Market Map: 140+ Real Estate Tech Companies Transforming the $32 Trillion Housing Market

[Note from editor: Originally published on Thomvest’s Blog]

Residential real estate has proven to be a strong driver of economic growth and individual wealth, representing more than 15% of our nation’s GDP. The combined value of housing in the United States reached a record-high $31.8 trillion in 2017, according to Zillow.

Yet until recently, venture capitalists rarely invested in the sector. In 2010, investment in real estate technology companies made up less than 1 percent of total venture capital (only about $30 million). By 2017, however, activity in the category skyrocketed — VCs invested more than $5.7 billion into real estate technology companies last year.

Why the sudden interest in real estate? In the wake of the housing crisis, many entrepreneurs recognized that software and data could materially improve an inefficient real estate market. Consumers have also demonstrated a desire to move many aspects of the home buying process online. As a result, we’ve seen a dramatic rise in the number of technology companies across nearly every aspect of real estate, from home listings, to lending, to property management and beyond.

We recently developed a market map to better understand the universe of companies in the residential real estate sector. We’ve shared the map above, which includes more than 140 companies across every aspect of the home buying and renting experience (available in PDF format here). A few recurring themes inform the approaches taken by companies on this map:

• Digitizing much of the transaction workflow leads to an improved consumer experience (see Blend, Opendoor, JetClosing).
• Data is being leveraged to better meets the needs of individual homebuyers and investors (see SoFi, HouseCanary, PeerIQ).
• The use of technology results in reduced costs for consumers and less capital flowing to intermediaries (see Figure, Lemonade, OpenListings).
• The combination of these themes (digitization, data, and cost reduction) is enabling new housing finance models (see Ribbon, Divvy & Point).

Below we’ve described the individual categories that are the building blocks for this market map. You’ll notice that several companies are included across multiple categories — that’s by design. Companies like Opendoor are reimagining the entire buying and selling process, wrapping the home search, financing and selling process into a single platform.

Find Your Home

• Listings & Marketplaces: Today’s home buyers have numerous search engines and agency-specific websites in order to shop for properties online and carry out subsequent steps in the home buying process. Opendoor, which announced its $325 million Series E in June, will buy, renovate, relist, and sell your home online. Some listing sites (Homie, Open Listings) also act as tech-enabled real estate brokers by matching home buyers with preferred real estate agents.
• Rental Listings: Most web and mobile listings include both “buy” and “rent” options. Several startups, however, have focused on building rental specific marketplaces. ApartmentList and Zumper aim to provide users a seamless experience from “rent-to-close.” RadPad, for allows users to sign their lease and pay rent through web or mobile app. Roomi takes a peer-to-peer approach for home and roommate hunting, whereas LoftSmartfocuses exclusively on finding students affordable off campus housing. Casalova has pioneered an algorithm to match renters to neighborhoods that meet their needs/interests.
• Tech-Enabled Brokers: These companies allow a customer to search for a home to buy/rent online and access a traditional real estate agent via online chat, phone, or in-person. Compass, for example, contracts independent real estate agents and takes a share in the commission. Houwzer, in contrast, replaces agent commission with a flat fee-for-service, and Door refunds the customer’s commission fee once the house closes.
• Agent Tools: These companies develop real estate software to generate and qualify leads by predicting when and why people move (First), improve search engine optimization (Hoozip), augment email marketing (Placester), match with real estate agents (HomeLight, UpNest), end-to-end marketing tools (BoomTown), and enterprise management software (Sweep Bright).

Sell Your Home

Multiple online listings and marketplaces exist on the sell-side as well as the buy-side of the residential market. When a customer is ready to sell his/her home, a direct home buyer (Opendoor, Perch, Offerpad, or others) will make an offer on the home in less than 24 hours. Homeowners can sell their property on their own terms without showings or repairs. FlyHomes offers sellers a guaranteed sale, a trend which is becoming table stakes for real estate agents to win deals. Felix Homes will even pay sellers to list their property and buy it within 90 days if they cannot find a buyer. Knock will buy your old home, finance a new one, and front costs of home renovations and project management.

