This week Aaron Norris is joined again by Mark Lesswing and Todd Carpenter of the National Association of Realtors to cover technology topics. Today, they continue their conversation on technology. This week, we jump from talking about blockchain technology in the real estate sector to other disruptors like artificial intelligence, zero interface, and how Amazon Alexa, Microsft Cortana, Facebook’s M, IBM’s Watson, and Apple’s Siri could eventually get into real estate and surrounding industries. See last week for more on blockchain in real estate.
- Should escrow and title be concerned about their jobs with this new technology?
- What does it mean that we are eliminating the middleman?
- Where will Blockchain start in the U.S., and when should we be hearing more about it.
- What does one refer to when mentioning zero interface?
- What is the biggest struggle for a brokerage or real estate company when it comes to generating leads?
- What new technology could we see in the future that is both exciting and groundbreaking?
- What do Mark and Todd read to keep up on all the latest technology?
Aaron asked them both if escrow and title should be worried about their jobs. There are adjustments to be made with any technology, which Aaron said is fair. The whole goal that makes a lot of people uncomfortable, not just in the real estate industry, is getting rid of the middleman. Aaron grew up in the age of real estate when he was in the back of a car sitting next to a Thomas Guide and a set of faxes from the realtor on properties to see. Now, as a realtor, you are working with a consumer who started online 95% of the time. They come to the realtor knowing the estimate and what houses they want to see.
The data they held near and dear and was the gateway to their success is now at the fingertips of the consumer. The value proposition the industry is bringing to the table has just changed. Aaron asked them what this is now, which they said if you look at the transaction itself, the difficulties, and the unpredictable parts about what happens from the time you decide this is the house you really love to the time you move in, it has proven to be so difficult that there are more real estate agents being used today than there were before the internet. As a gatekeeper of data, the value has gone down. However, as a shepherd who helps people go through that, more data has made it even harder for people to navigate that. Being that consultant has really been the primary value proposition for a modern real estate agent.
When Aaron mentioned eliminating the middleman, Mark said it is interesting to see that with blockchain and real estate, we are really eliminating all the wasted time of doing all these searches, scans, and gathering information between the parties. It’s an efficiency play; so we are not eliminating jobs, but rather the time it takes for each one of these jobs to happen. Reiterating what Todd said, you are still going to go out there and do $80,000. However, instead of thinking of your $80,000 transaction for 90 days, it’s really going to shrink. It could shrink to 4-5 weeks, and the consumer will need somebody to see what will happen with that kind of money in such a short amount of time. What could go wrong with this, and how could it go off the rails when you are moving that much money so quickly? What is being eliminated is waste.
Aaron asked when they think we will start hearing more about Blockchain in real estate and where it will start in the U.S. Mark said this was a good question since we will start pushing it from the upstream part of it where the transactions start where the brokers start. We will then push it downstream. This effort is happening in some progressive counties, but the problem is that there are over 1,000 counties. How do you get it moving from that side? The easiest way to push this is from upstream toward the downstream. Everything follows gravity that way. He doesn’t really see how you can start in the middle and push both ways.
In his second White Paper on the Blockchain, he summed up the adoption issues and things he would run into with it. Aaron did not understand the private Blockchain at first since it seemed off brand for Blockchain. However, his paper clarified it. You do not want to make a lot of mistakes in a very public way with a lot of people’s money. People could be losing real money if you make mistakes. To get it right first, you should do it in a private space. If we get it done first here, we can learn a lot about governance.
The question is what the new rules are since we don’t have these databases and firewalls. As well, how do you control it for the betterment of the consumer? Aaron said we are so heavily regulated. One of his questions for blockchain.info was in regards to us being in such a heavily regulated space and doing hard money here in California. When Dodd-Frank came out, we had a state that said it was not enough. They came out with their own overlay due to this. In a perfect world, we are cutting out the middleman and don’t need to consider regulation anymore. When the regulators and legislators come, they will work with those who know what is happening. Doing nothing is the worst because the regulators and legislators will do what they have to on behalf of the consumers to protect them. If we are doing it right, we can counsel them on how you can control and regulate it.
Mark said if you look at the way real estate did and moves around today, there’s a contract that is out there between the two different parties, whether it is a syndication agreement or terms of service. There is a legal contract that is binding the use of that data already, so we are not talking about a completely new concept. It is more of a marriage of the legal and technical aspects of moving data around.
Aaron thinks they will be very important in NAR over the next five years and hopes that regulators reach out to them. It is good they are already there researching the space, and Aaron thanked them for being there. Aaron next asked Todd about his report “Robots and Real Estate.” He was fascinated by it and said one of the things that comes up from realtors is that they hate Zillow and are not shy about it. Zillow has spoken at the Norris Group events before, and they know it too. What was interesting this year was how forthcoming they were this year about only being interested in the top 10-15% of the players. They were not interested in the realtors doing only a few transactions a year.
