Real Estate in the Metaverse
Today, the average home seller pays 5–6% commission to brokers for selling their homes. For context, this means that if you’re selling a $1M home, your broker just got $60,000 for selling it.
Up until a few years ago, most residential real estate was actually still physical. You would get a real estate agent and they would match clients. Of course, digital-first platforms like Zillow, Redfin, and Opendoor changed the game.
Yet, there is room for much more innovation. From getting a mortgage to finding a house to the ten other steps, the home-buying process is extremely tedious. Here’s how we can simplify it with tech and reduce costs, perhaps in the Metaverse.
The actual process of buying a house is extremely manual and dependent on real estate agents. To reduce the commission and seller expenses, we must decrease the role of real estate agents. Currently, real estate agents provide the following benefits: accurately pricing homes, copyright and taking pictures of homes, and accompanying potential buyers.
Sellers would like to accurately price their homes. Historically, only local real estate agents could understand local trends and accurately value a home. However, as real estate companies aggregate more data in suburban areas, it becomes easier to predict home prices. Companies such as Compass and Opendoor have proved they can accurately predict home prices.
Next, we come to the process of providing copyright and taking pictures of a home. Recently, Matterport unveiled a 3D spatial scan phone app. Homeowners can literally upload an immersive, virtual tour of their homes from their phone. I imagine in the near future there will also be AI-enabled drones that can automatically take high-quality pictures of a home. A real estate tech company like Redfin could ship this drone to sellers that list houses on their platform. This tech, combined with automated copyright services like copy.ai, can automate the current home-selling experience.
However, let’s go a step deeper. What if your moving from New York to California. Do you want to stay in a hotel for a month as you scrimmage to find a home? Do you want to take multiple cross-country flights to find the right home? What if you could instead put on an Oculus and view the home in realtime? This is how real estate transactions, from finding a hotel to buying a house, will occur with the Metaverse.
Another consideration is how real-estate tech platforms could increase their profit margins whilst lowering home-selling commissions. The two statements seem contradictory but achieving both is possible.
Redfin has already started this model by allowing home-sellers to self-list their homes for a low 1% commission while home-buyers get rebates for buying with Redfin agents.
To increase margins, real-estate platforms should take advantage of e-commerce and advertising.
Jeff Bezos said the following about ads on Amazon through the following statement.
“Consider 2 businesses. One with cheaper products subsidized by ads and one with expensive products and no ads. Customers will always go to the one with ads and prefer the cheaper one. It would be stupid not to enter the same market.”
This is the logic for having ads in a housing marketplace. The average homebuyer spends 124 hours looking for a home. Moreover, 72% of new homeowners will spend 10–25k on furnishings in their first year of buying a home. This presents a massive opportunity. Instead of seeing pictures of empty houses, potential buyers could see furnishings in pictures, helping platforms earn ad-revenue.
This ad-based revenue model can help real-estate platforms change their entire monetization model, lowering commissions yet increasing profit margins. I envision that the model will shift to lead generation and e-commerce rather than commissions on home sales.