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A mere seven years from now, the North American market for proptech will balloon to $94 billion, according to data analytics firm Grand View Research.
That amounts to a compound annual growth rate close to 16 percent.
And the market intelligence firm expects proptech software will be the real estate industry’s fastest-growing segment as demand grows from real estate agents and property managers who seek solutions to more effectively market their listings. These are the very products installed on the servers, desktops, laptops and mobile phones of the entire real estate industry.
Capturing a minute shaving of that $94 billion is all most proptech leaders can ask for. A lot stands between them and this goal, though.
According to proptech leaders Intel interviewed, the real estate brokerage industry is hurried, harried and uncertain in how it researches, decides on and adopts technology: Inconsistency abounds.
Many proptech entrepreneurs often start out thinking they built a product for the entire space — that every agent is a customer. After all, a real estate brokerage in Virginia earns money in fundamentally the same way as a brokerage in California, and their agents all sell the same thing. But in terms of how offices are organized and run, things couldn’t be more different.
For an industry that may be on the cusp of supporting $94 billion in technology, it can be frustrating as hell to sell technology, proptech leaders told Intel. Sales teams have to tie-in the prospect of new business to get a broker’s attention, even if their product isn’t built around getting leads.
And that’s often because collectively, the industry itself doesn’t even know what it needs, they said.
‘How do I get leads?’
If agents weren’t so preoccupied with lead generation, they could take advantage of an array of useful tech solutions that could meaningfully improve their daily task load, Vijay Gopalswamy, founder and CEO of Trackxi, told Intel.
Trackxi is an agent-task and client-management software. It’s designed to improve the way agents manage their business and keep clients attached to what’s happening.
It is not, however, designed to generate leads for agents — not that it has stopped agents from trying it for that purpose.
“I had probably five or so sign-ups in the last month from people who thought it was a lead-gen tool,” Gopalswamy said, “and they were like, ‘How do I get leads?’”
Gopalswamy, a licensed agent, maintains that real estate agents don’t know what they want. “Years ago I bought Zillow leads, I hated it. It didn’t work for me. These were people I had no connection with,” he told Intel.
He focused on better managing his business and his current pipeline, which led to a steady stream of referrals. He believes that success lies in better service during the deal. He said too many agents think of the CRM as the holy grail.
“I would get five-star reviews, by being transparent, following up, doing the right things,” he said about his time as an agent. “Half of agents are focused on marketing, Facebook and all that, if they focused on doing a better job, they’d get more business.”
ListedKit founder Derrick Magnotta said that he’s forced to bring up referrals and “extra commissions” because that’s the message proptechs are always up against. His software, like Trackxi, helps agents manage deal experience and keep clients linked to the progress.
“In order for this [our product] to resonate, we have to speak to incentives,” he said. “Just saying that, ‘You’re going to save time,’ doesn’t really translate into dollars and cents, we have to take it one step further in order to compete against the broader marketplace because it’s so saturated [with lead pitches].”
Magnotta says he emphasizes with agents because everyone makes big promises to them. He couldn’t be more right. Click on any Instagram ad for seller or buyer leads and it takes only minutes to be brow-beaten by countless “gurus” and hard-sale blowhards promising some odd number (because data shows odd numbers are more effective in marketing) of new listings within a month. It’s AMWAY on amphetamines.
“This is an issue with the industry overall, but if you ask any well-performing agent where 90 percent of their business comes from, and it’s their sphere of influence,“ Band said, not new leads.
Contributing to the problem, according to Band, is “straight math.”
“A broker-generated lead usually has a different commission split than organic generated business, so there’s obvious bias for tools and things that will help the broker both generate leads and then track, re-assign, etc.,” he said.
Band pointed out that if the agent did less to earn the business, the pay should be comparable. However, it can incentivize some brokers to seek technology that keeps that split favorable to the bottom line, and thus be resistant to solutions that fall outside of that space.
This model is what often pushes so many agents into not wanting to accept their broker-offered CRM or technology decisions, because it can lead to them losing future business, even when the broker is coming from a good place.
