and deliver a memorable client experience with the help of technology.

Better access to data sometimes gives people the belief that they now know as much, if not more, than a professional. Because, of course, if we all have access to the same facts than what really separates what you know from what I know? That is arrogance at the highest level! It is great that we all have better access to information but that hasn’t stopped many in my sphere of influence from asking me to help them understand what many different data points and new information mean. Words on a page mean

nothing if you do not understand how to interpret them. Experienced professionals will be needed because we help to interpret what is going on in an often-chaotic real estate market.

What this really does is help agents redefine our role to the public as advisors or consultants, instead of just sales people. In my business I have noticed a huge difference when I take an educator’s approach as opposed to a transactional one. The hot seller’s market we came off in 2017 still has many agents in “I can sell your home for $150,000 over asking in 7 days” mode. You do not know how many times I’ve heard people tell me stories of agents knocking on their door and offering to sell their home for some over priced number, without even discussing, or considering, where the homeowner will live after the sale. When we help consumers understand what is happening in the market, with new developments and how new government policies will affect them, we are offering so much more long-term value for the client (and ourselves) than commission from a quick sale ever could.

And I reason that long-term thinking is the key focus in all of this. As market conditions shift and consumers become more educated, the amount of real estate practitioners will in fact decline. Many will drop out of the business because they refuse to readjust their business model. Others will cling to reducing the price of their services as their value proposition. These approaches may work in the short term, however are disastrous in the long-term. Doing what has worked in the past while the environment continues to change won’t appeal to any target demographic and will not appeal to the new generation. Technology is progress and we cannot fight back progress. All we can do is embrace it and readjust our offerings as trusted professionals to better serve the public.

The Mobile Age of Real Estate will not replace realtors. It will make it easier for us to do business and serve more people. Advancements in real estate technology are affecting so many parts of the industry, from the middlemen to services rendered. And it is also offering advances in the kinds of homes consumers demand…

Blockchain Technology & Real Estate

This post is a continuation of the Mobile Age of Real Estate series. Click here to start reading from the beginning.

No technology has more potential to affect the real estate process, as it currently stands, more than blockchain. For those that don’t know, the blockchain is a digital ledger where transactions made using cryptocurrency are recorded chronologically and publicly. In other words, it stores digital information (i.e. “the block”) in a public database (i.e. “chain”). When you make a purchase on a platform using blockchain technology, instead of using your actual name, your purchase is recorded without any identifying information using a unique “digital signature,” sort of like a username. The technology offers a way to decentralize information, while making it public and keeping individuals’ personal information private. The blockchain is changing so much in the real estate industry, from access to deals, to the amount of time it takes to close, to property title mistakes, to the high fees and fraud that slow down the real estate process. I want to give you some understanding of how its application will affect how we, involved in the industry, do business.

It is becoming more and more difficult for anyone who does not currently own real estate to get access to affordable property. With home values increasing by more than 8.3% per year since 2014, many would be buyers don’t stand a chance acquiring a valuable capital asset like real estate. And over the next 3-5 years it will only become more challenging for anyone not already in the market. This makes investing in the sector very difficult for both buyers and sellers. A seller cannot liquidate their property if there are no buyers to afford the home. Blockchain offers us the introduction of two new concepts: tokenization and smart contracts.

A smart contract is a transaction completed entirely between the buyer and the seller (or renter and landlord) with little to no human interaction. The seller includes all the details of the property and the buyer puts all their necessary information on an encrypted and secure block. Computer protocols check the legitimacy of the transaction and no agreement can be completed until all terms are met. Tokenization uses cryptocurrency to split assets into tokens that are stored on the blockchain. So, a smart contract allows difficult to liquidate products (i.e. real estate) to be tokenized and owned by a multitude of investors, allowing the initial owner to not divest their entire stake but just a part of it. Let’s say you were a homeowner looking to sell off 50% interest of your downtown Toronto skyline home. Instead of seeking a buyer to purchase half of the interest in your home (would be very unlikely), or putting the entire property up for sale, that interest can be tokenized and sold to multiple investors; like a stock offering. This is a completely new environment for hard assets as it offers so many more liquidity options than what are currently available.

The blockchain can also help eliminate the need for things like title insurance. A November 2018 article written in Forbes details title insurance as a $15 Billion per year industry by ensuring buyers their newly bought property is clear of any outstanding liens and debts. This is a huge part of closing costs for real estate buyers. If all property title was decentralized on the blockchain, a large amount of time and money would be saved, and it could eliminate the need for title insurance altogether. “It could also be possible to add information about construction, damages and improvements to the title, almost like Carfax

for homes” citing the same article from Forbes. This will help make it so that people truly know what they are buying.

There are so many ways we can use blockchain technology to offer a more seamless real estate process. In fact, I recommend reading this article written by a software architect in Toronto name Michael Nolivos. In it he goes into detail regarding how we can use smart contracts and incentives to clean up real estate showings and offer a more satisfying experience not just for buyers but all involved parties.

There are some that view the Mobile Age of Real Estate as the death of the “middleman”. I believe that couldn’t be further from the truth. If anything, this is an opportunity for the middleman (i.e. realtor, banker, lawyer, etc.) to redefine ourselves and offer a different kind of value for our clients…