Beyond the Hype : Unveiling the Marginal Benefits of 3D Virtual Tours in Real Estate

3D virtual tours (VTs) have become a popular digital tool in real estate platforms, enabling potential buyers to virtually walk through the houses they search for online. In this paper, we study home sellers' adoption of VTs and the VTs' relative benefits compared to other marketing efforts. Using data on 75,178 houses sold in the greater Los Angeles area from March 2019 to March 2021, employing computer vision, natural language processing, and causal machine learning, we present four key findings. First, sellers using VTs provide longer descriptions and more photos, suggesting VTs supplement traditional marketing efforts rather than replace them. Second, after controlling for photo content and quality and listing description sentiment and topics, VTs do not significantly increase sale prices and slightly increase time on the market, suggesting their marginal benefits are smaller than previously thought. Third, smaller firms/agents and neighborhoods with more racial minorities and lower-income households benefit most from VT adoption but do so less frequently, presenting opportunities for platforms and policymakers to encourage VT adoption among these groups. Lastly, although VTs do not significantly improve final sale outcomes, they may offer benefits such as helping consumers screen options and assisting sellers in portfolio growth and management