Gopalswamy said that even though the broker may buy Trackxi, he’s heard from agents they like it because they can take it with them. “If they move companies, they feel more like it’s their account, their business,” he said. Band said the same about Contactually, and that its agent portability helped lead to quick adoption.
The push-pull of internal competitiveness is engrained, and as more agents adopt their own systems, the less uniformly invested in technology an office becomes, leading to persistent adoption challenges when a broker looks to implement a product. This is a big reason why the end-to-end solution is so elusive.
Stacks and stacks
In our inaugural proptech survey, Intel confirmed that the concept of the truly vertical solution, from lead to post-close client retention, remains mainly vaporware. Turns out, after selling software for a few years, a lot of proptech companies believe it too.
The survey explicitly asked respondents if they have an end-to-end platform or if they instead have a tech stack of individual products. Nearly half of the survey’s respondents indicated that they opt for the tech stack.
Fewer than a third, or about 32 percent, said they have an end-to-end platform.
Overall, the survey’s findings suggest that despite a massive amount of attention and years of development, end-to-end platforms remain somewhat rare. Moreover, even in environments where companies are providing comprehensive tech, the people in the trenches are still picking and choosing what they want to use.
This translates into proptech sales teams having to dislodge a competitor or sell features over benefits. For products that require investments in mindshare from decision-makers, the environment can be grueling.
“There’s a lot that we’re competing with, in terms of attention, there are a lot of products out there, and if we don’t have the easiest, fastest solution for somebody … ” Magnotta said. “They’re often looking for a magic pill.”
Gopalswamy starts out his phone calls asking about how transactions are managed, and he often finds Microsoft Excel is a competitor. That should be an easier sale, but there’s an education process to pry a person away from something that already works.
“You’re winging it, you don’t have a system or a process. You’re tracking tasks on a whim, and you forget them,” Gopalswamy said he tells prospects. “But I often hear, ‘I only do 10 transactions a year, I don’t need software.’”
However, he’ll argue, how much more could they do with a good product?
There’s very little consistency industry-wide in how software is purchased and implemented, leading to vastly disparate solutions and lack of universal buy-in. Gopalswamy recalled a conversation with a national franchise broker about nearby offices.
“He said, ‘their agents are cheap, and we don’t work along with each other. We are protective of our territory,’” Gopalswamy recalled. This is why it’s so fragmented, even within offices under the same banner, mere miles apart. “They only look at it from their vantage point,” he said.
Proptech sales teams also struggle to sell to brokerages whose agents may not even use the tech available to them.
“One of the big challenges in selling software to real estate brokerages is that the adoption rate is abysmal,” Band said.
That inconsistency is partly why Gopalswamy stays away from pursuing integrations. He acknowledges that his product could benefit from direct connections to a major CRM or transaction/compliance management solution for example, feeding new clients into Trackxi.
“I don’t think in real estate there’s a way to do an end-to-end tool, everyone wants best-of-breed,” he said. “They have 10 CRMs, maybe a project management solution, and even for Trackxi users, one may have a FollowUp Boss, or Boomtown or something, or maybe one has SkySlope and tomorrow one has BrokerMint or Dotloop, I don’t have a say in it.”
Josh Jensen, who founded and runs Inspectify, a solution for standardizing home inspections, learned that an enterprise sale didn’t automatically mean widespread adoption.
“When we started three years ago, the naive me, I went straight to enterprise,” Jenson told Intel. “The numbers made sense. If I could land a large team or brokerage I would only have to sell it once and get all these agents to use it. But as you know, the enterprise or brokerage has no control over what their agents do.”
Even if you get the sale and the rollout goes well, adoption might be “sub-1 percent,” Jensen said.
This wide variety of options, all selling against one another, gives proptech executives pause when considering building integrations. In some cases, companies will partner with a well-known complimentary vendor who can lead to more installations, but not without risk that the next brokerage they call on wants them, but not their partner.
Of course, it often comes down to who the sales lead can reach.
Scott Feldman is head of sales at Plunk. He’s been in sales for more than 30 years, 16 of them in proptech. His tenure in the field provides him the expertise he needs to nail down the right internal contact.
“Sometimes it’s the owner, sometimes a CTO or CMO, but there’s such a fine line with those roles these days because so many marketing solutions are technical,” he told Intel. “But office managers are the unsung heroes, it really comes down to them.”
