TheMReport — News and strategies for the evolving mortgage marketplace.
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24 | TH E M R EP O RT FEATURE While Blockbuster gobbled up competitors and focused on expanding offerings in their physical retail locations, how- ever, innovation was brewing. A small company called Netflix was building a platform that didn't require you to drive to a store only to find nothing good to rent. Pay-per-view on cable television networks and streaming video over the internet began develop- ing on-demand content that didn't require you to rewind that tape or return that DVD. Technology–and your custom- ers' expectations–are changing the game. Innovation is the key to not only survival but success. Real estate professionals need to follow technology better and listen to their customers to adapt. Moore's Law states that computing power grows at an exponential rate–specifically, it doubles every 18 months. Reflect on that concept– we hold mobile devices in our hands that have computing power and capabilities that embarrass older generation desktop com- puter towers. This machine power coupled with the availability of massive amounts of information at a customer's fingertips has changed the rules. It has placed real estate agents, title companies, mortgage lenders, and all other stakeholders in the real estate settlement and financing process into unchartered territories. Technology companies and start-ups are drooling over the countless opportunities to disrupt our massive multi-hundred-tril- lion-dollar industry. And as legacy companies now recognize the im- pending threat of these trailblaz- ers, we enter a new generation of hyperactive need to innovate. It is a scramble to beat out the compe- tition, whether it's the competitor we know and have wrestled with for years–or the Kendall Square start-up that wants to change the way consumers buy a home. Let's look at an incomplete and non-exhaustive list of some in- novation and technology looking to disrupt the real estate industry and change the status quo: Big Data Big data is the phrase to describe taking large data sets and using algorithms and computers to analyze them and predict pricing, trends, and behaviors. It is as simple as knowledge is power. The more data analyzed, the more accurate predictions can be made. Big data is being used in health care, construction, retail, and politics. Big data can be utilized in real estate to predict valuations, neighborhood development, and the overall trend and health of the housing market. Big data can also be used to ac- complish an appraisal of a property by using thousands of "compa- rables" rather than a select few. Artificial Intelligence (AI) and Machine Learning (ML) Computers don't make mistakes, arguably they don't have feelings (yet), and bias doesn't affect a machine's decision. AI and ML have become so powerful and refined that they can read documents and summarize the terms of a contract. AI and ML can optimize prospecting by reviewing leads and determining which ones are real, weak, or just plain tire-kickers. AI and ML can also review documents submitted for mortgage approval and identify potential fraud, inaccuracies, missing information and the like. New Software Look for new software platforms that are built from the ground up with easy-to-use interfaces that allow for easier scheduling, negotiating, and communications between stakeholders. Old legacy software will continue to die on the vine as startups introduce robust software that's also easier to use. In the next few years, investigate for platforms that integrate, decreasing errors and increasing productivity. Gone will be the days of taking a loan appli- cation and manually entering the information into a loan produc- tion platform–only to then deal with vendors such as appraisers and title/settlement professionals using fragmented platforms like email or portals. Virtual Reality Health care, tour- ism, aerospace, and construction are using advanced vir- tual reality to train professionals and reach customers that have been unavailable to them in the past. As virtual reality has become affordable, more mobile, and more "real," look at how developments could help market the experience of walking through your client's future living room. Distributed Ledger Technology (DLT) and Smart Contracts Commonly dubbed "blockchain," DLT and smart contracts are now being used by title insurance companies to manage back title policies. Banks have been test- ing and piloting programs to see how they can leverage the power of these ledgers that allow for recording of transactions of shared databases using cryptography that prevents altering of transactions and records. Many theories claim to explain why real estate has been so slow to embrace and adopt innovation. After all, mortgages are highly regulated and the process requires checks and balances to ensure such regulatory compliance— but lots of other regulated industries including banking itself have managed to innovate and develop tools for greater efficiency and smoother customer experience.