Opinion And Analysis

Three problems with VR and real estate

By Mike DelPrete 16 Comments NEWS, Opinion And Analysis
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VR in real estate has evolved, but there are some problems that aren't being addressed.

Using virtual reality to market properties is becoming increasingly popular but there are three issues that no-one is taking about, writes Mike DelPrete.

Last week Inman posted an article titled, “Sotheby’s International Realty beats Zillow and realtor.com to 3-D,” suggesting that Sotheby’s had somehow one-upped the top two property portals in the US with an exciting new technology.

Congratulations, Sotheby’s. You won a game that no one else was playing.

Everyone talks about the product, but there are three fundamental business issues with 3D and virtual reality in real estate that no one is talking about.

1. Agents don’t want it

Real estate agents don’t want to disintermediate themselves, and that’s exactly what this technology does. Agents want prospective buyers to contact them, ask questions about a property, and come to an open home. That’s how they get their leads!

Agents are a central part of the real estate transaction process. Why would they encourage buyers to use a technology that cuts them out of the process? High quality content like virtual reality tours empowers consumers by giving them more information about a home without the use of an agent.

There’s a fundamental issue with VR that goes against the grain of a traditional real estate agent’s job. If agents don’t want it, traction will be hamstrung.

2. Who pays for it?

VR tours and 3D models are expensive. As the article states, Matterport and other big providers charge between $100 and $200 to capture a typical home. While it’s a relatively modest fee for a $300,000 home, when you start multiplying that by hundreds or thousands of homes, it gets expensive. Fast.

There’s also a huge value misalignment: VR improves the buyer experience, but we’re asking sellers to pay for it.

So who pays for it? Buyers? Sellers? Agents? Brokerages? Property portals? Nope. No one wants to, because of the next point...

3. It won’t sell more homes

There is no convincing answer to the question, “Will VR sell more houses?” The current process works pretty well: people find a house, look at some photos, visit the property, then decide to make an offer.

Offering a virtual reality tour or interactive 3D model doesn’t change the process. The vast majority of buyers are still going to want to visit a house in person.

VR just adds another step to an already efficient process. It’s not a 10x improvement to the process of selling a house, and it won’t replace any existing parts of the process. It’s “interesting,” “neat,” and “cool,” but it’s not effective at selling more houses.

(As an aside, I believe there is very real opportunity for VR in the new developments and new construction space. In that scenario, the addition of VR adds a very real value in the process by allowing buyers to see something they previously couldn’t. It’s adding a real improvement to the process.)

The video problem

If we want to understand the potential impact of VR on real estate, we just have to look at video.

Video uptake on the big property portals is very low. REA Group in Australia has the highest numbers I’ve seen, with anywhere between 10 percent and 15 percent of listings having a video tour. But that’s the outlier.

If you look at the other big portals, like Zillow, Zoopa in the UK, or Trade Me in New Zealand, you’re lucky to find 1 percent of listings with embedded video tours. And Rightmove, the clear market leader in the UK, has basically none!

If that’s uptake for video (which has been around on our phones for a decade) - arguably a bigger bang for the value buck - what’s the hope for VR? A fraction of a fraction of a percent.

The one value of virtual reality

Sotheby’s didn’t beat anybody to anything. The big property portals around the world are more than capable of supporting features like VR and 3D. They just chose not to. Why? Because at the end of the day, VR doesn’t add enough value, faces structural impediments to widespread adoption, and is expensive.

At this point, VR in real estate is valuable only as a PR gimmick -- which worked, because I just wrote an article about it!

