Digital transformation in real estate: Trends and examples

There’s no doubt tech is changing home buying. 

This “digital transformation in real estate,” as some analysts call it, now touches all aspects of home buying, from home tours to mortgage preapproval to closing day. 

Like any other tech evolution, digital changes in the real estate market create pros and cons. The best innovations make home buying faster and more seamless for buyers and sellers.

What is digital transformation in the real estate business?

A generation ago, as tech started reshaping the economy, the real estate market stayed on its traditional analog course, for the most part.

Yes, online real estate listings replaced printed ads, and mortgage lenders started offering online mortgage applications along with traditional paper forms. 

But at its core, finding property, and financing the purchase of the property, remained about the same, even as the digital revolution transformed banking, manufacturing, media, and other types of investing. 

Why did real estate companies resist digital changes?

Real estate is physical and expensive. These two qualities made property transactions harder to digitize. 

After all, it's one thing to buy a $25 book and wait a few days for delivery. It’s something else to buy a $500,000 piece of property sight unseen.

In the current decade, the increasing power of digital tech has added a wealth of online tools, accelerating connections, and priming real estate for its own digital transformation. 

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Real estate digital transformation trends and examples

Here are some of the tech innovations changing the real estate:

MLS integration for home searches

The National Association of Realtors says real estate agents started sharing listings with each other in the late 1800s. The idea, which was to put more listings in front of more buyers, proved simple and effective.

Today’s technology takes this collaboration to the next level. Through the online integration of more than 500 different Multiple Listing Service (MLS) platforms, buyers can search listed homes in any location and set up smartphone alerts for new properties that meet their criteria.

Buyers typically know what home they want to buy before reaching out to a Realtor or lender.

Virtual reality for home tours

Today’s buyers tour homes without leaving their couch through virtual reality home tours and staging. Property managers can offer virtual tours of homes to rent.

Creating virtual reality tours was possible decades ago, but back then sharing virtual tours online took more bandwidth than most consumers could access. Today’s processing power and network bandwidth is delivering a seamless experience for buyers, allowing them to narrow down home choices without traveling all over the city.

Buying a house without looking at it in person can be risky, but some buyers are doing this, especially if they’re buying in a competitive housing market.     

All-online lending for financing

The original World Wide Web, in the 1990s, shared text, photos, and documents. Back then, applying for a mortgage online meant downloading a form, filling it out, and emailing or faxing it back so loan processors could start looking through the data.

Online forms eventually eliminated the need to download files, but the result remained the same: the borrower sent data which the lender entered into its system to process.

Today’s online lenders, such as Better, use digital tools to automate loan processing in real time, as the applicant enters data. This is changing lending and borrowing for the better. For example, borrowers could get a preapproval from Better in about three minutes.  

Live tracking for loan files

Gone are the days when borrowers submitted their forms and documents and spent days, and sometimes weeks, wondering whether they’d be approved for their loan.

Now, live tracking lets borrowers know where their application stands, what their next steps are, and what timeline they can expect for approval. 

Automated valuation models for appraisals

Human home appraisers set the value of most real estate, but computer algorithms can also estimate property values. Today, these automated valuation models, or AVMs, provide the estimates buyers see on property listings at sites like Zillow and Realtor.

AVMs give buyers an instant reference point for the value of a home. While these values may differ some from the real appraisal ordered by the lender to help complete the loan, they’re a much faster and cheaper source of information. 

Crypto, blockchain technology, smart contracts

Large amounts of money flow in several different directions during a real estate transaction. Digital transactions have already revolutionized how parties get paid over the past few decades. 

Now, cryptocurrency is entering the conversation. Some lenders can use crypto as collateral on a mortgage loan or as a source of reserve funds. Smart contracts also harness the power and security of blockchain to create a closed system that excludes fraud and human error.  

Market trends show consumers value this kind of security, especially when exchanging large sums. 

Data analytics for processing

The process of finding and financing a home generates a lot of information, about real estate properties and about people. Modern, AI-driven data analysis combines all this data to keep track of past, present, and potential future transactions.

How does this help home buyers and sellers? For one thing, they can see, instantly, the transaction history of a property without searching deeds at the courthouse or using antiquated software to access the county’s computer system.

This digitalization also helps lenders estimate home equity and help homeowners get the most out of their real estate investment.   

CRMs as a digital hub

Data analytics and automation help consumers only when they can access it. Customer Relationship Management systems, or CRMs, provide a 24/7 access point for mortgage lenders and borrowers. 

Rather than submitting documents in person or emailing files and waiting for the lender to receive and process them, borrowers can help shape their loan files digitally, any time, through modern CRMs.

Artificial intelligence

The next step in the digital transformation of real estate uses artificial intelligence to help borrowers access the data they need to make better decisions.

For example, Better Mortgage’s Betsy is pioneering the use of AI to support customers. Paired with Better’s digital infrastructure, Betsy is saving borrowers time and money.

Challenges of the digital transformation in real estate

Digital technology has gained momentum in real estate over the past five years, but there are still roadblocks. They include:

Customer acceptance

Many consumers still prefer 20th century approaches to spending and borrowing money. Lenders and real estate agents continue to offer in-person customer experience while also offering customer service that harnesses the power of digitalization. 

For some organizations, the need to offer multiple points of service can slow the digital transformation of the real estate sector. 

Employee acceptance

Workplace surveys show some employees in real estate companies have been reluctant to adopt digital technology. This is a common characteristic in industries in the midst of rapid change. 

Ultimately, it’s customer need and demand that tips the scale toward the adoption of new innovations. Good managers can help by making sure employees get the right kind of training in new technologies.

Compliance and security

Lenders and borrowers must follow federal lending laws. Conventional and government-backed loans must also adhere to regulations set by federal agencies. These rules can slow the embrace of  new data-driven technologies.

The importance of protecting consumer data and privacy also limits how fast companies can integrate data-driven real estate property technology, or proptech. 

IT resources

Not every lender and loan servicer has the digital infrastructure to support artificial intelligence and monitor blockchain transactions. Not every Realtor can afford the most recent real estate software. 

The upfront money needed to create digital systems and train employees to use them continues to slow the digital transformation of the real estate market.

The future of digital real estate

Where is the digital transformation in real estate going? Where will it end? 

No one can say for certain. Ideally digital innovations will continue to work together to make property purchases easier, faster, and more secure for buyers, sellers, and everyone else in the real estate business.

For example, adopting blockchain-based cryptocurrencies could remove the potential for wire fraud and other crimes that affect cash transactions. This security could help people feel safer as they buy and sell property.

And as artificial intelligence continues to integrate with the economy, AI’s role in the real estate industry should continue to grow. AI could become central to every aspect of home buying and selling, from finding a home to closing the mortgage and registering the deed. 

Automation has the potential to save money. In the real estate business saving money can mean lower interest rates and less hands-on work. 

At Better, we’ve built technology to streamline the entire homebuying and mortgage process, making it cheaper for us to make the loan which means we can then pass the savings on to you.

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Experience the future today with a Better pre-approval 

Home buyers can experience the digital transformation in real estate today by getting a preapproval from Better. 

Better’s AI-powered mortgage process integrates modern digital analytics throughout the process. The process can deliver lower rates, higher chances of approval, and a fast and responsive experience for borrowers. 

Start your pre-approval here. Many applicants get an answer within three minutes.