Sometimes, when you cover your ears to escape all the chatter about real estate crowdfunding, you may ask yourself, “What is the big deal?”

After all, crowdfunding is not new. Indeed, it’s ancient.

“At the end of the sermon, they’re passing the plate,” crowdfunding expert Sydney Armani said at a recent crowdfunding conference hosted by The Soho Loft, a financial adviser for crowdfunders.

Real estate finance is also no stranger to crowdfunding. For decades, intermediaries have aggregated and funneled money from investors to real estate companies that use the money to purchase or develop property.

But the fact is, the technology-fueled method of pooling money for real estate investments that has come to hog the label of “crowdfunding” iterates on its predecessors in a fashion that could transform real estate finance in a big way, particularly once the Securities and Exchange Commission (SEC) fully implements new regulatory changes.

As a result, the differences between crowdfunding and its ancestral forms may be worth exploring. If you’re interested, they boil down to two words: access and transparency.

Accredited investors, all aboard!

Real estate crowdfunding — pooling money online to purchase individual properties — opens up real estate investments to many more people than traditional “real estate syndication,” crowdfunding’s offline predecessor.

That’s partly because crowdfunders power portals that anyone can visit to glean at least some information about potential real estate investments, whereas in the past, investors could only sniff out syndication deals by tapping existing relationships with syndicators or making direct offline contact with them.

“Almost every investor in our transactions wouldn’t have known about the transactions without us,” said Jilliene Helman, CEO of real estate crowdfunder Realty Mogul, in a crowdfunding panel discussion at The Soho Loft.

Realty Mogul, which crowdfunds both residential and commercial properties, has raised about $8 million for 23 deals since its founding in 2012, according to Helman.

Still, it’s not as if anyone can join the party. Generally, real estate crowdfunders let only “accredited investors” — investors who are worth at least $1 million or have made at least $200,000 a year for the last two years — participate in their deals. In fact, most of them won’t even show their investments on their websites to people who don’t represent themselves to be accredited investors.

That’s because, traditionally, the SEC has allowed companies to raise money from investors without filing for a public offering (a move that is cost-prohibitive for many small companies) only if the companies use a securities exemption, and most securities exemptions don’t permit companies to publicly solicit funds.

According to the exemption that Realty Mogul and others use (Rule 506(b) of Regulation D), maintaining a website that publicly displays deals counts as “general solicitation.”

Ready, set, solicit

But to much fanfare, the SEC recently changed course. In implementing Title II of the Jumpstart Our Business Startups (JOBS) Act, it lifted the ban on general solicitation for private offerings.

Still, many crowdfunders don’t publicly display their investments because, as part of the new regulation implemented by Title II (Rule 506(c) of Regulation D), doing so also requires them to verify that investors are accredited.

Most real estate crowdfunders prefer to let investors self-certify their qualifications — which they can still do if they follow the rule that they have been following (Rule 506(b) of Regulation D) and don’t publicly display their deals.

If crowdfunders advertise their investments, “it now is the issuer’s burden and liability to prove net worth or salary,” said David Drake, chairman of The Soho Loft and a founder of Crowdfund Intermediary Regulatory Advocates (CFIRA). Real estate crowdfunders “don’t want that liability and rightfully so for now.”

Nonetheless, experts say the lifting of the ban on general solicitation is likely to fertilize crowdfunding as companies grow more comfortable with 506(c) and ultimately take advantage of it.

At least one real estate crowdfunder has already decided to test the waters.

Democratizing real estate investment

Fundrise pounced on the opportunity to publicly display a private investment opportunity the very day Title II went into effect in September, posting a $500,000 private offering for a Washington, D.C., commercial property currently occupied by a grocery store, according to CEO Ben Miller.

Fundrise’s trailblazing doesn’t end there. The startup, which Miller said has raised $7.75 million for deals so far, also demonstrates crowdfunders’ potential to drastically increase accessibility to investments by virtually extinguishing the entry threshold for people who want to invest in individual properties.

