SAN FRANCISCO — Three real estate industry experts (dotloop’s Austin Allison, the California Association of Realtors’ Joel Singer and Williston Financial Group’s Patrick Stone) discussed this topic at length — here’s what they had to say.
Please see the entire transcript of Austin, Joel, and Patrick’s talk below:
Brad: Now, we want the skinny on Dotloop but we also want to talk about TRID and all this other stuff. So I’ve got three great speakers, Joel Singer, Pat Stone and Austin Allison are going to join me. Housekeeping first. Austin, congratulations.
Austin: Thank you.
Brad: It’s really hard to do what you did. When did you start?
Brad: 2009. Now some people don’t understand something when you sell a company for $108 million. You didn’t get all of that money, right?
Austin: This is true.
Brad: There’s some investors.
Austin: There are some investors.
Brad: Are they happy?
Austin: I think so. Yeah, I think so. It was a good week.
Brad: So what’s the first call you made when you closed?
Austin: The first call I made was, well we didn’t close yet by the way. So we’re still closing.
Brad: Right. You don’t even have the money.
Austin: So my first call was to our customers. The handful of them, yeah.
Brad: That’s cool. But when you close I called my dad. Did you hear that story? I’ll tell you real quick.
Austin: I did hear that story.
Brad: I’m walking down Sausalito. A homeless guy came up to me. I was talking to my dad about closing the sale of Home Gain and he said, he was asking for money and I shooed him away because I was talking to my dad and dad said, “Who was that?” And I said it was a homeless guy asking for money. He goes, “Brad, hang up the phone and give him some money.” (Laugh) So anyway. Anyway congrats. It’s hard to do. And I hope you close. So play it safe here.
Austin: Me too.
Brad: But real quick all the fear in the industry, you know like what’s Keller-Williams telling you? That’s a big customer. What are these people saying? What’s going on?
Austin: Yeah so I think you’re referring to the questions around data and privacy. Is that right?
Brad: Yeah. So just hit it right hard. You had it in your video but I think our audience would like to hear you know eyeball to eyeball.
Austin: Yeah so what’s funny is that most of the questions we’re getting are actually about synergies and what it means to our customers. We’ve gotten a bunch of calls from Dotloop customers and premiere agents about you know are we going to get a discount? Are you going to give the product away for free? And we don’t have a lot of those answers yet but we do hope to do things that benefit our customers in that way. And there’s also been a couple of questions around data and privacy and this is a really easy thing for us to answer. Ever since we started the business six years ago we build it on a foundation of trust and integrity and that included privacy for our customers. So nothing’s going to change our agreements with our customers. We’ll continue to remain intact. And we only use data in ways that are permitted by our end users.
Brad: Because I always tell the example if I bought Housing Ware one reason I’d buy it is for their customer data. I would want it in. But there’s something different here for me getting that data in? Normally I would get the data if I’m the new owner of the company.
Austin: Well I mean one of the things that may be a little bit different is that you know the business of real estate transactions is a pretty important and mission critical component of the real estate transaction. And frankly we wouldn’t have a business today if we didn’t put our customer’s interests first. And you know we have many, many customers, the leading brands and brokerages across the country that trust Dotloop. I’ve seen many of them from you know Sherry Chris, the reality folks to Chris Heller and many others in this room that trust Dotloop because we prove our security and privacy every day.
Brad: Yeah and people may not like some of these companies but you guys aren’t like criminals. You know you would be abusing some pretty serious things. That’s not who you are. So let’s go on to the next one. I’m sure someone will refine the question that I ask when they get up to the mic but what I would like to do is to get to the opportunity that’s created by all of your hard work, Joel’s hard work and Pat. And I mentioned recently how the lights went on for me when Pat Stone who can be you know kind of a curmudgeon about what can and can’t be done. He’s in the title business. He has to be careful about protecting data. There’s a lot of regulation with mortgage. But he said there’s a pony in TRID, the three-headed monster. And what I’d like to do is really get to the heart of that but to move quickly into what we could see in the next year that’s finally going to create what I called years ago the latte vision, what I call now the Keiser experience for the consumer. But first, Pat, quickly for the audience you’re hearing, you’re hearing TRID is dread and I think it is. The government requiring more reporting and most of it nonsensical. But TRID not as dread but first TRID is a regulatory disclosure requirement by your industry and the mortgage industry. Just quickly do a 30 second elevator on that.
