Closer than Ever, But Still Far Away
This is the fourth blog post in a series of ten that covers the trends that will shape the residential real estate industry in 2019 and beyond according to the publication, Swanepoel Trends Report 2019. The views, thoughts, and opinions expressed in this post belong solely to the author, and not necessarily to the author’s employer or the publication cited.
The real estate transaction has long been an analog process that has, until recently, been more than adequate. Real estate agents who could manage the plethora of different systems and personalities (i.e. mortgage, inspection, title, insurance, etc.) could excel in the business.
More companies, both inside and outside our industry, are now recognizing that the real estate transaction is broken. Too many unknowns; too many systems; too many parts that don’t talk to each other; too much duplication – – – and none of them create an exceptional customer experience. But that is changing.
The Swanepoel Trends Report looks at the typical real estate transaction and breaks it down into fourteen, disjointed steps:
To make it even more confusing to the consumer, travel from county to county or state to state and some of these steps don’t even exist or there may be additional steps. Add on top of the geographic idiosyncrasies the fact that each step has different players that perform a variety of diverse services, and you have the making for a very complex transaction.
Technology is not the issue when it comes to the dilemma of creating a digital end-to-end experience. It exists now. Here are the real hurdles as outlined by the report:
Data Standards – The brokerage part of the equation is probably further ahead than the mortgage and title industries are at this point. The Real Estate Standards Organization (RESO, www.reso.org) has developed standards for defining and moving data within the brokerage industry.
The mortgage industry has their own set of standards that has been developed through the Mortgage Industry Standards Maintenance Organization (MISMO, www.mismo.org).
The title industry at this point is well back in their quest to standardize their part of the transaction.
Lack of Integration – If you look closely at what exists now, none of these standards really talk with each other. UGH!
Whose Closing Platform – Within each industry, their are numerous platforms that the respective players utilize. For instance, the brokerage industry has at lease a dozen or more platforms to manage the transaction. DocuSign, SkySlope and DotLoop are perhaps the most popular.
Personally, I don’t see major strides being made in the end-to-end transaction until some of the platforms go out of business or get bought out by competitors. It’s just too difficult to get multiple platforms with one industry to communicate with multiple platforms from another. By the way, I don’t think that time is too far off.
Fraud Risk – The back-end of all these programs also need to be able to ward off the risk of wire fraud. Anytime you have two platforms communicate with each other, there is a risk that someone is scrapping the data that is going back and forth and using it to wreak havoc in the transaction.
Movement Toward a Digital Transaction
Even with all these challenges, strides are being made to one day get to a seamless digital transaction.
Within the last twenty-four months, states are starting to allow Remote Online Notarization (RON) which allow closings to take place without a live notary present at the settlement table. In order to take advantage of RON, the lender, borrower and title company all need to make their platforms accommodate the new technology. If they don’t, they risk the consumer selecting another vendor who will make their platform hold hands with the new technology.
And then you have all these participants who are at the mercy of investors who buy these loans. Some will accept electronic closing documents – some won’t.
So where do we stand?
Digitizing the Transaction
Since all these industries know that the digitized transaction is the future of our business, why can’t we get it done?
Well it’s like sticking Steve Jobs, Bill Gates, Jeff Bezos, and Sam Walton in a room and asking them to create the perfect customer experience. Each of them could accomplish it on their own if left to their own devices. But throw other ego-driven personalities into the mix with their own ideas and – – – well, I think you understand the crux of the matter.
The Real Estate Brokerage Digital Marketplace
Large real estate brokerages have been trying to create end-to-end platforms for years with varying degrees of success. They try and integrate the mortgage, title, and insurance puzzle pieces together to create a better customer experience.
Companies like Realogy and HomeServices of America have long trumpeted the advantages of trying to integrate these services into their offerings to the general public. While they have successfully built a broader business model, even their own internal subsidiaries at times don’t talk to each other.
And then there are the disruptors; Redfin, OpenDoor, and Zillow Group, who are looking to re-write how the real estate transaction is performed. Personally, I think their odds of achieving the end-to-end digital transaction are much better than existing real estate brokerages because they don’t have to play by traditional rules and worry about who’s toes they step on.
Whether you like them or not, you’ve got to give them credit for forcing our industry to take a good hard look in the mirror and face some tough questions about how we conduct business.
The Mortgage Digital Marketplace
Lenders are beginning to recognize that they need to form long-term relationships with their customers. This means identifying the consumer early on in the home search process and then continuing that business partnership through multiple transactions. (Hmm!?!?! Kinda’ sounds like what real estate agents/companies are trying to do.)
Probably the largest pain point of most home buyers is the application and processing of their mortgage but that is getting better by the day.
The standard mortgage application (Fannie Mae Uniform Residential Loan Application 1003) is now digitized and can be integrated with numerous loan origination systems.
One such system, AccountChek by FormFree, eliminates the hassle of collecting paper statements from borrowers, reducing the length of time to verify employment and asset data two to three weeks through an advanced asset verifier system.
By creating this faster, digital experience, lenders can increase the likelihood of doing business with the borrower time and time again.
Enter Quicken Loans. They have rocketed to the top spot (no pun intended) in mortgage loan originations supplanting perennial mortgage behemoth, Wells Fargo.
Many in the real estate and lending industry poo-poo their brand but there is no denying their impact. Rocket Mortgage has successfully branded itself as the digital way to get a mortgage. Faster and more convenient is their mantra.
Well don’t look now, but they are also getting into the home search business with Rocket Homes. By the end of 2019, they plan to have national listing coverage where a consumer will be able to search for a home and apply for a mortgage on a high-tech, digital website. Quicken already has a nationwide referral network of 25,000 agents where they can refer a qualified buyer who wants to buy a home and collect a referral fee.
Quicken is pushing the digital, end-to-end, transaction envelope and will force not only lenders to rethink their business model, but real estate companies as well.
The Title Insurance Digital Marketplace
And then there is the title business. Their job has traditionally been to stand in line until the real estate broker and loan originator have done their thing. Not anymore.
Fidelity National Financial, a mega-title provide, has revealed its intention to build an end-to-end real estate digital platform. Their vision is to build a system that takes the client from contact through contract to close.
To accomplish this, they have bought two CRM (Customer Relationship Management) platforms within the past twenty-four months, CINC and RealGeeks. They have also bought a majority stake in the digital transaction management platform SkySlope.
These acquisitions and investments have nothing to do with the title business. They have everything to do with building something bigger.
Wow! There’s tons to absorb here.
It seems like there are a lot of major players in various, real estate industries that are racing into the fray to create the ultimate digital real estate experience. At some point, I think these major players will come together or absorb each other which will create critical mass.
Couple that with the public clamoring for an easier, more fluid transaction experience, and you have the setting for a tidal wave of change.
In my opinion, when that wave begins to emerge, many surfers who aren’t ready to embrace a new way of doing business will get caught in the undertow and get pulled under. It’s inevitable.
Man – – – I love this business!
Up Next: Trend 06: The NAR-Broker Relationship; How Brokerages Can Best Leverage NAR
SOURCE: Clarke, Ben and Conaway, Jeremy. “Trend 7: The Digital End-To-End Real Estate Transaction Dream; Closer than Ever, But Still Far Away.” Swanepoel Trends Report 2019, edited by Stefan Swanepoel, 14th Annual Edition, RealSure, Inc. and T3 Sixty, LLC, 2019, pp. 62-78.