How and why is the Big Data market so potentially lucrative for the real estate and mortgage industries? Big Data is an accumulation of massive amounts of potentially overwhelming information, which is then analyzed, sorted, and organized in a way that a business may later use to target for new customers. A real estate and mortgage professional who knows his customers better than his local competitors is more likely to prosper. As such, Big Data mining is very important for finding motivated and even pre-approved clients.
As it pertains to the real estate industry, Big Data was first used on a larger scale in the value analysis or appraisal sectors for all sorts of property types (i.e., land, homes, multi-family apartments, shopping centers, etc.). Originally, data was pulled from the local county recorder’s office. The information provided included the property’s square footage, the bedroom and bath count, lot size, number of stories, and other amenities. This compiled data was later used by Appraisers, Brokers or Agents, Buyers, Sellers, and other 3rd Party businesses. Online sales comparable and valuation information provided in a relatively short period of time was then quite beneficial to these same parties.
On a March 9th, 2014 episode of the television show 60 Minutes, the exponential power of Big Data was explained in detail. Interestingly, several Big Data companies tend to refer to themselves as “Marketing Companies” as opposed to “Data Brokers” or data collection companies. While the phrase “Big Brother knows all” seems to come to mind these days with the lack of privacy out there in our real and virtual digital worlds, Big Data does seem to know more than just about anyone else out there today. If your competitor knows more about your client than you do today, he or she is more likely to get their business as well.
Most consumers who visit many of the small, mid-sized, and larger websites may note that virtual “cookies” follow them to other websites. The consumers’ viewing habits and interests are tracked, packaged, and sold off to tens or hundreds of businesses and marketing companies. Do you ever wonder why a person may start seeing numerous ads on various seemingly unrelated website pages for the same product, hotel resort, or sporting event that the person had Googled earlier in the day, week, or month? If so, the person is seeing firsthand the magical power of Big Data at work.
Big Data, Real Estate, and Mortgage Professionals
As compared with several other industries in the USA today, Real Estate and Mortgage Professionals are seemingly well behind as it pertains to truly tapping into the full potential of Big Data. The irony of people’s addictions to the internet and Social Media in recent years is that it tends to make people have much shorter attention spans and a lot less patience as it applies to buying products or making very basic or complex life decisions. Americans want instant gratification these days, and don’t want to wait 30, 60, or 90+ days to purchase their “Dream Home” or close their next refinance mortgage loan.
“Day Trading” stocks, or buying and flipping stocks in a short period of time (aka “Stock Flippers” as compared with today’s “Home Flippers”) was an early version of the power of Big Data as investors followed the data on their television sets or computers from sites such as CNBC or Bloomberg. In recent years, “Home Flipping” has become quite popular partly due to oxymoronic “Reality Television” shows which promote the potential successes of home flips.
There are now several analytical websites and computer systems out there which analyze Big Data (i.e. valuation and population trends, buyer and seller demographics, vacancy and home listing percentages, title insurance and “chain of title” searches, etc.), and then match up both buyers and sellers for quick one to three day closings. In many ways, today’s real estate industry is becoming more like the stock market profession due to the advanced speed of information available to investors’, real estate and mortgage brokers’, and sellers’ fingertips.
In a study entitled “Harvesting Business from Broker Data: Keys to Leveraging Big Data in Brokerage Operations”, the WAV Group found that residential real estate brokerage firms were “way behind in the curve of excellence in lead management.” Additionally, this same study reported that real estate professionals were very inefficient as it related to not properly utilizing any collected internet or Social Media data, and that they may possibly only reach 50% of their website leads or target audience who had expressed an interest with products associated with real estate. This same paper concluded that real estate professionals may be better off by either creating their own in-house “Big Data Team” or by hiring third party experts to better tap into the seemingly infinite or limitless information out there today.
The WAV Group was also quoted as saying:
“Leveraging advanced tools and techniques deployed by large banking and mortgage institutions allow real estate brokerages to work smarter, manage leads more effectively, and cultivate more business from past, current, and prospective consumers. This strategy enables the residential brokerage to leverage residential real estate customers to drive repeat and recurring business for the brokerage’s mortgage, insurance, and other home services offerings.”