Pat: CFPB tasked lenders and the settlement industry with combining truth and lending and RESPA disclosure forms into one form for the consumer with the idea that it would be easier to read, easier to understand and the consumer will get it three days prior to closing. There’s a time requirement. And I’ll tell you honestly the form is easier to understand. It is easier, much more comprehensive for the consumer. I think it’ll actually the form will have a positive impact on consumers because they’ll understand what they’re getting into, they’ll understand what they’re required to pay. They’ll have more clarity and vision into what’s happening.
Brad: And then the second part which I heard you say at the CEO connect which I thought was really important is, and by the way, I hate acronyms. It’s like calling me BJI. I mean who is BJI? CFRBD, what is that agency?
Brad: Yeah who are they?
Pat: Consumer Financial Protection Bureau. And this is the, this is the heavyweight in Washington, D.C. right now. CFPB is overseeing financial activity in the United States and with a very heavy hand. They can find anybody at any time. What they have done is they have told lenders you are responsible for all third-party participants in a transaction. When you are doing any sort of lending, any third-party you use be it the settlement agent or anybody you’re legally responsible for their conduct. Consequently lenders have gone to the title industry and everybody they use they have done tremendous interrogatories to find out if the title industry is compliant, data security, so forth and so on.
Brad: So they’re the regulatory body?
Pat: They are.
Brad: And we’ve got a liberal president and we’re post-subprime so they’re coming down hard on industry. They’re like the FC is trying to get muscle to do their job. So, but the second pony in here is you think they are going to actually through this facilitate an e-transaction.
Pat: Yeah but I get excited about this. I’m going to tell the audience that our industry is going to change. I’m in my 41st year in this business and I have been, I’m very cynical like you over time about anything ever changing. This is going to change this business because there is a level of data integration and systems integration going on now between settlement agents and lenders that I’ve never seen before. There are conversations about setting us up for electronic transfer of information and absolute working together. And it will extend to the realtor community also. On top of which CFPB’s next mandate is going to be promoting e-closing. So we are actually, I’m actually going to see this in my career.
Brad: So back to my Keiser, all in the Cloud, all on a password (screech). That was the CFB. (Laugh) The mortgage app, all of that data I control it. Right? So I’m responsible for it. Can we get there Joel where all of this integration in the backend that used to be impossible and the e-signature. We bring in, we bring in Austin’s stuff, we bring in your stuff, we bring in the forms. Are you as excited? Because you’re cynical too about things.
Joel: Yeah well I agree with Pat. And I am cynical. But before I agree valiantly with Pat I want to congratulate Austin. It’s quite an achievement. It’s a remarkable valuation. On behalf of the realtors who own ZipForm this is a Zestimate we love. (Laugh)
Austin: Thanks, Joel.
Joel: In any case, going forward I think it’s going to accelerate a development that has been very slow and piecemeal. Transaction management from a standpoint of technology should have been much further along than it is. With the regulatory agency it’s going to accelerate dramatically quite along the lines Pat says. I think the interesting aspect for those of you who are real estate practitioners is at least for the foreseeable future the main emphasis is going to come on the financial services side. There’s another track that Austin’s involved in, we’ve been involved in for 15 years, which is the real estate side of transaction management. For the most part they’ve been two separate tracks. I think the real promise for the future from the consumer standpoint, from a technology standpoint is actually melding them into a single track. And although I don’t think it’s going to happen immediately the precursor for that is the type of integration that Pat’s been talking about. And we are excited about it. We, you know in the short term by the way there will be some dislocation in terms of closing transactions. You know I think you have to be a little cautious. You may have to for the next few months there will be incidents, particularly I think with the smaller lenders where there may be some delays in closings. But our suspicion is that the infrastructures already in place among the larger lenders, the larger title companies. Six, eighteen months from now we will have forgotten this location and then that’s when the opportunity will start accelerating.
Brad: So now we can put all of that, that data will be integrated. You said, I think Pat instead of how many data entries in a real estate transaction?
Pat: You know we did a survey once and to go around the country on average names and property addresses or legal descriptions are entered an average of 80 times per transaction, by if you count all the participants and all that time they did. And you can’t do it 80 times without there being a mistake. You just can’t.
Brad: So Austin now imagine you’ve got a piece of the puzzle, Joel has a piece of the puzzle. There’s forms, there’s documents. What, and I’m going to throw out a challenge to the entrepreneurs here. What can you imagine the entrepreneur side, the product guys building because no offense to Joel and Pat but I don’t think they’re going to build the cool product. They can’t build Nest. They can solve the backend. I know they’re both trying but, and I love them but I don’t think they will. What, challenge the entrepreneurs, what do we need now to be able to put all this in one bundle so I can go on just as I do my health records and find all this stuff there, notification, communication, and storage data on one place. No more faxes, no more spreadsheets, no more PDFs.