Finance Your Home

• Digital Lenders: Digital mortgage lenders, such as Rocket Mortgage or LendingHome, will retrieve a borrower’s bank statements and credit history to rapidly pre-approve him/her for a mortgage. Instead of playing a middleman — as with a mortgage broker — direct lenders have a financing arm to fund loans and sell them on the secondary market to investors.
• Digital Brokers: Digital mortgage brokers help a borrower find a mortgage that fits his/her needs and surface loans by connecting the borrower with a variety of lending institutions. Once approved for a mortgage, the borrower usually deals directly with the service provider or loan originator. Digital mortgage brokers may act as marketplaces (Morty, LendingTree) allowing lenders, banks, and credit partners to compete for customers. Other companies tack on mortgage advisory services (Sindeo) or refinancing services (Lenda).
• Alternative Financing: Customers today have a variety of alternative financing options from which to choose. Divvy Homes, for example, offers customers a “rent-to-own” proposition in which a portion of each month’s lease contributes to a future down payment via equity credits. Knock, FlyHomes and Ribbon promise all-cash offers upfront on behalf of a home buyer with a flexible schedule to close on the property. Unison, Patch Homes, and Point, offer debt-free alternatives to typical home equity loans. Instead of accepting monthly loan payments, these companies share in the property’s future appreciation or depreciation in value (i.e., shared equity mortgage).

Mortgage Lender Software

• Loan Application & Docs: New loan application tools enable borrowers to apply for mortgage loans online. Qualia introduced the “first end-to-end online real estate closing platform.” Blend, Roostify, Lendsnap, and others offer consumer-focused, mobile-friendly platforms to automate the collection of qualifying documents (i.e., bank statements, W2s, tax returns, and pay stubs).
• Loan Origination: Whereas some companies focused on front-end mortgage application, others have modernized loan origination. Ellie Mae, LendingQB, and others enable lenders to originate, underwrite, and close loans using one system, not by shifting between different applications.

Close on the Property

• Valuation & Appraisal: Companies in this category are bringing big data analytics to home valuation — analyzing and cleansing MLS, public records, and proprietary data to refine the accuracy of automated valuations. HouseCanary and Cherre, for example, have leveraged machine learning and predictive analytics to refine estimates of valuation and forecasts down to the individual block.
• Title & Escrow: The U.S. has 3,000 U.S. counties, many of which still rely on paper-based property deeds. However, innovative startups have begun to digitize title insurance and escrow services. NextAce, for example, is capable of delivering a title report in minutes. JetClosing and Spruceintegrate with mortgage lenders to expedite the closing process. Players earlier in the value chain (Redfin, Opendoor) have also added title insurance offerings in hopes of providing a great end-to-end customer experience.
• Insurance: In addition to title insurance, home buyers are required to have mortgage and home or renter’s insurance. Lemonade, offers low cost homeowners and renters insurance for a flat fee, leveraging machine learning and chatbots instead of brokers and commissions. Other insurtech startups offer mobile-only on-demand property insurance (Trov), pull online data to replace the manual insurance application process (Kin), and leverage digital renters insurance to lower security deposits (Jetty).
• Transaction Management: Several companies provide listing-to-close management software to streamline the closing process for all parties involved. Glide and Dotloop (acquired by Zillow in 2015) enable real estate professionals to complete an entire transaction from start to close online by automating the collection of documents and signatures. Similarly, Snapdocs offers a seamless workflow to automate title transfer and mobile closing with e-signatures.

Manage the Property

• Home Improvement: Several startups have taken the inconvenience out of home improvement. Househappy, for example, provides customers with a concierge service for renovations and maintenance. BuildZoom is a marketplace for homeowners to find general contractors in their area. HomeZada offers an all-in-one app for home valuation, insurance, maintenance and remodels, and HVAC/energy management.
• Rental Management: These software tools streamline day-to-day operations for property owners, thereby lowering O&M costs, reducing vacancy rates, and avoiding missed or overdue payments. Startups focused on rental management include Rentify (pricing algorithms to ‘guarantee’ rentals), OneRent (marketing, tours/showings, application tools), Cozy(lease/application, screening tools, and rent collection), and Mynd(maintenance requests and rent collection).

Manage the Loan

• Liquidity & Refinancing: Today, homeowners have a variety of options for mortgage refinancing and home equity release services. Alternative financing startups Unison and Point, as well as EasyKnock, Hometap, and Tangello, enable customers to access the equity in their homes debt-free by investing alongside the homeowner. Irene introduced a similar “sell and stay” offering for retirees to take liquidity out of their homes.
• Loan Securitization: In addition to large institutional investors who trade mortgage backed securities, a number of startups have begun revolutionizing securitization. Income& has introduced an alternative MBS, PRIMO, which offers fixed income returns to investors. Optimal Bluesells a digital mortgage marketplace for loan originators and investors. Blockchain consortium, R3, has developed the technology to track home mortgages packaged into securities.

[Note from editor: Originally published on Thomvest’s Blog]

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