How about trying on a home for a few days, just to see if it fits?
by Garry Marr
The traditional face-to-face approach of real estate agents and mortgage brokers is getting a little closer to extinction, according to a new study that suggests online shopping is taking over those sectors, too.
The report from HSBC Bank even goes one step further and suggests the day may be coming soon when consumers will be able to test drive their homes for a few days — albeit on a virtual basis.
“New technologies are poised to transform the way people buy a home,” says the bank in an international study on home ownership called Beyond the Bricks.
James Dearsley, a PropTech expert based in the United Kingdom quoted in the report, suggests the days of physically visiting an agent’s office may be almost over.
“Virtual reality will allow home buyers to live in a virtual version of a home for several days to truly try before they buy,” says Dearsley.
Jonah Brotman, 32, who founded the House of VR in Toronto about six months ago with his brother, says about 90 per cent of Canadians have not had any virtual experience and the lack of access to virtual technology is probably the main obstacle to a change in real estate habits.
“Entertaining and gaming is the first vertical that has succeeded in the VR space,” he says. “But the technology is incredible and will be a game changer in many industries. Real estate is one industry that has picked up that.”
Within real estate, it is new projects that are dominating the VR space because customers can be put in a headset before a project is built and virtually walk around their future unit – and even make design changes to it. “The person can be in a headset and decide if they want the countertops say marble or granite.”
The HSBC study looked at three key elements of home-buying, researching property, financing and then actual contact with an agent for purchasing. The bank said funding of disruptive property technology, so-called PropTech firms, has jumped from US$221 million globally in 2012 to more than US$2 billion in 2016.
Looking at the United Kingdom, Canada, Australia, France, the United States, Malaysia, China, Mexico and the United Arab Emirates, it found on average among those countries 83 per cent of recent buyers had searched for their home online. In Canada, the figure was 90 per cent.
Bob Faulkner, the owner of Vancouver-based Metropolitan Fine Printers, says about 40 per cent of his clients who are building major projects are looking for a virtual tour as part of their solution.
One of the problems that he has encountered with headsets is health concerns because people don’t want to put something around their eyes that has been used by another person. His company has switched to iPads and iPhones to create a tour.
“It’s early days of the technology but when you do get it, there’s a real wow factor to it,” said Faulkner, adding one of the restrictions is just the cost of creating an app for your project and then getting people to download it. “The last thing most people want is another app on their phone but for some of our offshore clients this allows them to tour a condo through their smart phone. They can walk through that condo, see the view from the floor, look out and see the view to the mountains.”
He said development costs for that virtual experience are anywhere from $50,000 to $150,000 so applying it to individual homes seems unlikely today.
“The cost just doesn’t make sense, it has to be a big enough development,” said Faulkner. “And it really has to be a realistic experience.”
The HSBC study also looked at financing and found 74 per cent of Canadians had researched their options online and 77 per cent had used online tools to determine what they could afford.
Rob McLister, the founder of ratespy.com, said Canada has been a little behind the curve when it comes to consumers completing a transaction online.
“The trend is starting to pick up steam but we are nowhere near the point where the average (person getting a mortgage) is going to close a mortgage online,” he said. “It is changing. You have banks promoting an end to end no human being mortgage process. You can apply online, upload your documents. You can do everything but sign the paperwork with a lawyer.”
It’s all leaving mortgage brokers fighting to keep clients and that means fewer profits. “They are taking their commission and giving over half of it away to consumer through rate buy downs or cash back,” said McLister, explaining why some of the online mortgage sites have discounts you usually don’t see at a bank.
The survey found in Canada that 39 per cent of respondents were dealing with agents completely or mostly offline but 29 per cent were dealing with their realtors completely or mostly online. The remaining 32 per cent used a combination of meetings and online contact.
At the Ontario Real Estate Association’s town hall meeting Thursday, technology was high on the list of issues the group said it has to tackle.
“We believe that technological disruption currently possesses the biggest risk to the livelihood of realtors,” said Ettore Cradle, president of the group, promising to work to enhance realtor access to technology and innovation. “Technology is changing everywhere. It is changing the way business happens. And real estate is not by any means an exception.”
The rise in online shopping is no surprise considering HSBC found that in Canada 27 per cent of respondents cited dealing with people as their biggest pain when buying a home. Fees were the second major pain at 23 per cent, followed by negotiating the price at 22 per cent and understanding the legal work at 20 per cent.
Dearsley says “artificial agents” may become the wave of the future as consumers look for a smoother and easier transaction.
“The traditional role of the estate agent is ripe for reinvention, as we are already seeing through the rise of online do-it-yourself platforms that allow homeowners to market their own properties and negotiate directly with sellers,” he says. “All houses may be sold this way in the future, with property websites offering end-to-end marketing, search, financing, negotiation, transaction and conveyancing services that significantly reduce the time and hassle for homebuyers.”
The research for the study was conducted in October and November and represents the views of 9009 people in nine countries. In Canada, 1000 people were interviewed.