“Fintech” today may feel like a word too ubiquitous for its own good — everywhere you look in financial services, there seems to be a start-up threatening to turn traditional processes on its head (think Venmo in payments, or Betterment in personal finance).
Yet for financial services in real estate – buying, borrowing, lending, and investing – there hasn’t been the same talk of a fintech revolution that has affected other sectors.
This is perhaps due to how opaque the financial side of the industry has always been, when large banking institutions created and fully controlled financial real estate products, leading to the mortgage crisis and its after effects in the form of lingering reticence in consumers to really believe in reform.
It could also be due to the ingrained tradition of face-to-face interactions that have dominated the real estate space — from viewing a property to applying for a mortgage — or the onerous process of financial background checks and approvals, and the complexity of real estate transactions.
Yet despite these issues, real estate is a space ripe for disruption, and real estate-focused fintechs are introducing new technologies that look to reform and innovate real estate’s financial processes.
These new services aim to put more power into the hands of individual parties — whether they be lenders, borrowers or investors, to better serve the industry’s supply and demand economics, and to offer more ease and functionality in transactions than ever before.
5 fintechs rewriting the rules of engagement in real estate
Here’s a platform that champions investors in real estate, for the first time providing a secondary market for individuals to invest in loans. The site has two different interfaces. One for investors, who can pick and choose the private loans they want to invest in for a minimum of just $1000 on the platform.
These loans are underwritten and carefully vetted by PeerStreet. The other interface is for lenders, where approved lenders can access technology solutions, data analytics and monitor the status of individual loans.
The benefits are obvious – investors get access to an investment class that’s short term, with a strong yield and secured by real estate. Lenders are able to reduce costs and increase efficiency by conducting business from a single platform, and free up capital to focus on what’s really important: originating more high quality loans.
This one takes the hassle out of homes that are for sale by owner (FSBO). It’s a platform that allows regular homeowners to sell like pros without the high costs of engaging a real estate agent…in some ways, HomeBay is truly your digital agent.
The program does the heavy-lifting and back-channel work of listing the property on the local MLS for free and syndicates it across major real estate sites, like Zillow, Trulia, and Redfin. The system then guides the seller through the selling process, from countering offers to arranging escrow.
Sellers pay HomeBay a small commission based on their closed sale. Everyone complains about the high costs of real estate broker commissions, HomeBay does something about it.
A different spin on selling your property, for those who don’t want to do the selling at all. The company makes an offer on properties based on market data and information provided by the seller, if the seller accepts the offer, they are paid in a matter of days and the deal is done.
Opendoor then prepares the home for sale, and you can bet they plan on making more on the sale than what they originally paid for the property, but for those who don’t want to deal with the hassle of selling a house, or are trying to buy something else and need to free up cash, the value is easy to see.
The company also provides assistance to homebuyers buying Opendoor properties, and real estate agents referring Opendoor to clients.
For homeowners tired of seeing their wealth tied up in their properties, Point’s solution is to help them easily sell small fractions of equity to investors, or in other words, allowing homeowners to own less than 100% of their homes by giving some percentages to investors.
Sounds a bit unconventional, but today, the next generation of potential homebuyers, ie. millennials, don’t want to be fully tied down to a property, or simply can’t afford to buy their own homes just yet. Point will make an offer to buy between 5 to 10% of a home’s current value and payout the amount that the equity is worth.
Point is paid when you sell your home, at the end of the investment term, or during the term, when you choose to buy the percentage back.
This company’s mission is to help people make better real estate decisions, and that goes for all parties involved. HouseCanary has built an incredibly comprehensive data set, tracking details on anything from a given piece of property to macroeconomic factors, and then using that data to provide forecasts of the future.
Its data solutions include value reports for lenders, investors and other real estate professionals, appraisals for lenders, buyers and agencies, as well as real estate trends and other analytics for all real estate industry players.
They aren’t often on the front end for retail customers, but their data is helping transform the real estate industry and bring it into a modern era.
Compared to other sectors in financial services, real estate financing is largely still an archaic system — but fintech companies are now quickly filling the space in creative and original ways, often run by talent from notable tech companies looking to apply their skills elsewhere.
As the rest of the financial industry begins to adapt to new rules of engagement brought on by fintech innovation, smart lenders, borrowers and investors will start paying attention.