Austin: Yeah, I think we’re already doing it. I do think we’re on track to transition from what has historically been a fragmented, frustrating, inefficient process to a process that’s very efficient and seamless online. And Dotloop’s played a role in that. ZipLogix and many other entrepreneurs in this room have done the same. And I think it’s a function of time. I mean when you think about the, I don’t know that anybody in this room would deny the fact that the transaction experience is transitioning to being an online experience. It’s the right thing for.
Brad: For the whole closing?
Austin: Yeah the whole process. You know search all the way to close. It’s the right thing for consumers. It’s the right thing for the industry. It eliminates friction and introduces efficiency which translates into profitability and growth over time. I don’t think anybody in the room would deny that. The question is how we get there. And obviously it needs to be compliant and legal. And a lot of the regulatory changes that are happening I would agree with these guys are a great thing for the consumer and for the industry long term. I think the other piece of it is making the process seamless. And that happens through product innovation. It happens through customer service and customer support. And you know feet on the street. Helping real estate agents and real estate brokerages use the tools that are out there and leverage the resources that we all have to innovate faster and better than we have.
Brad: And Austin what if, and let me ask you all, and you guys both have products so I want you to defend them. But I want to throw out $25,000 from Brad Inman to the entrepreneur that December 1st builds the specifications for the product that I described at Keiser. I will write you a check under this. I don’t want to invest. I don’t want to own because I don’t want any conflicts with Inman. I will donate whatever if you get off the ground my shares to a nonprofit. But I really want someone to tell me, there’s a real simple product. Would you throw your stuff, Austin, into this? And could we throw title and mortgage and could we, my purchase offer Joel. I’d like to have that in there. And the home inspection. Can we put this all in one place? Just data storage and allow me to do e-signature inside this environment and have that shared amongst all the people?
Joel: The technology is there.
Brad: Am I asking for something stupid?
Joel: The technology is there, Brad. You know Austin.
Brad: Why didn’t I have it when I did my deal?
Joel: Austin’s got a part, Pat’s got a part, we all have a part. There’s other issues that I think have to still be discussed. Among the issues is the question of the data. Austin’s valuation is an incredible valuation. There was some bet being made, in my view, on the value of the data because the data is significant. We have a data warehouse that does 40,000 transactions daily. Those transactions include incredible data in what is historically a dark period. Right? From the contract until the close is finished that’s the dark period. That is really valuable. One of the great discussions that I think has to happen is who controls that data, how is it used. I think people will be response to it.
Brad: Joel I totally respect you but you guys have been discussing it for 20 goddamn years and I still can’t get an automated transaction. Will you stop discussing it? Let’s get this done. You’re saying now we can do it legally. Why can’t we do it?
Joel: Well, control of data is not irrelevant by the way. Ask Pat. (Laugh)
Pat: So we participated, CFPB ran an e-closing experiment. We participated in it with a large credit union and Accenture, a Boeing Credit Union and Accenture. 100% e-closing 200-500 transactions a month. Now the only difference between that and real life is it was a credit union so they didn’t sell the note. So e-note was not an issue. Signed on iPads.
Brad: What does that do? Just so I understand that little dilemma.
Pat: Well the problem with e-closing so far is that the secondary market won’t take e-notes but I think that’s going to change.
Joel: Well notarization is a problem.
Brad: The secondary market. Who Fannie Mae and Freddie?
Pat: Yeah. And private.
Joel: Well there’s a notarization issue. Every state’s got a notarization rule. Virginia’s got a notarization rule because we’ve done some e-closings using our e-signature but on packages in Virginia. The regulatory environment is not there yet.
Brad: Did you sell that in California yet? You have all that political crap?
Joel: We’re working on it. It’s very hard. The lenders, you know ask the realtors.
Brad: Solve a way to do that you know instead of some of these other shenanigans. Why don’t they just pour it all in to making it easier for consumers to close the transaction?
Joel: Look, I think realtors have made it easy for consumers to begin transactions in many, many ways. I think the realtor is the one who has got the relationship with the consumer. The last thing the realtor wants is to do is to make the consumers life hard. The focus has to be on how you do that. And the role of the realtor is also on question here, it seems to me as you add technology. Technology, and you know hats off to Zillow. They’ve become you know the consumer brand in the search industry. But the consumer brand from contract to close at the moment is the realtor. You’re the ones, those realtors in the audience, who solve all the problems. You’re the ones who do it all behind the scene. And new technology will help you do it better. Austin and I valiantly agree on that one too. But the issue is.
