Throughout the last ten years, financial and real estate services seem to have been equally transformed by fintech and proptech. However, this is hardly accurate.
The former has seen a notable change in behavior towards a smooth user experience and lean operational structures, whilst the latter remains dominated by antiquated systems and sluggish procedures. However, this indicates that there is still room for technical innovation in the real estate fintech space. And the first to adopt it will dominate the market for many years to come.
- Proptech & Fintech Defined
- How Real Estate Fintech Companies Reinvent Transactions in Real Estate
- Why Fintech in Real Estate Is the Up-and-Coming Source of Opportunity and Wealth
- How to Develop a Disruptive Proptech Fintech Solution?
Proptech & Fintech Defined
Proptech and fintech are two affluent phrases that originated in the field of “technology” and were developed little more than ten years ago. While the latter refers to how new technology is used to enhance and automate the delivery and use of financial services, the former stands for “property technology” and refers to all disruptive real estate startups and their technological solutions aimed at redefining how the property is sold, managed, and invested in.
Three technical trends that are becoming more and more entwined are fundamental to proptech:
- The term “smart real estate” describes technology-enabled methods for designing and maintaining houses via a network of linked devices and sensors.
- All technical solutions that increase productivity during the building phase are included in the category of construction technology.
- The term “shared economy” refers to the usage of real estate assets in both the residential (AirBnB) and business (WeWork) sectors made possible by technology-based platforms.
Conversely, fintech is often linked to peer-to-peer loan platforms like Funding Circle, crowdfunding solutions like GoFundMe, and money transfer applications like Venmo and PayPal.
Fintech and proptech have naturally entered into a significant crossover known as real estate fintech, facilitating the transactions of real estate assets. Both were sparked by acute issues such as the lack of transparency into processes, poor data management, and slow decision-making in finance and real estate.
How Real Estate Fintech Companies Reinvent Transactions in Real Estate
Three broad categories may be used to group real estate transactions: 1) loan; 2) buying and selling; and 3) investment. These incredibly large tracts of real estate have all been beset by ineffective, opaque systems and procedures, which has left physical space a painfully illiquid asset in terms of selling speed, sale likelihood, and sale costs.
However, it is no longer the case. Alternatively put, not at all, as forward-thinking proptech and fintech businesses progressively test the waters of the adaptable real estate market while cautiously but steadily introducing novel concepts into the transaction cycle.
In light of current developments in CRE and residential technology, the most likely fintech and proptech map seems to be as follows:
Purchasing, Selling, and Renting
Leasing, selling, and purchasing are three significant life events that need extensive study and back-and-forth conversation, resulting in a ton of data that is finally too much for one person to handle. Conversely, the below-listed proptech and fintech businesses and their solutions have a lot of low-hanging fruit thanks to these opaque procedures.
Fintech Marketplaces for Real Estate
Renters may find their search for a place to live to be an unending nightmare if they don’t gather all the information they need, including area descriptions, prices, and images, in one convenient location—ideally online.
Online real estate marketplaces, working in tandem with brokers and owners, revolutionized the way consumers conducted real estate research by offering a common location for different companies to post properties for sale or lease and for renters and purchasers to look for the ideal home. These kinds of solutions come in two varieties:
Marketplaces for single-family homes (SFH) like Zillow and Trulia, the late, so-called PropTech 1.0 companies that rose to prominence in the US market in the 2000s, provide a more straightforward, quick, and worry-free substitute for a conventional house search.
Fintech systems for commercial real estate, such as LoopNet and Crexi, streamline the process of searching for office and multifamily buildings.
Enhanced data aggregation, which gathers client data via chatbots, forms, and in-person interactions, and artificial intelligence, which examines user behavior online to generate intelligent recommendations tailored to individual needs and preferences, are typically at the heart of these fintech and proptech websites.
Fintech and Proptech iBuyers and Automated Appraisal Systems
Finding houses is just as difficult for potential homebuyers and sellers who want to downsize or upsize. The extreme unpredictability of the appraisal process doubles the concerns: buyers always want to be sure they’re not overpaying, and sellers often wonder whether they have asked for the optimum price when accepting an offer.
