This is a longer version of an article that appeared in the March 2020 issue of Pro Builder.
Homebuying is ripe for new processes and fresh approaches. One of those is self-sevice homebuying. But in order for homebuying to shift to a self-service model, these five challenges will need to be addressed:
1. Online financing
2. Home visualization
3. Neighborhood and amenity visualization
4. Trust in the digital process
5. New homebuying processes
Homebuying: Ripe for Disruption
If I asked you to make a list of disruptive companies, it would likely include Amazon, Airbnb, and Uber—the prime examples of businesses that have transformed traditional shopping or service experiences to be completely self-service. You can get just about anything these days by clicking the ubiquitous "BUY IT NOW" button.
But will customers ever buy a new home completely online?
The answer is yes. Some are already experimenting with it, so it’s just a matter of time before online homebuying goes mainstream. But how close are we, really?
What Will It Take to Shift to a Self-Service Homebuying Model?
Buying a new home is exponentially more complicated than simply saying “Alexa, buy me a new house.” A new home is one of the most complex and expensive purchases anyone could make, and there are plenty of serious obstacles to the self-service homebuying 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 homebuying.
Challenge 1: Online financing for homebuying
While innovation in fintech (financial technology) is one of the biggest challenges, it also shows the most promise. Companies know they need to adapt to the mindset of today’s digital buyers to stay relevant.
As of Q1 2019, more than 40 fintech enterprises attracted $154.1 billion in venture capital to transform financing as we know it. Some of the most impactful real estate trends include iBuying, digital paperwork, alternate mortgage financing, and cryptocurrencies.
It’s been a slow process, but banks are getting on board and so are home builders. For example, Lennar partnered with Opendoor, an online real estate marketplace (the original iBuyer), to enable customers to buy a newly built home and sell their current home in one seamless transaction.
Challenge 2: Home visualization for selling homes
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 being slow to embrace technology, such as 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 a digital experience, and the latest technology is better and more affordable, with companies such as Matterport bringing interactive virtual tours to the masses. High-quality online visualization is a critical step toward selling online.
Challenge 3: Neighborhood and amenity visualization for selling homes
We no longer live in a time where a buyer has to physically walk the neighborhood to really get a feel for it, thanks to Trulia and Zillow, which have learned what buyers really value in a neighborhood and provide tangible metrics for walkability, crime and safety, and schools. User-generated reviews and blogs also play a role in giving the relocation buyer assurance about neighborhood quality.
And when it comes to online visualization of community amenities and location, VR/AR can be a powerful tool. Just look at the application of that technology for Sweetwater, a master planned community in Austin, Texas, by Newland.
Challenge 4: Trust and the digital homebuyer
This is a critical aspect for the home building industry. Look at any disruptive company 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 think it would be safe?
Now multiply that feeling by 100 to gauge how important trust is for the digital homebuyer 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 platforms because of a low star rating. But it’s different for builders that want 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 the peaks and valleys from first impression to referral. It also requires a commitment to identifying bad experiences and fixing them in real time.
Then, put a Voice of the Customer (VoC) listening program in place to identify any customer who is having a negative experience and reach out to fix it in real time. This approach 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.
Challenge 5: Outdated processes for homebuying
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 isn’t going to be sustainable with new generations of buyers. A disrupter’s mindset is what it’s going to take to make online homebuying possible.
Imagining a self-service future in home building is exciting. 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 five challenges will be the ones best positioned to reap the massive rewards.
Access a PDF of this article in Pro Builder's March 2020 digital edition