Feldman said he’s talked to countless office managers who serve as internal champions, often having to face agents leaving for another brokerage with different technology products.
“They [office managers] would tell me they had agents leave not knowing they had that solution all along,” Feldman said.
Still, he said, it can be a room full of multiple decision-makers, and questions are coming from everywhere.
“Some companies are a free-for-all,” Feldman said. “You go in and no one lets you answer a question — everyone is asking questions. You need to know how not to lose the room.”
For others, like Magnotta, finding the right contact doesn’t come so naturally yet, which may stem from many proptech companies relying on founders to also lead sales, which is a big ask. In real estate offices, it’s not an accepted best practice to have a dedicated technology role only in charge of buying and overseeing office systems.
“We’ll start with the broker or a team lead,” Magnotta said. “Then it’ll transition to who we’ll call the ‘air traffic controller,’ regardless of title, but it can range from an admin to a head of operations.”
In most cases though, once that internal champion is found, they’ll go to bat for the product.
Trackxi looks to appeal to transaction coordinators who are always a good source of what technology works and what can be put to pasture. They’re most likely to see the software’s value proposition.
Because sales in proptech can be so referral based, Gopalswamy uses it to his advantage, often seeking out high-performing agents to pitch.
“If that guy or girl is using it, then it must be good, I need it,” he said.
Band agrees, citing the social nature of people and real estate agents in particular. “What’s working for one person is likely to work for another, and they’re being pitched by so many different companies all the time.”
As in real estate sales, a referral can save someone a lot of decision-making time. But, also like house buying, proptech is an expensive decision. It can impact a lot of what comes after it.
Under Band, Contactually built a sales team of folks who had been in business-to-business sales, and a normal tenet of that world, according to Band, “is that you could clearly identify the exact role or title of the person you’re supposed to talk to.”
In real estate, not so much.
“There is very little consistency in titles among executives and leadership, and that definitely became a challenge,” he said. “There would be COOs who had nothing to do with software and COOs who basically ran the company.”
Band said brokerages that have a training department are usually involved in the decision process or at least know who to talk to. In time, Contactually learned who to target, and replicated the process across its sales database.
“There was a lot of spearfishing,” he said.
Crossing the finish line
Sales still get closed, despite the consternation about who to talk to and the “leads-first” mantra echoing around the industry. Clients become excited about what new technology can do for them.
When asked about what made their last sale a success, the proptech leaders who spoke with Intel collectively agreed that it came down to parallel thinking about what’s important for the business and earning attention.
For Jensen and Inspectify — timing transactions is everything.
“The secret sauce is attention,” he said. “If they’re doing an inspection every 30, 60 days, I need to stay top of mind for that next transaction. If I pitch them the day after my last inspection, it might be 45 days before they need me.”
Aligned with other voices, Jensen said it comes down to learning who the right persona is to target, and for his product, it’s high-performing teams. They offer more autonomy and shorter decision timeframes. It can be argued too, that having a smarter, more automated inspection solution supports a tech-savvy team brand.
Magnotta is finding that teams are a sweet spot, too.
“We just closed a small team, who doubled in the last few months and likely will again in the next few,” ListedKit’s Magnotta said. “They were committed to growing their business by delivering a great customer experience, being their caretakers. They didn’t buy leads, instead committing to their sphere of influence.”
ListedKit’s core competencies rest on improving how agents serve clients, which leads to expanding how buyers and sellers view the transaction experience. It’s an ideal fit.
“It was a values pitch,” he said.
Feldman credits his time in the space for recent successful sales, meaning he understands what agents and partner proptechs face, and can communicate how Plunk’s features get them over hurdles.
“Personal trust” is what works, he said. “Knowing that I know their business, by asking questions and really digging, knowing what their business drivers are.”
Feldman doesn’t assume every office he calls on is the same. While unsure who to credit for the phrase, he tries to emulate the idea that “Prescription before diagnosis is malpractice.” Feldman wants to know the problem first, then wrap a product benefit around it.
Magnotta concurs, telling Intel he has to act like a doctor at times too, slowly working through issues to find to the root cause of the pain.