It was clear to Aaron that they were trying to create a platform from soup to nuts. You will be able to accomplish an entire transaction. It is CRM meets Project Management meets Contract Management all in one. Their market is clearly that top 10-15 percentile. The other concern for realtors is that they hate advertising there. Specifically, Aaron was looking at his chart in Exhibit 3.9 where realtors ultimately ended up purchasing back from 2001. You just see the change. In 2001, the internet was driving 8%, and now it’s 51%. He was surprised to see the real estate agents being 48% in 2001. It’s 34% now, so it’s still a major player. Things like news print and advertisement is down to 1% while Home Booker Magazine does not even show up.
For realtors who have been around a long time, the industry has changed right before their eyes in a short period of time. In regards to the catch-up factor, Aaron sees eyes glaze over quite a bit when he is talking. Aaron asked them when they are out and about discussing these things, he wondered if there is a sense of resentment in being willing to learn. Todd said there are a couple things to consider. When you talk about the old magazines, newspapers, and print advertising they used to do, 90% of the people who looked at listings in magazines were the real estate agents who listed it just to make sure it was in there. As expensive as those books were, marketing on the internet is far cheaper before compensating for inflation.
He can understand why nobody would want to advertise online, but the thing he always goes back to are the real estate portals not being your competition themselves. They are the tools that your competition is using. If you have another broker in your market spending all kinds of money on a portal, it is not really the portal’s fault. Rather, it is the fact that the other broker wants to drive you out of business. They will get more of the business itself, so you have to look at this advertising in general as a necessary evil. When you think about the companies that the portals have taken out of their pocket books, it is the old print advertising.
What will be interesting with artificial intelligence is when you start having robots that aren’t just Amazon or Google, but are in your pocket that work just for you. The internet would have to adjust to this since there is a big possibility that the robot will go out and do all your searching for you. Suddenly, the internet portals and all the places where people invested to market online could be in for a big shift.
CB Insights released a quote stating how one company learned to swipe before they learned to wipe. When talking about artificial intelligence, he thinks about a 1 ½ year old who can’t talk but can find pictures and videos of themselves without a problem. A couple months prior, he witnessed a fellow realtor who had several kids under the age of 8. He watched how they interacted with Amazon Dot and Alexa. They were just talking to thin air. When Aaron speaks in front of an audience, he tells them how he thinks we are five years away from getting rid of the telephone screen. He tells them about all the different bots that outlets like Facebook and Amazon have. It is so personalized, and eventually every one of us will have a bot in our pocket that gets to know our preferences.
Aaron asked Mark about one of his presentations that talked about zero interface. Aaron had never heard of this term. He said that zero interface is the things you do not have to touch at all. This could also refer to the machine looking at you and determining things about you by your facial features and gestures. This was seen when the Wii was released. With zero interface, you are controlling something that is getting its cues from you instead of you waiting to click a mouse or hit the key. It is watching your body movement or listening to the sounds you make. With zero interface, nothing is touching you at all.
People asked how we can get rid of cell phones. Aaron mentioned things we already have, like the Apple Watch and Google glasses. We are not that far away from wearables being a major player. With an ear piece, what more do you need? Is being connected to a screen really all that helpful and useful, especially with augmented reality being right around the corner. Aaron thinks artificial intelligence will happen a lot faster than we think. Before the interview, Aaron asked Alexa where to buy real estate. He had spoken to the Amazon team since he had been talking on the circuit about voice search optimization. We compete a lot with search engine optimization, so he asked the Alexa team how they are deciding who shows up.
Aaron makes sure his company is on the top ten on Google. However, when he gets away from his cell phone and asks Alexa what makes up the referrals they are giving a user, he gets an interesting response. When he asked Alexa about real estate, local real estate companies got spit back at him. They were both realtor and mortgage companies. Aaron asked them if they had any idea or speculations on how they will be referring leads. Todd said if you look at a service like Alexa or Ask Google, it is not that much different from a Google search in that you have this central cloud and one decision-making engine that might do some customization based on what it knows about you. It is like when you do a Google search and get results based on you since it knows your IP address and what you searched for prior.
When you start talking about the wearables and robot aspect of a machine, think about the robot like it’s your dog. Your dog could know a lot about you, including when you eat, when you’re home, and other personal information. When a robot can process this locally and not share it with Amazon or Google, then people will instinctively let that robot know more about us. Suddenly, your ability to come up first in the search results goes away completely because the robot looks for what is right in just that one person. It doesn’t necessarily mean it’s right because of location or past traffic on a website. It’s based on how often they like to walk or where they like to eat, the types of things that are much more personal.
When it comes to generating leads, likely be the biggest struggle a brokerage or real estate company will have is to navigate through it. Those robots will sort through all your efforts to market to them and come up first in those results. Aaron said when he presents, he shows that one of the things Facebook used to have was a relationship with Bing. You would do a search, and if you were logged into Facebook on the right hand side it was like your network talking about those things. If he talked about pizza, for example, and did a search on Bing, you would have your paid ads, SEO ranking searches, GO modified search, and the word-of-mouth results. This was unique to Bing at the time because no other search engine was really pulling in those social cues.
