Self-service is disrupting nearly every industry imaginable. It’s just a matter of time before online home buying is the new normal.
If I told you to write down a list of disruptive companies, your list would likely include Amazon, Airbnb, and Uber. What they’ve done that’s disruptive is take traditional shopping experiences and make them completely self-service. You can get just about anything these days by clicking the ubiquitous “BUY IT NOW” button. But what about new homes? Will customers be buying new homes completely online anytime soon? The answer is yes. In fact, some home builders are already experimenting with it, (one side effect of stay-at-home orders). It’s just a matter of time before Millennials get their wish, and online home buying goes mainstream. But how close are we?
What’s it going to take to make self-service (AKA online home-buying) possible?
It’s obvious that buying a new home is exponentially more complicated than hailing a cab or buying a new case for your phone. It certainly won’t be as easy as saying “Alexa, buy me a new house.” A new home is one of the most complex and expensive purchases anyone could make. There are plenty of serious obstacles to the self-service home buying model. One is the financing process. Another is the difficulty for buyers to visualize the home and neighborhood without walking them. Then there’s the trust needed to convince someone to make a $300K purchase sight unseen. Let’s break down these and other challenges as we consider what it will take to prepare for a future of online home-buying.
Online home-buying challenge 1: Financing
This is one of the biggest challenges, yet one that shows the most promise. With so much regulation, innovation in the fintech (financial technology) space has been challenging. But companies know they need to adapt to the mindset of the new digital buyer if they want to stay relevant. As of Q1 2019, there were over 40 VC-backed fintech unicorns worth a combined $154.1B, all looking to transform financing as we know it. Just look at the most impactful real estate trends, and you’ll see iBuying, digital paperwork, alternate mortgage financing, and cryptocurrency topping the list. It’s been a slow process, but banks are getting on board, and so are home builders. For example, Lennar has partnered with OpenDoor, an online real estate marketplace (the original iBuyer), to allow customers to buy a new construction home and sell their current home in one seamless transaction.
Online home-buying challenge 2: Home visualization
I hear this one a lot from builders, but less so from buyers who are accustomed to the HGTV-style visualization of the dream home. Many builders are still slow to embrace technology like 3D virtual tours, VR/AR, and fully digitized home plans because it doesn’t fit with their current method of selling homes. There’s a lot of money invested in building and selling out of models, which means little budget is left to invest in digital renderings. But buyers, especially Millennials, have come to expect more. And the technology is becoming more affordable with companies like Matterport and Outhouse bringing interactive virtual tours and floorplans to the masses. High-quality online visualization is a critical step toward selling online.
Online home-buying challenge 3: Neighborhood & amenity visualization
We no longer live in a time where a buyer “has to walk the neighborhood” to really get a feel for it. Companies like Trulia and Zillow have learned what buyers really value in a neighborhood and give real estate shoppers valuable metrics like walkability scores, crime and safety scores, and school ratings. User-generated content such as reviews and blogs also play a role in giving the relo buyer assurance about neighborhood quality. And when it comes to online visualization of community amenities and location, VR/AR can be an extremely powerful tool. A powerful illustration of this capability can be seen here on Sweetwater’s web site, (an Austin MPC by Newland).
Online home-buying challenge 4: Trust
This is critical for the home building industry. Look at any of the disruptive companies mentioned earlier and think about how important trust is to their model. Would you buy a $300 speaker off the internet with no assurance that the quality would be good? Would you get in a car with a random person you don’t trust? Would you stay in a stranger’s home if you didn’t trust it would be safe? Now multiply that feeling by a factor of 100x to understand how important trust is for the digital home buyer. The stakes are high when making one of the largest and most intimate purchases of a lifetime.
The disruptive giants solved the trust problem with user reviews. This sounds simple enough, but every person reading this knows how difficult it can be. It means we have to stop fearing reviews and social media and instead embrace them. It’s easy for Amazon or Uber to drop a provider from their platform because of a low star rating. But it’s different for builders to eliminate negative reviews when there are so many points in the buyer journey where things can go wrong.
That’s why it’s critical to map out the customer journey from the buyer’s perspective and understand where the peaks and valleys are - from first impression all the way to referral. Then put in place a listening program called a Voice of the Customer (VoC) program to identify any customer that’s having a bad experience and reach out to fix it in real-time. This requires effort and accountability at all levels of the company. It’s not easy, but it’s the proven way for large organizations to manage complex customer experiences and build trustworthy reviews.
Online home-buying challenge 5: Outdated processes
The construction industry isn’t known for being at the forefront of innovation. Many builders don’t have the R&D resources or willingness to gamble big on new technology when it may cut into already slim margins. But it’s becoming obvious the current way of doing business is not going to be sustainable with new generations of buyers. A disruptor’s mindset is exactly what it’s going to take to make online home buying possible.
Imagining a future of self-service in home building is an exciting prospect.
Builders have been talking about the “BUY IT NOW” button for years, but it’s always been theoretical. It’s closer now than most people think, and the builders that aggressively tackle these 5 challenges will be the ones best positioned to reap the massive rewards.