“It’s not always easy for us, so we chat about the impact to the business, that they can make fewer mistakes, earn more referrals,” he said. “We’re more about benefits than features.”
Closing sales relies on making a message land, and in the transaction-first mindset of the real estate industry, time for doing that is minimal. Plus, it’s a loud space.
“They are being pitched by so many different companies all the time,” Band said. “The risk of product failure is huge. If they develop training, do a brokerage-wide rollout that ends up being buggy or the agents hate it, that’s huge brand exposure to the brokerage they need to think about.”
Band and his team learned that even though Contactually had case studies proving agents were making more money with the product, some brokers had different priorities.
“It’s counter-intuitive, I know,” he said. Having only a few agents find success was sometimes subservient to greater adoption, according to Band.
“Integration came up a lot too, despite still not seeing any product that can talk to all the others, there’s always that discussion: ‘What website providers do you talk to?’”
Selling to real estate agents teaches someone a lot about the industry as a whole. Making that many calls, sending that many emails and shaking that many hands tends to have an impact over time.
Gopalswamy learned that the industry isn’t as busy as it likes to think it is. In a demo of Trackxi for Inman, he revealed that he studied the number of emails he sent during an average deal.
“I counted 192 emails per transaction, and about 170 of them were not needed,” he said. “You take all this noise out, just imagine how much business you can do. Because they’re busy, they think they’re doing the right thing, that being busy equates to success.”
Like Jensen, Band thinks the 1099 independent contractor model creates a lot of challenges, not just when it comes to deciding what technology to buy.
“It’s the root challenge of the real estate business model, being a 1099 contractor, they can do whatever they want,” he said.
Inspectify is aiming to change a branch of real estate — home inspections — that is historically tangible, a learned trade defined by spider bites and subjectivity. And in some cases, deep relationships.
“An agent’s job is to protect their client, and if you’re on the right side of the consumer, you’re on the right side of the argument, but not all agents are created equal,” Jensen said. “Think of RESPA, for example: we create standardization but we’re not using the same inspector all the time so we’re removing the potential for too much control by the agent. You would think agents would understand the ethical argument.”
Jensen said that it’s mainly “the old guard,” who won’t budge from who they hire to inspect a home. They want their person — every time. “It’s a little frustrating.”
While every agent earns income by selling a home, either to or for someone, how they arrive at closing varies widely. In essence, brokers industry-wide are managing as many different business models as they have licensed agents. From how leads are earned to transactions managed, the freedom to choose becomes a burden on the operation. It can’t grow uniformly, only in fits and starts.
“Every person an agent touches is their own lead, their piece of business, and there is more concern about what the brokerage is doing with my data,” he said. “We had a lot of people in brokerages adopt us because they knew if an agent left the brokerage, they could unhook their account and their database was theirs. There’s always a residual fear about data sharing and privacy.”
Still, despite a few sketchy actors Band has met, that fear doesn’t emerge from under the bed very often, but the specter remains pervasive, affecting how agents and technology decision-makers choose who to work with.
Magnotta faces the same stigma.
“The biggest surprise to me is how often I’m asked, ‘Who owns you and who do you sell your data to?’” he said. “We’re independently owned, we don’t sell data to anyone, but they still want to know if we’ll be acquired. It’s clear that their confidence in technology solutions has been shaken, there’s trauma there.”
Zillow’s acquisition of Showingtime, an application that was used comfortably within multiple listing services around the country, is no doubt the source of the trauma Magnotta references. He says he gets it, he can see the agents’ side of it. It’s an information war spilling blood across the closing table.
In turn, Magnotta thinks smaller proptechs are the answer; it’s where innovation happens faster, and there’s a shorter line between user feedback and software changes. Client data isn’t hidden in layers of enterprise code or behind a firewall of customer service teams.
While knowing the relationship between institutional money and innovation, he thinks it incumbent on the national players, the brokerages, to talk more about the added risk that venture capital plays in pushing upstart technology companies to sell, or grow too quickly on the backs of agents, then knock over their tech stack when they sell.
And the aftermath of the next one becomes one more cornerstone in the barrier between an energized technology company and the industry it wants to help.