Canadian property techs are in danger of dying from data starvation
Haider-Moranis
other
Haider-Moranis: These startups represent the future of real estate and should be encouraged, not thwarted
The combination of artificial intelligence and big data is transforming businesses across the economy.
In real estate, it has led to the emergence of so-called prop-tech, a class of technologies that address all different aspects of the real estate buying and selling process. While prop-tech is thriving in the U.S., it has not caught on to the same degree in Canada. The problem isn’t a lack of innovative algorithms — it’s access to data.
A 2018 report by McKinsey Global Institute estimated that neural networks-based deep learning algorithms have the potential to “enable the creation of between $3.5 trillion and $5.8 trillion in value annually.” But such value creation is possible when the sophistication of algorithms is matched by the richness of the available data.
For Canadian prop-tech to be a part of that trillion-dollar value generation, real estate transaction data must be available to those who have the technical know-how to create products and services to enable informed and efficient decisions.
Recently, the Toronto Regional Real Estate Board (TRREB) has cut off a data feed to a company called Bungol Inc., which operates a prop-tech business, for violating the “Authorized User Agreement.” With no new data, Bungol will struggle to survive as its user base shifts to other channels.
Bungol started operating as a Virtual Office Website (VOW) in 2018.Jack Zhang, a tech-savvy young entrepreneur, established the firm when the Competition Tribunal instructed TRREB (then known as Toronto Real Estate Board or TREB) to allow brokerages to share listings and sold data with prospects who have signed in and registered with a password-protected VOW.
Before the Competition Tribunal ruling, brokerages were restricted from sharing sold data online with their clients. Brokerages could only show listings online. A federal court ruled in favour of the Competition Bureau against TREB that enabled brokerages to put sold data to good use.
Several innovative firms of various sizes and scope benefited from the ruling and launched innovative real estate businesses. We have written in this space about Nobul.com, which is also a VOW that enables a digital marketplace for buyers, sellers and real estate agents to find each other.
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Bungol is similar to Nobul. These businesses represent the future of real estate in Canada and are helping to redefine what a real estate brokerage can be in the twenty-first century. To understand the new model, let’s first look at the old model.
The traditional brokerage model involves a broker of record who established a physical office. For many years, fax machines were the instrument of choice in sharing documents. Buyers and sellers had to sign the print copies of contracts to be legally binding. Agents would drive back and forth between buyers, sellers, lawyers and financial institutions to finalize a deal.
Over the years, accommodations were made to accept digital signatures in place of physical signatures on paper so that contract documents could be signed and transferred electronically. Though other small improvements were made to benefit from the advances in technology, not much was accomplished for more intensive use of real estate data.
Instead, real estate boards in Canada have considered data as proprietary, and the user agreements specify howbrokerages may or may not use it. In an earlier directive, TREB cautioned members that its “data cannot be scraped, mined, sold, resold, licensed, reorganized or monetized in any way, including through the sale of derivative products or marketing reports.”
Bungol is a millennial-run brokerage that understands how smartphone obsessed millennials are likely to interact with the real estate sector.
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Bungol has no agents working in the office. It finds prospects and refers them to short-listed agents in other brokerages for a referral fee. It uses data to help buyers and sellers find each other with the help of a real estate agent. It is innovative while adhering to the traditional real estate model.
Technology is expediting the growth of innovative business models. It enables businesses to reach scale in just a few years. Before the use of information technology became ubiquitous, such growth took decades, if not more.
Bungol and others like it are struggling tech startups in the prop-tech domain in Canada. These startups will not survive if they are denied data. Their innovative algorithms and business models will die due to data starvation. Such an outcome will not be in the interest of the real estate industry that should embrace technology as others have.
© 2020 Financial Post
