John Amram, founder of the brokerage company HPBA, knows that a lack of chemistry between the buyer and the seller can be a deal breaker. Digitalisation will not change this.
From the data room through to due diligence, more and more processes in the real estate industry are being digitalised. Many a market player already has a vision of a totally transparent real estate world based exclusively on data and figures, free of errors, with the automated matching of investors and investments, companies and offices, and even families and apartments – a world in which people are reduced to the role of a controller, adjusting algorithms here and there as necessary. One thing is clear to me: this beautiful new world will not come into being.
Although I am a believer in digital solutions and personally use the scaling effects and the possibility for more precise definitions that have only been made possible thanks to digitalisation, I have repeatedly seen that personal chemistry, individual character traits and quirks cannot be digitalised that simply. In this respect it is particularly true of transactions that the greater the mutual acceptance between the parties, the greater the probability that a deal will be reached. I would add that as far as I am concerned chemistry and acceptance do not mean that people hold hands, but rather that they understand one another, or as the saying goes: they are on the same wavelength.
I have quite often seen private investors, family offices and institutional investors sit down at a table to discuss one and the same property – and ultimately all three spoke a totally different language. The private investor looked at the time spent with the property and the emotional ties, often related to his family. The family office considered the compatibility of the building with the statutes of the foundation and the allocation targets which it had set for itself. The institutional investor concentrated on the numbers after the decimal point when it came to the return, or on hedging targets and potential management fees. Any mutual understanding for the respective requirements is extremely limited in such meetings.
Nowadays computer programs can do a great many things, but identifying and interpreting feelings between human beings who are totally unknown to one another is something they cannot do. Yet if all the emotional aspects are removed from the equation because they are not reliable, we are left with a fixation on the purportedly best offer and the greatest-possible efficiency. This could be deceptive, however: the greater the chemistry between the actors, the greater the willingness to reach a compromise. Likewise, transactions often fail to come about as the necessary willingness to reach a compromise does not exist due to a lack of mutual sympathy for one another. This is a unique feature of the real estate transactions, regardless of the degree of digitalisation.