The Coronavirus has impacted businesses throughout the economy and real estate is not immune from the radical changes caused by social distancing and lockdowns. How will the real estate industry adapt to the changes? What does this mean for the future of real estate? What changes will survive long after the crisis resides?
It is amazing how quickly the economy went from record highs to record unemployment and talks of a recession. As we saw with the last recession, the market very quickly filters through the noise and selects winners and losers. Unfortunately, it is not always apparent who the winners will be at the beginning of the crisis.
As the lockdowns ease throughout the country and the economy begins to creak back to life there are five changes to real estate that will likely last.
- Totally virtual closings: to reduce transmission risk, many title companies have adopted processes for totally virtual closings. I’m surprised this hasn’t happened sooner. You can file your taxes online, open bank accounts, buy a car, etc… but you can’t buy a property? Title companies will drastically reduce their office footprints as they rely more on virtual notaries, drive in closings, etc…
- Drive by / virtual appraisals: many lenders will resort to drive by and virtual appraisals to save time, money, and reduce risk to employees. In the near future companies will likely have the borrower download an app and do a virtual tour with the underwriter or an appraiser working wherever.
- Virtual tours/showings: Many properties were bought and sold during the lockdown totally virtually. I don’t think in person showings will be totally eliminated, but you will likely see where people take a virtual tour of many houses before they decide on the property they want to buy. Many sellers might say that a buyer can’t do an in-person tour until after an offer is accepted.
- No open houses: The open house is dead, virtual open houses will replace the in person open house. Even before the virus, the benefit of open houses was questionable, the virus will end this practice as the risk reward for having that many people in a property no longer makes sense for the seller.
- Opens the door for tech to replace other real estate functions: There is a trend in the 4 items above. With technology replacing more traditional real estate functions, this opens the door for efficiency in the industry. For example, If a realtor isn’t spending as much time driving around showing properties, the agent could do substantially more volume with the same resources virtually.
The “market” over the next 24 months will swiftly pick winners and unfortunately losers. Coronavirus will force efficiency in the market which will lead to considerable consolidation in the industry. Just as we are seeing in the technology industry, the big get bigger and the same trend will occur in real estate. The top tier will thrive while smaller participants will not be able to compete. The five changes above are just the beginning of the radical transformation of the real estate industry.
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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending. Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors Magazine, The Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.
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