Builders predict virtual reality will change the real estate industry
It is a beautiful day in Florida, with gentle ripples on the surface of the swimming pool and shadows of palm fronds subtly shifting with the breeze. You open glass pocket doors to step onto a wide porch from the great room, where a linear gas fireplace has a bed of sparkling crystals underneath the flames.
Walking through the house from the great room and the open kitchen into a large dining room and a home office, you notice high ceilings and plenty of daylight flowing into the rooms from the floor-to-ceiling windows. You admire the serene blue-and-white master bedroom and step out onto its private balcony overlooking a lake. Then you take off your headset and realize you're in the middle of a crowded convention center surrounded by other people, not relaxing and enjoying the sunshine and the sparkling new house.
Welcome to virtual reality, the future of homebuying.
"Technology is changing rapidly, but we think the use of virtual reality will reshape and transform how new homes are designed, marketed and sold," says Tim Costello, founder and chief executive officer of Builder Homesite Inc. (BHI), the parent company of Builders Digital Experience (BDX) and NewHomeSource.com, a builder marketing business based in Austin, Texas.
Costello says that while almost no builders are exclusively using virtual reality to market their homes, the number of them experimenting with the technology has increased exponentially in the past year.
Eventually, some experts say, use of the technology may diminish the need for builders to construct real models for people to walk through - a move that can save them money and allow them to begin selling their residences sooner.
"Maybe 1 percent of builders have actually deployed virtual reality, while many of the rest are still trying to decide how they should deploy it," Costello says.
Potential buyers can experience a home that has yet to be built through virtual reality either by using a headset at a builder's design center or sales center and sitting in front of a monitor or by using a cardboard headset and an app on their smartphone created for the builder.
"Most people can't read a floor plan, and they can't visualize how the light will come into a room," Costello says. "They see the words kitchen and great room on a floor plan and the room dimensions, but they can't visualize what that room will feel like. Virtual reality gives you a true sense of place, that you've actually walked around the room and can judge it because of the ability to see it from multiple angles."
While the applications for virtual reality are enticing because they can save money and help builders design communities and homes, the most likely scenario for most builders in the future would be that they would use virtual reality in conjunction with at least one physical model home.
Pulte Group, the third-largest homebuilder in the country in 2016, according to Builder magazine, introduced virtual reality at two of its communities last year, says Valerie Dolenga, director of corporate communications for Pulte Group in Chicago.
"We've been using it for six months to presell condos at a New York City building where there won't be a model until next summer, and we've already sold one-third of the units," Dolenga says. "In Florida, we're using virtual reality to sell houses in a single-family home community while the model homes are under construction, but we plan to continue using it even after the models open."
She says that as virtual reality becomes more mainstream and more people have headsets for gaming, the technology will become more integrated into everyone's lives.
"Model homes are here to stay because people still love to touch and see a home before they buy it, but maybe eventually we'll build one model instead of three models and use virtual reality to showcase those other floor plans," Dolenga says.
Betenbough Homes, the largest builder in west Texas, is among the pioneers of virtual reality for residential construction, having launched the virtual version of their Rebecca single-family home model at the 2016 International Builders Show.
"We have 42 house plans right now, and building a model for each one gets very expensive," says Jeanna Roach, vice president of sales and marketing for Betenbough Homes in Lubbock. "Each model home costs $350,000 or more to build, but we've found we can attract buyers with virtual reality and spend under $20,000."
Roach says the virtual-reality walk-through of the model home - plus the ability to show what different options look like - generates a lot of excitement among buyers.
"We have a waitlist of 50 interested buyers who have only seen the virtual model or looked at our online options," Roach says. "The average age of our buyer is 33 and we've found that a lot of them enjoy gaming, so the technology appeals to them."
Betenbough Homes is "building" two more virtual floor plans.
"What's different about virtual reality compared to a regular video tour is that this is more engaging to buyers," Roach says. "The buyers are controlling where they go and what they look at rather than passively watching a video. It's more fun."
Josh Goldschmidt, executive vice president of Eagle Construction in Glen Allen, Virginia, says his company opted to use virtual reality to sell homes at its GreenGate community in the west end of Richmond because it wanted to showcase the newly designed four-level brownstones, which have glass accordion walls and roof terraces and are unusual for that region.
"Right now we can't get buyers into the houses or even onto the property because it's a construction zone, so we had BDX build us a virtual-reality model that people can see in our design center or with our app," Goldschmidt says. "The virtual model is identical to what we are building, right down to the exact model number of each appliance and cabinet and the exact flooring. We've already sold 15 houses at prices that exceed the surrounding market."
Goldschmidt says the company's research has found that buyers spend a lot of time looking at photos of houses before purchasing a home. He says virtual reality is the next step beyond photos and offers a more realistic sensation of actually being in a house and seeing each item.
"I can see us using it again, particularly for cutting-edge communities like this one because it's a good fit," Goldschmidt says. "The virtual-reality version of the model cost between $5,000 and $10,000, which is far less than actually building a model home, which costs $100,000 just to furnish."
