No doubt real estate transactions involve intricate processes -beginning with a letter of intent and finishing with a final closing agreement. This sector demands an enormous amount of contracts and compliances and each jurisdiction adds its own list of specific documents that need to be executed in the form of disclosures/declarations. Moreover the contracts, tender proposals, disclosures etc. are supposed to be in a written format.
Real estate is the world’s largest and most important asset class. All the property in the world, including commercial and residential property, is worth an estimated $228 trillion. However it is a very slow moving asset and the people managing it are very conservative.
If we compare the underlying due diligence performed by legal teams/real estate agents/property managers/sellers/buyers (‘stakeholders’) working in the sector today and the last decade, we hardly see any difference between the amount of executed paperwork, number of documents reviewed, and the extent of manual processes involved. The process is still time consuming and mostly manual. This sector has been really slow in the adoption of technology. That needs to change.
Will technology replace real estate agencies/lawyers?
A discussion on collaboration of Legaltech and the real estate sector often raises questions like “will Legaltech destroy jobs for the agencies working in the real estate sector? Will it disrupt the current state and bring new changes in the long run?”
It is important to understand that innovation does not always mean disruption. Legal technology can be a good source of new business opportunities. It has the capacity to shape the market and make it work better in the long run.
Despite the advances made in the digital field, real estate brokers/agents and property managers are still stuck with the laborious work of due diligence, reading long complex contracts and explaining these documents to their clients. This sector needs to adopt new technologies i.e. artificial intelligence (AI) to ensure real estate transactions are turned around faster and in a cost-effective manner. It will not only reduce the time that due diligence demands, but also help the lawyers focus on complex aspects of their work e.g. commercial transactions that actually require their expertise rather than wasting time and money doing the first line review.
The digital advancements can help all stakeholders in evaluating documents better. AI can help this sector in both completing the paperwork and in finding out other key information like contract value, key risks, etc., with just a few clicks. For example, just a smart search that helps you find out whether a developer can legally build in a concerned area or a feature that generates a summary of a contract so you don’t have to explain the same to your client.
Although agents and lawyers are traditionally used to have control over the timing and distribution of information, they need to acknowledge the fact that clients nowadays expect quick and online access to the information regarding the services they seek. It's time that the stakeholders involved in this sector bring in these changes. It will not only ensure transparency, but also assure the clients that they are valued, ultimately benefiting their business as well.
How can adoption of technology revolutionize the real estate market?
Adoption of Legaltech in the real estate sector will help the concerned stakeholders overcome the burden of due diligence and instead focus more on adding real value and analyzing information that the clients actually care about. With the help of Legaltech capabilities available in the market, a system that allows the user to get all the necessary information and updates, can be created. This feature will provide a clearer picture of what comes next and minimise the chances of disputes. For example, platforms that enable stakeholders to easily monitor expiring contracts/date of renewals, can save time and money, prevent communication lapses, and allow those people who are willing to adopt Legaltech to handle more deals at once without wasting time in manual monitoring/excel maintenance.
Use of Legaltech in the real estate sector will help stakeholders with high-level analysis of hundreds of contracts in a matter of minutes and keep track of inspections/renewals (checkout these solutions offered by SpeedLegal). Since this sector has large-scale work streams, there is always a risk that important issues or documents might get left out amongst the plethora of documentation. With the assistance of AI and Legaltech, these stakeholders will have additional security by knowing that human error will play less of a role in their work.
The current situation demands Legaltech and the field of real estate to team up to tackle large stake transactions that require numerous contracts and documents reviews in short time spans.
Conclusion
Today, the real estate sector needs its stakeholders to shift from the traditional practice of reviewing large piles of files for due diligence towards being supported by data rooms, AI, and Legaltech. Additionally, a key pain point for stakeholders - explaining documents to their clients, can be easily taken care of by the latest advancements in Proptech like AI based document summary generators. The much needed collaboration of Legaltech and the real estate sector will help create new ways of working and leave more time for creativity and innovation.
References:
[1] https://medium.com/axeleo/5-ways-ai-is-changing-the-real-estate-sector-a726bf600a83
[3] https://www.accruit.com/blog/real-estate-transaction-basics
[4] http://www.slaw.ca/2017/06/28/reflections-on-technology-changes-in-real-estate-practice-2/
[5] https://leverton.ai/blog/2016/06/16/legaltech-robot-lawyers-in-real-estate-law/
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