Let’s take a virtual home-staging application of Augmented Reality (AR) and look at it through the lease of a realtor who may use it to sell more homes at higher prices.
Based on studies by the National Association of Realtors (NAR) a well-staged home sells for 9%-12% more than an unstaged home. Still, not everyone has the finances, nor equity to be able to afford to stage their home at the time of sale. If there was a cheap, easy alternative that could help achieve more value in the home sale, let’s calculate what that would provide. We’ll start with the assumption that a well-presented virtual home-staging offers the same increase in home sale price as the physical staging. We’ll use 10% since it falls in the normally accepted range, makes the calculations simple and is on the conservative side of the spectrum.
According to the US census, the average US home sale price in February 2019 was $379,000 with the median being $315,000. Though in this calculation, average is likely a better number, we’ll use the median to stay conservative. and partly because some of the homes sold were already staged increasing their sale price, so going with the latter makes up a bit for that.
The average potential increase in home sale price is $315,000*10% = $31,500. There are over 5,000,000 homes sold every year in the US. So, the total value created by staging could potentially be 5,000,000*$31,500 = $157,500,000,000. That’s $157.5 Billion! Absolutely massive.
Now to address the possible value created by virtual home staging. In the upper end of the market, there is much more likely an opportunity to pay for a full home staging experience, so the full market shouldn’t be included at the present time. As the technology progresses, perhaps it will reach into the higher end, expanding it’s market size, but let’s take a look at the lower end of the market. Even assuming the only homes that would be staged in a virtual manner using Augmented Reality (AR) are homes priced at or below the median, there is a potential value created of $232,500*0.1* 2,500,000 = $58.125 Billion. That $232,500 is the estimated average home price sold below the median price based on data from the US census.
That $58 Billion is value that is created by increasing the home sale price, not necessarily the addressable market size. Assuming that realtors are the customers, working off the standard 6% commission, the market is $58.125 Billion * 6% = $3.4875 Billion. In order, to create value for the realtors, they must get an earning boost. Assuming that, keeping roughly a third in fees for the product leaving two thirds of the additional value to realtors, sets the market size at roughly $1,000,000,000/yr.
How does the work back to a pricing model? There are 1.1 million realtors in the united states. Therefore, charging roughly $1,000/year approximately reaches that $1 Billion mark if they all adopt it.
In reality, 27% of realtors spend between $500 and $2000 on technology. If only that group adopts it, it would mean the market size is roughly $270,000,000/yr.
Keep in mind, all these numbers reflect the US market alone. They aren’t indicative of the world wide market.
Now, how much does the average realtor stand to gain from using this tool on a sale?
If we take the average home price we used of homes below the median of $232,500 and calculate the commission on that, it’s seen that $232,500 * 10% increase in value * 6% commission = $1,395 in commission increase on a sale. That’s typically split 2 ways, so roughly a $700 increase for the realtor who staged the place virtually. Really good value, even if it took a couple extra hours virtually putting in furniture to a few different homes. Especially, if it helps the buyer make a decision faster, netting the realtor more time to sell more houses.