Goldschmidt says he has showcased its virtual model to potential buyers and to real estate agents with a headset. Better yet, he says, the company has cardboard Google boxes with the Eagle logo that he provides to customers to use with the Eagle app on their smartphones.
"This is the best marketing tool out there, because for $6 a box we give them something they can take home and share with their friends and neighbors," Goldschmidt says.
Will people buy homes using virtual reality? So far, customers seem to be slow warming up to the idea.
Buyers using virtual reality can use a pointer to change direction or look at something specific, and some people are better than others at determining how to make this as smooth as possible.
As builders begin to test virtual reality, research by the New Home Source Insights Panel, which surveys thousands of homebuyers across the country, found that 75 percent of respondents had heard of virtual-reality tools for home shopping but just 14 percent had actually experienced it. Many respondents said they think this new technology can save them time since they could use it to whittle down the number of physical model homes they would need to visit.
Some respondents pointed to the difficulty understanding how deep closets are when they see them virtually, and some say closets are left out of a tour. Trying to understand how steep the stairs are can be difficult, too.
Worse, some respondents say they experience vertigo or nausea when they use virtual-reality headsets. Some people surveyed said they feel virtual reality is disorienting, at least when they first try it.
However, many buyers said the time saved by looking at multiple models using virtual reality and the ability to see models that have yet to be built is valuable to them.
Dolenga says that many large communities have five or six model homes that are far apart, so some buyers prefer to see them with virtual-reality goggles instead of driving around.
One in four respondents said they would be open to purchasing a home online from a virtual-reality experience, while another fourth said they would use the technology for research but not buy until they could see the home in person. Builders may need to do some marketing for their new tool with other buyers, though: 47 percent said they could never see themselves using virtual reality to make a purchase.
Mostly, home shoppers in the survey said that using virtual reality would be helpful if they had to buy a home long-distance or while living overseas. Shoppers expressed hesitation about the veracity of virtual reality and were concerned it could be manipulated to show an overly idealized version of a home.
A benefit for builders is that with virtual reality, they are more likely to see more of a variety of floor plans.
"Builders sometimes say they don't sell enough houses that aren't the same floor plan as the model home, and some communities have a 'non-monotony' rule that requires them to sell a certain number of homes that don't look like the model," Costello says. "Virtual reality can help buyers visualize how the other models look."
Costello says that buyers perceive builders who provide virtual reality as tech-savvy and different from other builders. Over time, the novelty will wear off and more buyers will become accustomed to using virtual reality as one more tool for looking at homes.
"Shopping for a home is something most people do with other people, so the way people see virtual reality will evolve in the future," Costello says. "Eventually it will be an immersive experience like it is now, but people will be able to experience it together instead of one at a time."
Comparing finishes
Betenbough Homes not only offers a virtual-reality tour of its model but also uses augmented reality to allow buyers to compare various options they can choose to personalize their houses.
"It makes it much easier for people to see what different cabinets and counters will look like together, which saves them time and saves sales people time, too," Roach says. "The customers get a better sense of what their home will look like when they can see an image of their entire kitchen instead of just looking at small samples."
Pulte Group uses virtual reality to improve its home designs with the help of focus groups.
"Every floor plan we build goes through our consumer research focus groups," Dolenga says. "In the past, we built 100 different floor plans in a giant warehouse but now we have transitioned to a virtual-reality experience using iPads to 'walk through' the virtual model to get feedback on where to put the pantry and every other detail. In our next phase, we will be able to do everything through virtual reality."
Not only is using virtual reality more cost-effective, Dolenga says, but it also makes it easier to get feedback on local or regional home designs from local buyers without building a prototype model in each location.
"Testing models with virtual reality allows you to walk through the floor plan at different times of day to help design a better house," Costello says. "Consumers can expect a better product, and builders can make tweaks to the design before they ever actually produce the product."'
While Costello says the primary purpose of virtual reality now is to help buyers to see a house, another potential use of the technology could be for community planning.
"Builders spend millions of dollars on land and then they are stuck paying for it while they wait for approvals and permits from various jurisdictions and tweak their plans," Costello says.
"Imagine having a virtual-reality tour of the community ready to present to zoning board and architectural review boards that could demonstrate what it will look like," Costello added. "Speeding up the process could even improve affordability for buyers because delays drive up costs and builders either need to increase the cost of construction or increase density to recoup their initial investment."
Most builders think virtual reality will be used in the future to augment a physical model home, but Costello sees an even bigger future for the technology that will include avatars similar to the gaming world and entire communities showcased rather than just one house.
"The first step for people looking at newly built homes is to be convinced that they are looking at a community they can live in," Costello says. "A year or so from now, we'll model an entire community like a video game. You'll be able to choose the car you want to drive, pass through the gates and go to the tennis courts, then walk around the community center and drive to the model-home row and see all 13 model homes - all virtually."
While buying a home is serious business, using virtual reality can make the shopping phase fun.