In addition to doing private offerings with accredited investors, the startup also conducts bona fide crowdfunding: fundraising that draws on the crowd — not just people who make more than $200,000 or have a high net worth. Shares of its “local public offerings” cost only $100 a pop.

Fundrise pulls this off by using a different securities exemption than most other real estate crowdfunders. The exemption (Regulation A) lets small companies raise up to $5 million from the public in a sort of miniature public offering that costs less than a full-blown initial public offering (IPO). Regulation A allows companies to advertise their investments, so Fundrise openly displays all its Regulation A offerings, and, depending on its investors’ preferences, some of its private offerings (Regulation D).

Screen shot of Fundrise’s investor dashboard.

Other real estate crowdfunders don’t use Regulation A because it requires companies to prepare vast amounts of paperwork and obtain direct approval from the SEC. (Regulation A offerings are still easier and cheaper to execute than traditional IPOs, though.)

“It costs a lot more work to be compliant,” Miller said of Fundrise’s Regulation A public offerings. “We spend hundreds of thousands of dollars a year.”

For that reason, most real estate crowdfunders use exemption Regulation D, even though it only allows them to raise money from accredited investors.

But in doing so, crowdfunders like Realty Mogul, iFunding and the recently launched RealtyShares still transact deals that require much lower minimum investments than traditional real estate syndicators, which generally require minimum investments of at least $100,000, according to Helman.

Realty Mogul’s minimum investment is only $5,000. IFunding, which specializes in single-family home flips, sells shares in its private offerings for as little as $1,000.

IFunding funnels the money it raises to builders who flip homes within four to six months and then share the profits with iFunding’s investors.

The JOBS Act effect

The green shoots sprouting in the real estate crowdfunding space may presage a full-blown renaissance. Should the SEC implement Title III of the JOBS Act, regulation that it’s currently reviewing, companies would be able to raise money from nonaccredited investors much more easily than they can now.

Title III, in fact, is largely the reason why many crowdfunders launched in the first place.

The regulatory change would make it possible for small companies to issue shares to the public without obtaining direct approval from the SEC. Crowdfunders would be able to offer the sort of real estate investments that Fundrise already does using Regulation A without having to shell out close to as much cash.

The SEC is currently gathering comments from the public on Title III. Drake said he believes the agency will implement some form of it in the summer of 2014.

Thus, if all goes as planned, real estate crowdfunding will transform an investment opportunity — fractional ownership of a single property — once open exclusively to rich, well-connected people to one that is available to just about anyone.

Pulling back the curtains

But real estate crowdfunding doesn’t only stand out from its ancestral forms simply because it opens up investment opportunities to more people.

“In traditional syndicate fundraising, you don’t have a direct connection to what you have invested in or with whom,” Miller said. Miller claimed that, traditionally, investors mostly received information on their investments in the form of financial and tax filings mailed to them perhaps once a year.

Real estate crowdfunders, however, tend to put their projects under a microscope.

“Real estate crowdfunders allow an unprecedented level of transparency because now reporting can be pushed to them simply through an online portal similar to E*Trade,” he said.

Whenever they want, investors typically may sign into online dashboards from smartphones, desktops or tablets to see frequent, or even real-time, updates on their property.

Fundrise’s online portfolio lets users view updates including monthly leasing updates, photos of a property, construction invoices and geotechnical reports. The crowdfunder even shows investors the identities of their co-investors, serving up headshots of the them (linked to LinkedIn profiles pages).

“Have you ever heard of an investment when you know who else you’re investing with?” Miller asks.

Realty Mogul keeps all of its investors in the loop by producing webinars and Q-and-A lists for each investment.

“Newer investors can benefit from listening to the questions more sophisticated investors ask about the market, property comparables, economic drivers, returns and structure,” she said.

In addition to posting the latest invoices associated with a home flip, iFunding even lets its investors monitor projects in real time through live video.

“They love this,” said CEO William Skelley.

Editor’s note: A previous version of this story incorrectly stated that RealtyMogul is currently managing 15 deals and has raised about $10 million for its investments since its founding.

In fact, the crowdfunder has raised about $8 million for 23 deals. The original story incorrectly tied those numbers to crowdfunder iFunding.