The “instant buyers,” or fintech proptech businesses that buy and resell houses swiftly using technology and analytics, help to clear the air surrounding the delicate pricing topic.
iBuyers such as Offerpad and Opendoor are able to make a fast and well-informed offer on a property in a matter of seconds by using AI and big data to power automated valuation models (AVMs) that consider hundreds of variables.
By using LegalTech, such smart contracts, these platforms cut out intermediaries from the laborious transaction process, significantly lowering costs for both buyers and sellers. With the enormous potential of AVM in the property valuation process, appraisers may benefit from iBuyers’ fintech and proptech models in the same way that home buyers and sellers can.
Important iBuyers features
- An easy, safe method to purchase or sell a house
- Automated valuation models use vast volumes of data about a property to quickly assess it and determine an offer price.
- In the absence of intermediaries, there are no additional costs or commissions.
Tools to Facilitate Brokerage
The beneficiaries of the marriage of fintech and proptech are brokers, who can take advantage of the aforementioned solutions (iBuyers for property valuation and marketspaces for listing marketing) as well as a plethora of other brokerage enablement tools such as CRM systems (Salesforce, Dynamics 365), tools for creating marketing collateral (Composer, Buildout), and safe spaces for deal and collaboration (MarketSpace).
But rather of using each solution separately, it makes sense to have them all linked in a single ecosystem, especially in light of the new platformization trend in real estate fintech (source).
In addition to our primary products and Marketspace, as well as Dynamics 365, we have collaborated with prominent real estate companies such as JLL and Colliers to provide tailored solutions for their brokerages.
Form fill technology and e-signature features may help a marketing platform like Marketspace drastically increase broker productivity by prepopulating forms and documents with data that currently exists in the form when linked to a CRM system.
Lending services in the proptech and fintech industries are centered on mortgages, which are loans provided by banks or other financial organizations to assist borrowers in buying real estate. The mortgage loan procedure typically consists of three separate processes, each of which takes many weeks to complete:
Application: This is the borrower’s first application in which they are requested to provide, often in hard copy, evidence of their income, savings, debts, and any other information that may be relevant to their finances. This process takes around one week.
Underwriting, the most time-consuming procedure that determines the borrower’s financial risk and assesses the property, may take anywhere from a week to several months, depending on the information needed.
Closing is the last stage, which occurs three days to a week after the borrower gets a Closing Disclosure outlining the last specifics of the loan, such as the loan amount, interest rate, expected monthly payment, etc.
Ellie Mae states that the total period from the lender’s receipt of a mortgage application and the loan’s disbursement may exceed 52 days.
But given the enormous potential of fintech in the real estate industry, an antiquated, traditional process that still requires applicants to fill out paper forms and submit hard copies of their bank statements can be readily transformed into a fully digital one, where lenders can electronically verify your application and grant you a house loan in less than an hour:
Platforms for Credit Reporting
Fintech systems focused on credit risk in real estate seek to automate credit reporting, which is the first stage of the loan origination process. Before beginning any further talks, these solutions often collaborate with credit reporting agencies such as Equifax or TransUnion to provide lenders a thorough picture of their clients’ credit histories.
Credit risk fintech real estate applications use sophisticated and predictive analytics programming, customized credit scoring formulae, and risk alert tools to provide accurate analytics.
Hazu is a good example of how credit reporting data can be provided to lenders. It is a rapid data provisioning solution that connects with the lender’s on-site system via a specially designed end interface, making it simple for all kinds of users to access, filter, and export the precise data they require.
Additionally, these credit real estate fintech solutions must have strong visualization features, similar to what we included in Source Energy Partners’ bespoke Salesforce CRM.