Aaron said he is banking on reviews and social clues being really important as well as geographic location. This is really all those in the real estate community can really bank on; but what is interesting about that is relationship. The real estate industry is so relationship-driven that if you ask a realtor where the majority of their leads come from, they will say from past clients or personal referrals. It is a trust factor. People are going on the internet and doing their research there, but they are coming to a person for the relationship and help them get through the process. Aaron thinks this is something our industry has to pay a lot of attention to since it will be very different when it happens. He does not think it is too far away.
Aaron asked Todd and Mark if they are seeing anything they find exciting. Aaron said he likes the semi-automated mason and the 3D printing. Using the latter, a property in Ukraine went up in 24 hours. Aaron asked if they get excited about any of the robotics in the space and what they will do. Todd said going back, the robot that is most impressive to him is Siri. He read about this in one of his reports. He likes the way it is trying to do machine-learning locally. The iPhone is only ten years old, and you think about where it will be ten years from now. He was just looking at some pictures the previous night that he took with his iPhone ten years ago, and they are terrible. Now you look at just the camera on the phone and seeing how much it has improved.
The example that blew him away lately was Wired Magazine’s video on Boston Dynamics, who builds robots. A few years ago, they had a video of a robot that looked like a deer. It had four legs, would trot around, and would still be able to keep its balance when someone tried to kick it. Now they released a video of one that has two legs and arms and looks more like a human. It is doing things like calisthenics and back flips. It sounds crazy and futuristic now, but how safe would it be if a real estate agent had a robot go with them to attend all their showings? You could have it record everything about the house as well as be a security device or provide other extra services. It is not as far into the future today as it was five years ago. It seems like it is much closer now. Not only will you have these robotic things that are phones or thermostats, but we are very close to having these mobile devices that we can just walk around carrying.
Aaron said another interesting thing stated in the report was how Siri was different from Amazon. With Siri, the artificial intelligence is really staged in your pocket. With some of the other bots, like Alexa, they live on the cloud. People will be more comfortable working with a bot like Siri since it is not communicated back to other companies and sold compared to Alexa. Todd said Google and Alexa would need to demonstrate that they are not going to do that. However, the mere fact that Siri is being developed to do as much as it possibly can at that local level. It might not be Apple who ultimately wins at that, but the concept of other companies building robots could be really strong. They can’t look at the customers as creators of data they can sell to someone else, but rather how they can serve them.
Aaron asked about 2018 and the next couple years and if there is any technology that really excites them that the industry should be watching for right now. Todd said they have a technology accelerator that their venture capital funds provides. They funded this company called Trust Stamp, which is a really cool company that uses machine learning and Blockchain to create a way of sending messages where it uses facial recognition to assure that the person sending the message is the person you think is sending it. One of the biggest factors that is really going to effect real estate in the future. It goes back to cybercrime and the different ways people are getting more and more advanced in stealing money.
Mark talked earlier about the acceleration of the transaction and things happening really fast. You definitely want a real estate agent out there to protect you from having your entire life savings stolen. These new technologies like Trust Stamp that are helping to make sure the person emailing you really is the person you think is emailing you will be really valuable. It is a small service in the grand scheme of things and a sign of where we are going.
Aaron asked Mark if there was anything about which he was really excited. He said identity management is huge. When you look at the upside of it, it’s really how consumers interact with their communities and cities through the use of data. It is a data play that improves their lives by looking at the data of the city itself and helping them understand how to get from point A to point B. We have that now in cars and can understand things like air quality better. We could get very big as far as applications for the consumer go based upon data. Realtors have a good play there.
Aaron said the internet of things is where your smart devices in your home are all connected via apps. Mark is talking about the big sister, which is the array of things. Both Todd and Mark are based in Chicago, although he doesn’t know how they ended up there since NAR is on the East Coast. Aaron asked how many of these different devices were deployed in Chicago on pulse throughout the city. Mark said there are over 40 and bigger. They are in a wave and moving out, so just analyzing that data for different things is where the future will be. Harvesting that data and looking at how people live gives you great insights into what the needs of the consumer will be.
For instance, with things like food desserts, if you are at a commercial base you should ask yourself where to move your businesses. You can get that data, but there will be free data associated with that and in much richer sets where people can take their business. Aaron has taken micro marketing courses that take into consideration traffic and net worth. Mark is saying that possibly in ten years you may be able to be a national brand that wants to roll out to a place where the average decibel and walkability of a place is to their liking. All of this will be assessible.
Aaron asked where they can watch their work and what website to follow at NAR to keep up on everything. For the real nerdy things, you can go to crtlabs.org. This is really where you can see the center for real estate technology. They have a full laboratory there to explore crazy things like material science, building materials, and Blockchain. Here they have all the hard science.
Aaron asked what they read to keep up on everything. Mark said his secret was to never get away from doing the software himself. He is still an active participant in every project and makes his own goals. He is not just in a room doing meetings, he is actually at his computer coding away every day. Todd said the one mistake a lot of real estate agents make when it comes to technology is they spend a lot of time looking at a real estate website when there is some great consumer technology sites including the Verge and Wired Magazine. Others focus on social media, but those two in particular cover how it’s used. You don’t necessarily get your best ideas from the people in your sphere. You will find something new when looking at a broader scope and seeing what somebody in Fintech, health insurance, or health care is doing.
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