A Better Target Audience Equals Higher Close Rates
With any type of direct marketing, one of the main reasons for a successful advertising campaign is related to the quality of the target audience. For example, an ice making business owner who advertised for new customers in Alaska during the winter months will probably not be as successful as a business which targets new potential customers in the summer months in a Southwestern U.S. desert region. The better the quality of one’s audience who may be more likely to need the same product, then the higher the potential sales revenues will be for the marketer.
1.) Smart Marketing: In today’s world here in the 21st Century, people are surrounded by what is commonly referred to as “Smart” products. These “Smart” products may be “Smart Phones”, “Smart Meters”, “Smart Televisions”, “Smart Computers”, and other products which actually seem to have a mind of their own as well as some type of perceived “Free Will.” One of the most obvious trends in “Smart Marketing” is related to Google-like searches on the internet. If an individual searches for a new apartment to rent or homes to buy in Los Angeles, Chicago, or New York, then that same person may see ads for large apartment buildings to rent or upcoming Open Houses for local homes for sale on their computer screens for weeks or months thereafter. It is as if the computer is reading the user’s mind or listening in on their speakers, and then placing targeted ads on their favorite Social Media, News, Sports, or other online internet sites.
With “Smart Meters” in one’s home or apartment unit, the compiled Big Data information will provide 3rd parties with information about how often the air conditioning or heating system is used and at what temperatures, what type of dishwasher, refrigerator, or washer and dryer products are used by the homeowner, and whether or not they use a Robot-type vacuum for the home, which will provide detailed information about the size of the interior of the home and the flooring types. This information can be very valuable to companies which provide these same services or products to homeowners.
2.) Big Data and Reverse Marketing: Today’s ongoing targeted online marketing is a more modern version of “Reverse Marketing” with high tech gadgets which follow the customers. The origin of the phrase “Reverse Marketing” is related to how a customer seeks the product out first as opposed to the marketing business attempting to seek out the customers. Traditionally, business firms hired advertising companies to place television, print media, or online media ads as the internet continued to grow exponentially each year since the mid-1990s. Then, viewers or readers who were interested in the products either went to their local store, or called the businesses, and requested that their products be shipped out to them.
A customer who contacts the business first is more likely to buy the product as opposed to a customer who was “cold called” at home by a pesky telemarketing business late at night. With Big Data, the customers are known and targeted by way of past interest expressed by these same customers. This method of modern day “Reverse Marketing” is equivalent more to a “Warm Lead” than a “Cold Call” to someone who has no need or interest in the product being marketed.
3.) Retail Marketing, Big Data, and Real Estate: Data is literally all around us. It is created when a person buys groceries, clothes, jewelry, travel vacations, or attends a sporting event or rock concert, searches or surfs the web, or even fills out a questionnaire or survey form. This same data created will then be used to generate coupons on new products or provide information in regard to the newest Italian restaurant in town, which happens to also be your favorite food, coincidentally or not.
Every credit card swipe at your local favorite “Big Box” retail store and every click of your computer mouse provide Big Data for Retailers, Marketers, or others who may work in the Real Estate profession. This information lays a foundation for marketers to target their customers with products or services which may interest them. These same “Big Box” retailers have created enormous and very powerful Data Computer Warehouses (i.e., modern Univac computer systems), which seem to know anything and everything today about their customers.
Retail companies like Wal-Mart and Target helped to set the trend for “Big Data Warehouse” marketing efforts. In recent years, Real Estate professionals are following the Retail sector and mining many of these same virtual or literal Data Warehouses, and are prospecting for new buyers, sellers, tenants, or investors. Big Data can lead to big profits too, for real estate and mortgage professionals, so this is why more businesses of all types are learning about the most creative ways to mine the seemingly infinite Big Data out there.
Author: Rick Tobin
Rick Tobin has a diversified background in both the Real Estate and Securities fields for the past 25+ years. He has held seven (7) different Real Estate and Securities brokerage licenses to date.
Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), Equity Funds, and foreign money sources.
You can visit Rick Tobin at RealLoans.com.