Principal Elements of Credit Reporting Systems:
- Integration with trustworthy credit data sources such as Equifax or TransUnion
- Real-time data provisioning via an external solution or an integrated interface
- Improved analytics and data management
- Capabilities for data visualization
- Systems for Originating Loans
These all-inclusive fintech real estate tools were designed to automate every step of the lending process, from data collection to deal closing. They can be used for quick loans for retail customers through mortgage origination processes, or for complex business loans for SMEs or corporations.
Proptech and finance platforms have a dual purpose of facilitating the automation of tasks often performed by office workers and gathering applications. Some loan origination tools, like Lender Price, offer real-time analytics to manage pricing for conforming, non-conforming, qualified and non-qualified mortgages, portfolio, and specialty loans. For instance, US-based startup Cloudvirga can perform intricate calculations at the point of sale to create underwriter-ready loans. As a result, these fintech platforms for real estate finance considerably shorten loan closing times while improving client satisfaction.
The loan origination system must be cloud-connected and integrated with other disparate systems already in place within the company, taking into account the emerging proptech trends around SaaS and data accessibility. This will enable lenders, appraisers, and underwriters to collaborate on loans and access necessary data at any time, from any location.
Important details about loan origination systems
The whole loan procedure is automated by this end-to-end system.
processes that are automated and assign work to the appropriate people, such as underwriters, appraisers, and lenders
Interaction with systems from other parties
a cloud-based technology that enables online operations for all parties
Capabilities such as e-Signature and digital document processing that we specifically designed for MarketSpace
Additionally, these real estate fintech platforms have to provide a mobile application so that your clients may apply for loans conveniently.
Systems for Automated Underwriting (AUS)
Fintech real estate platforms prioritize underwriting, while loan generating technologies automate every stage of the loan processing cycle. In addition to the total worth of the property they are trying to purchase—which is often estimated by an appraiser—they assess a client’s financials, including income and credit score, using machine learning and artificial intelligence (AI), as well as manually specified business guidelines by the underwriter. After that, the loan application is either approved by the system or sent to a human underwriter.
Essential Elements of Computerized Underwriting Systems:
- Gather information and handle paperwork
- Utilize AI and machine learning to compare borrower data with databases of jobs and credit scores.
- Make note of any discrepancies and direct them to a manual underwriter.
- Create property values without requiring formal assessments
- Cut down on instances of fraud
Investing, the third multi-trillion dollar real estate pool, is a multi-step, intricate activity that is often masked by the inefficiencies of the old systems. For those who are thinking about using the proptech and fintech marriage to overcome these shortcomings, here are some real estate innovation ideas.
Fintech Online Real Estate Crowdfunding Platforms
Real estate crowdfunding platforms, also known as crowdfunding websites like CrowdStreet and DiversyFund, are the result of real estate fintech crowdfunding, a relatively new method of investing in residential or commercial real estate.
The fundamental point of these online finance real estate platforms is that they connect regular investors with developers to provide them access to assets that are often only available to the rich. Although less than what would be needed to buy real estate outright and avoid the headaches of owning, financing, and maintaining properties, capital investment is still needed for this.
Online fintech real estate crowdfunding systems should feature a user-friendly design, simple navigation, investment monitoring, ID verification, Know-Your-Customer modules, chatbots driven by machine learning, and mobile apps since they are primarily intended for individual investors.
Key characteristics of crowdfunding websites:
- Large target market since investing via crowdfunding is much more cheap than buying a home.
- User-friendly design and features, including chatbots with artificial intelligence, ID verification, Know-Your-Customer sections, and investment monitoring
- Modules for e-signature, reporting, and document management.
CRM for Real Estate Capital Markets
The administration of real estate capital markets is another unexplored field for proptech fintech innovations. Finding investment opportunities and connecting them with qualified investors requires a lot of data that is often dispersed unevenly among the organization’s systems and several communication channels, both past and current, for capital markets organizations.
Capital market companies need a core system that would bring all workflows and dissimilar operations under one roof in order to manage such a complex infrastructure. And by using an all-in-one CRM designed especially for real estate investment transactions, budding fintech real estate enterprises are well-positioned to do this.