Brad: But Joel if Steve had given me that app it would be Steve not Keiser. Steve. Brad, Steve. Brad, Steve. And I would be loyal to Steve. And Steve would be in there because I trust him so he provided it for me.
Joel: Again, go back to the data.
Brad: Or it can be Austin or Zillow doing it for me.
Joel: Absolutely. Go back to the data.
Brad: But if you don’t do it don’t blame them for doing it.
Joel: Hey. The issue.
Brad: I want to buy another house but I don’t think I’m going to do it just because.
Joel: Well, you know what Brad? If you use some of our software and I’ll talk about all three of us, you’ll have a better experience. You should try it. (Laugh)
Brad: Feeling honorary today. I don’t know. I’m sorry. I’m sorry. I like you guys.
Pat: But real quickly for the audiences sake. The capability is there. Fannie Mae did a study, an e-closing study with a common data room where everybody could access data as needed. And they did it all e-closing. Average closing time is 21 days, which I think everyone here, including the three of us or four of us would really appreciate. So the technology is there and I think we are breaking down.
Brad: Well and also Pat I think your point about the title of this section is Taking time, cost and failure out of the real estate transaction and we know things fall out because people aren’t qualified, they change their mind. But a lot of it falls out just because of the time you know solving that. I mean I’ve got to tell you that, that e-signature for me in business just changed everything. I’m more likely to maybe sign a stupid deal because it’s so easy now on my phone. You know? Austin, you were told to be really quiet, I know.
Austin: No, I’m happy to chime in. I think this is, you know, pretty simply a function of time and a big industry transitioning from a place that has been very fragmented to a place that’s very seamless and collaborative. And one of the things that is interesting and dynamic about the real estate transaction is just how many people are involved in the process. And I know I can speak for you know lots of our customers, many of which are in this room, that are running very efficient, end to end seamless transaction experiences through their brokerages. But you know somewhere around 9 out of 10 transactions involve two different agents from two different brands. So somebody could be completely online and digital here interacting with somebody who’s not on the other side. And it takes time for an industry this large to adopt it.
Brad: I’ve got a cardiologist in New York. I’ve got a cardiologist in L.A. I’ve got a cardiologist in San Francisco. I’ve got nurses. I’ve got dermatologists. I’ve got reports. A lot of vendors working on Inman and it’s all in Keiser. It’s all there. It’s easy. I guess what I want to do is all the excuses we have. Now it’s going to be fight over data. Another fight over data and I’m going to have to wait five more years. Let’s just get this done.
Joel: Brad, you’ve got the connectivity issues that we talked about earlier. You know we’re both trying to accelerate connectivity on two different tracks. Right? The financial community is doing it. They’re going to get a good boost. But you know I think Pat you said three to five years. Isn’t that what you said?
Joel: You know this stuff is not easy.
Brad: Three to five years more?
Joel: On the financial side. On the real estate side it’s going to take you know not that long necessarily because we’re pretty close. But until both sides get it done, until there’s a set of rules there’s going to be a lot of regulatory changes needed. There’s going to be some legislative changes needed. And then you merge it together. But it’s very, very close. As I say it’s not a technology issue. A lot of this has to do, you know a lot of this has to do with a regulatory environment. And you’re talking about a transaction that occurs you know once in ten years. It’s an unusual transaction. It’s much more than a business transaction. It’s buying a home. And the government doesn’t make that easier. Their view is not that we should you know exchange this.
Brad: You know right now they’re making it easier. Right, Pat?
Pat: They are going to make it easier.
Brad: And that we should ride that. Just like it made health records easier.
Pat: And actually that’s the blessing on this. This is a lot of regulation. It’s a lot of disclosure. It’s a lot of pain. The end result will three to five years from now 21 to 30 day closings, instead of 20% falling out 5% or 10% falls out. We all make more money. We’re all happy. And we have a happier consumer.
Brad: So three of the smartest people in the industry are working on this so I feel really good. I will get texts as I do when I walk into these from people say, “Push them, push them, push them Brad.” And every time I’m up here people are all, “Why are you like that?” Well I’m pushed by my customers to push you. So let’s make it happen. Let’s cheer them on. And by New York we’ll do an automated closing.