Mike DelPrete is a tech entrepreneur and business advisor with broad expertise in online real estate tech. As head of strategy at the online real estate portal and classifieds firm Trade Me in New Zealand, he oversaw investments and acquisitions for the publically-traded firm. Now he travels the world engaging with leading property portals and real estate tech startups, gathering first-hand knowledge on emerging trends and industry themes. This post was first published on his blog, Adventures in Real Estate Tech

Comments

  • BuyPlaya Real Estate Advisors
    October 25, 2016

    nice article

  • Rocco Capone
    October 26, 2016

    The market will dictate the success of VR in the real estate marketplace. I can tell that you’re a tech guy and not a marketing guy. It will not be up to the realtors as to whether or not VR walkthroughs will survive and thrive in real estate. It WILL be the property buyers who will demand it or not. Just like it wasn’t the taxi drivers who determined the success of Uber (they didn’t want it either). If we left “innovation & change” up to the people who just support current industries, we’d still be riding horse and buggies today. It will be the Millennials and all the other intelligent smartphone tethered people who enjoy Googling and researching the crap out of everything, before they even think about making human contact, who will revel in viewing 30 virtual open houses, very quickly from the convenience of their smartphone, so they can narrow down their selection to a few they’d like to view at their actual open house. Out-of-town home prospectors will love having the ability to immerse themselves within a digital open house that helps them narrow down the search. Virtual Reality WILL change the real estate industry, just as driverless cars will change the auto industry. The people who support each industry – realtors and manufacturers will either adapt or be left behind.

  • Eli
    November 16, 2016

    This article misses out on the biggest spenders on marketing in the property industry – property developers. It also misses out on the most immersive technology – which is highly interactive and best applied to new property. Property portals aren’t the only (and are often a small part) of a developer’s marketing spend.

  • EDcook Real Estate
    December 26, 2016

    This is very much great and hope fully nice blog. Every body can easily get perfect information from here.

  • Aaron
    January 10, 2017

    I believe it will find it’s place within the market where it wants too. Virtual reality has not even been captured by the market by the kids, which means it has really yet to enter the households. I own a roofing company and am starting to think about using drones for my business because there are some places outside the home that I am unable to see. Great information. Enjoyed the read.

  • Justin
    February 27, 2017

    If agents are scared of VR because it cuts them out of the process, then they should also be scared of photos. Photos and VR are similiar in that they provide visual information. Do agents really hate photos because customers can obtain vast visual information by looking at them, thus reducing the job of agents?

  • Andy
    February 27, 2017

    Experiencing an immersive VR walkthrough merely provides the customers with visual information. It doesn’t answer a lot of questions like prices, availability, floor plan etc etc. There is still a big role for real estate agents.

    Now if the immersive VR walkthough can provide a “wow” and “emotional” experience besides visual information, that will spike the interest of customers.

  • Decorante
    March 15, 2017

    VR has a good WOW factor that makes clients to put step on it.
    But completing VR with AR and pleasant option for customizing internal design and decoration with real possibility to change, could be a vast massive shot for sale in action.

  • Purushottam Kiri
    April 13, 2017

    One possible solution to this is to add open up a real estate VR showroom in high footfall shopping malls. This will help in generating new leads, and through a discount coupon code, the company can handle leads that convert and charge brokerage to sellers. Moreover, The company can charge real estate developers a monthly fee to keep their listing on the portal. But, This will too, be expensive as renting a place to sell properties in every city will cost an island. So, Not Scalable.

  • Jonathan Truelove
    June 19, 2017

    I can tell you now, Agents love VR Tours. Maybe not the big ones, but the independents who want to gain an edge against the bigger guys. Also, for distance selling VR is fantastic and it stops a lot of wasted time for agents.

    How do I know? I sell VR Tours and I can tell you now, we have work coming out of our ears from agents!

  • VoxelWorlds
    July 25, 2017

    We are a recognized brand when it comes to consulting, technology and next-generation services for real estate. We empower clients across the globe to outpace the competition and stay ahead of the innovation curve.

  • Livia James
    August 8, 2017

    Sometime these problems occur with real state agents. Real estate agents should keep in mind all these problems.

  • Chris Bradwell
    August 24, 2017

    Good article. Talking about stuff that matters.
    The value of VR pivots on the context of the stage of a development.
    If it’s finished, it can be photographed or visited, if it’s not, it can’t.
    Translated that means there’s TWO types of VR: photographic and CGI.
    And you’re dead right, the one worth spending money on is found in CGI VR – experiencing the future now.
    What’s that worth to a developer?

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