The real estate industry has undergone dramatic shifts over the past few years thanks to tech companies such as Zillow and Redfin, but some aspects of the industry haven’t changed in decades. Most transactions are still handled by a real estate agent, for example.
Some venture capital investors think that will change with the next wave of real estate innovation.
It’s a trend that Julie Sandler, managing director of Pioneer Square Labs Ventures, is watching. She sees disintermediation — i.e. cutting out the middleman — in the real estate sector on the horizon. Sandler shared her predictions Thursday at the National Association of Realtors iOi Summit in Seattle.
“This question is a little awkward to answer in a room full of agents and brokers so I’ll caveat by saying that,” she said. “But I think there’s been a longstanding focus on disintermediation in the entire category especially given some of the transaction sizes you see.”
Sandler believes agents, brokers, and insurance providers will continue being a critical component of the real estate ecosystem. But she warned the agents in the crowd that “the next generation of founders are coming after your lunch” and stressed the importance of doubling down on “what you can contribute to the customer experience that none of these founders necessarily can create with their software.”
Sandler was joined on the panel by Seven Peaks Ventures founder Dino Vendetti, MetaProp NYC venture advisor Elie Finegold, and Constellation Software President Scott Smith. They discussed trends in real estate tech and how investors are surveying the industry’s landscape.
Finegold, a longtime real estate tech entrepreneur and advisor, took issue with Sandler’s prediction. He offered a different perspective, “as someone who has tried for years to disintermediate parts of this business.”
“While I do think that there are certainly some parts of the business that are going to be disintermediated, my thesis is that disintermediation happens when transactions are frequent, when they’re standard, and when they’re relatively small, either financially or emotionally to the parties involved,” Finegold said. “For me, on the residential side of transactions and on the buy-side in particular, these transactions are infrequent, they’re not standard to the buyer, and they’re a deeply emotional process. There’s a human touch that cannot be financialized out.”
Real estate companies such as Zillow, Redfin, Opendoor, Compass, and others are investing heavily in the burgeoning “iBuyer” market that lets people quickly buy and sell homes online. Those transactions still require a real estate agent.
Sandler’s team at Pioneer Square Labs, a Seattle-based startup studio that also has a VC arm, has spun out several real estate tech companies over the past few years. They include Remarkably, which launched in January and provides marketing and analytics services to apartment building owners and developers. JetClosing is an early PSL spinout focused on streamlining the real estate closing process.