Why Fintech in Real Estate Is the Up-and-Coming Source of Opportunity and Wealth
Proptech and fintech have been the talk of the business world for the past ten years, but it’s safe to say that the financial services industry’s progress, which was once hampered by slow, manual workstreams and physically based—much like real estate is today—was a major source of inspiration for the proptech disruption.
Venture capital financing clearly demonstrates the enormous difference in development between proptech and fintech: in 2015, when real estate tech was just getting started, proptech businesses earned just $2.21 billion in funding, while investments in financial technology reached $46.7 billion.
Additionally, despite $32 billion in investments in proptech startups last year, the real estate industry is still among the least technologically advanced due in large part to highly fragmented infrastructure, regular compliance inspections, and a wide stakeholder ecosystem.
It is also one of the asset types with the highest transaction volume. In the United States, real estate transactions resulted in the exchange of $3.6 trillion in 2021 alone.
Due to the undertechnologized nature of real estate and the high number of transactions, real estate fintech businesses have a plethora of opportunity to address major unresolved pain issues that have been destroying transactional efficiency in the industry for decades. The use of fintech in real estate specifically entails:
- quicker cycles of payments. Fintech real estate firms may significantly shorten transaction times by using proptech trends like tokenization and blockchain. For example, completing a mortgage deposit, which formerly required three working days, can now be completed in a matter of seconds.
- Transactions resistant to fraud. Fintech businesses in the real estate industry, such as Zepto, provide account-to-account payment systems that eliminate the requirement for a third party or connection to a sponsoring bank in order to execute payments. This eliminates the possibility of fraud and data breaches.
- Underwriting and service made possible by data. Real estate owners and investors will be able to better use data as integrated fintech in real estate grows, introducing new technologies such as Big Data and Artificial Intelligence, to enhance their underwriting and service models.
- precise assessment of credit risk. Thanks to improved client data aggregation, lending institutions and landlords alike may determine whether a borrower can afford a loan or not by having access to the renter’s financial records.
- enhanced encounter with customers. Due to the demographic shift in homebuying toward millennials (source), today’s digitally savvy and mobile device-wielding homebuyers need a flawless online banking experience. Real estate fintech startups need to catch up with their more established peers in this regard.
How to Develop a Disruptive Proptech Fintech Solution?
Even while real estate transactions are clearly experiencing good disruptions, there are still a lot of problems that need to be fixed. Banks, appraisers, investors, brokers, and buyers and sellers still find it difficult to negotiate the fragmented physical space market and must depend on unsafe offline payment methods. Workstreams are also a source of conflict for these parties.
As previously said, these inefficiencies provide as a benefit to fintech real estate entrepreneurs that want to introduce novel value propositions and slender operational frameworks into the real estate transaction management process. But this would be very difficult without technical training rather than real estate experience.
As a software developer and technology consultant in the real estate industry for 16 years, Appic Softwares took the time to become knowledgeable about the problems with conventional transaction management and how to address them with innovative proptech and fintech solutions. It is worthwhile to think about working with us if you have a ground-breaking proptech fintech concept but lack internal resources or real estate expertise because:
- Since we have developed real estate products ourselves, we have a wide range of solutions and are familiar with all the subtleties involved in starting from scratch with creative concepts.
- With our main office located in Dallas, Texas, and three other locations throughout the globe, we use our diverse expertise in the local, national, and international markets to provide innovative real estate fintech software at affordable prices, 24/7.
- It is a privilege for us to work with industry giants in real estate like JLL and Colliers.
- Our unique expertise lies in creating cutting-edge cloud applications that provide real estate fintech companies outstanding performance, agility, and interoperability.
the dynamic synergy between Real Estate and Fintech in 2024, as explored in our guide, reflects a transformative landscape. The interplay of innovations and key trends signifies a promising future, showcasing the potential for continued growth and collaboration between these influential industries.
Moreover, if you are looking for a Real estate development company that can help you create a future proof solution then you should check out Appic Softwares. We have an experienced team of Proptech developers that have created several real estate solutions like RoccaBox.
So, what are you waiting for?