We were pleased to see our old friend, Brad Inman, take the real estate industry to task in his recent article: “Why homesellers demand better than a shaky real estate labyrinth.”
If you missed it, Inman wondered why some people write checks at grocery stores while others use Apple Pay.
He also wondered why we can order any other kind of product from our phone or tablet and receive it the next day but need to invest months, reams of paper and all of the minutes in our unlimited phone plans during the process of buying a home.
For many reasons, the real estate process continues to be mired in inefficiency, delay and cost despite the availability of incredible new technologies used by virtually every other industry.
We may even borrow Inman’s vivid use of the term “labyrinth” to describe the process. It’s painfully accurate. And it’s what we’ve been preaching to anyone who would listen for years.
Terms like “silo,” “compartmentalized,” “ad hoc,” “inefficiency,” “bolted-on technology” and “ineffective” come to mind as well.
The real estate and mortgage industry could undoubtedly do much, much better for the consumer — and for itself — when it comes to the dilapidated and decaying “process” it tends to use to usher a homebuyer through the process.
We beg to differ, however, with the notion that the blame for this train wreck of a process lies at the doorstep of the title agent and the mortgage lender. We’re all in this together, and that includes the solution.
Think in terms of circularity rather than linearity
The real estate process, whether we admit it or not, is symbiotic. Each of the businesses and professionals working to put a consumer into a home has a part to play and is simultaneously dependent on other service providers to advance the process. That includes, of course, realty professionals.
As trusted advisers and information gatekeepers for the consumer, agents have tremendous influence over the transaction. If we only put the onus for improvement on lenders or title companies, we’re already off to a poor start.
Everyone needs to be involved in the improvement of the process because everyone will be affected by changes to the process.
Let’s not forget, either, that no one company owns much of the process, much less the entire transaction. A lender is dependent on the title firm to build a Loan Estimate disclosure.
A real estate agent can’t give his or her client the keys until the closing agent finishes the settlement. A title agent can’t begin the settlement process without key information from the lender and/or real estate professional.
And the real estate agent, while perhaps not “owning” many segments of the transaction beyond the sales purchase agreement, may well have the most influence on her client’s homebuying decision, choice of mortgage lender and more.
Forget going it alone
When market pressures or regulatory changes drive us to build new solutions, as an industry, we tend to go it alone. The title side gets to work building a system for title providers. The lender side gets busy building a lender-focused solution.
Instead of truly collaborating for comprehensive technologies that empower all of the service providers involved, each segment tends to withdraw into its own think tank to create a technology that works only for its own particular function.
This is a funny way to solve challenges that affect all of the firms helping advance a transaction. We forget every day that processing a home sale or purchase is about interaction and collaboration. And right now, not a single group of providers is doing it as well as it can be done.
It’s also easy to forget that, unlike real estate providers, lenders and title companies must function within an extremely rigid environment of compliance and information security requirements.
These aren’t optional, and failure to meet them can bring serious consequences.
Unfortunately, this framework often imposes limits on what we can (or cannot) do with our production processes and technologies.
Look to improve on current solutions
The great news, however, is that there are some answers emerging and progress is underway. We have recently seen a re-emphasis by MBA on its MISMO initiative (first started in 1999), whereby lenders share a common electronic standard for the mortgage industry to reduce time and cost of processing while facilitating data exchange.
There are effective vendor management programs now in place between the mortgage and title industries that allow for integrations between loan origination systems and title production systems, thereby eliminating rekeying of data in both ordering and delivering functions.
The savings in rekeying time are about an hour a file, but the elimination of mistakes and keying errors, plus the reduction in phone calls, faxes, scanning and other functions is manifest.
Of most interest to the real estate community is the emergence of high quality “dashboard” programs for consumers, realty professionals and lenders. These programs automatically update the consumer, realty professional and lender on the status of a transaction, thereby eliminating countless phone calls, inquiries and the dreaded anxiety that goes along with uncertainty and the lack of understanding.
The “dashboards” currently in use provide up to 21 updates during the course of an escrow, done automatically out of the escrow system.
The real estate agents involved in the transaction can request that they deliver some of the updates personally, or choose to let the system operate automatically while still acknowledging their participation.
Response to the “dashboard” concept has been overwhelmingly positive and resulted in buyers and sellers coming to the closing table much better informed and without the typical anxiety bred in the vacuum of uncertainty.
Communicate and collaborate
Let’s start — be it title underwriters, loan origination system developers, major brokerages or community banks — with a spirit of collaboration. There are too many “end-to-end” technologies that truly only cover a small part of the entire transaction.
We’ve focused a lot on technology development for the sales side of things. And why not? It’s easier and more fun. But attacking a mess of a process? Quite a challenge. But it can — and is — being done. Right now.
Let’s drive out the “go it alone” mentality that has cursed our industry for decades. This is what causes two or even three providers to rekey data that’s already there for the using. No other industry retraces its steps or chases its tail as often and as ineffectively as our industry. It’s within our power to change that, if we choose.
Let’s think of the homebuying process in a circular, rather than linear, fashion. Right now, we move with all of the efficiency and effectiveness of a 1950s automobile assembly line.
Each service provider stands at its place on the line, doing nothing until the product reaches that provider in its particular role. Once that job is done, the product moves up the line, and the provider returns to dormancy. Wouldn’t it condense the cycle if we worked on the product at the same time, collaboratively?
It’s difficult to collaborate (especially in this small world of ours) without communication. It is high time for us to address this issue, using new technology to evolve.
Let’s remove the fax machine, courier and snail mail (as much as legally possible) from the equation. Let’s make the phone the channel of last resort.
There are many robust technologies available, and more coming, that should give all providers (and the consumer) access to the transaction status at anytime, anywhere. It’s time to make that the rule, rather than the exception.
It’s very easy to sit back and apportion fault for the mess that is the real estate transaction process today. It’s unquestionably outdated and ineffective.
It’s no secret that the next wave of homebuyers from the millennial generation will have even less tolerance for a process that mirrors the best practices of the early 20th Century.
So it’s not just in the interest of the customer, but in our own interest as well, that we pull it together quickly. It’s now reasonable to expect even more clarity as these system integrations continue, and it’s not a long-term expectation. This is happening every day, right now.
A better transaction is within our reach, especially if we are all willing to be involved to make it work.