When we first started working on the nuts and bolts of a real estate transaction system many years back, it was a formidable task. Having initiated the project with all the typical arrogance of a Silicon Valley Masters-Of-The-Universe attitude, we slowly realized that we had grossly underestimated how difficult it is to build a good, complete system.
But today at planetRE, we offer a system that’s now been used for millions of transactions by agents at brokerages across the country.
Real estate transactions in the U.S. make for one of the most complex and obscure business processes in the world. It’s not clear, for example, why the various fees and charges at various points along the way for consumers, like closing costs and escrow documentation, should be what they are.
The question in this day and age of huge databases and interconnected information systems is why buying a house isn’t as easy for consumers as buying products off of Amazon, and why we’re still living in this byzantine system where random fees pop up and we’re still reliant on individuals’ vacation schedules to find out whether we qualified for a loan or not, and at what rate.
The complexity of transactions management
Our transactions also have multiple actors – real estate agencies, buyer, seller, lender, title, escrow, attorneys and so on.
These actors change based on which state you operate in. Then there is mountain of paperwork with privileges as to who can see what. Technologists building systems to manage these detailed workflows are like conductors who have to control and orchestrate a broad symphony.
Transaction coordinators are the unsung heroes of our industry who make it all happen. It doesn’t matter what form of conventional or alternate financing one uses but the processes are similar and complex.
Back when we started working on transaction management systems, we asked, “whom are we are building for?” We answered: the consumer. Why? Because they are the ones who fund the whole drama. They need transparency, efficiency — and some cases — accountability from service providers.
We imagined that the consumer should know where the loan is at two in the morning if they were anxious enough. We called it “on demand” since the word “cloud” was not invented. Overall, we set out to build a comprehensive transaction system and we did.
Then something else happened a decade ago – new systems sprung on the market that allowed agents to fill out contracts online, sign and store documents with full use of electronic signatures to speed up the deal.
Many good companies went and just did that. It moved the needle forward. It catered to agents, helping them be subscribers to these services to ease their lives, enabling them to make the “deal” even from a phone.
However, signing the contract is one of the 100 spokes in the giant transaction wheel. What about rest of the transparency of the deal to customers? Hmm. we don’t really have one, do we?
We’re still stuck in the dark ages
We spend a lot of money buying lead traffic or leads and give our beloved consumers a visitor login to our website portal. In a few days, if all goes well, the lead becomes a client. Yet there is nothing hooked up to transactions on these consumer portals.
If you reimagined this in a retail context, it’s like you buy a product on Amazon but have log into a different web site to track where it is on its way to your house.
Let’s roll up to 2020 now. I did a property refinance transaction recently. The experience was a roller coaster that took me many years back in time. Nothing much has changed in terms of transparency.
I tried more than one lender. The experiences were similar. They use similar software. There were a few e-signatures here and there. The rest was as it always was.
I also observed that even though the signing process is much easier than before, it’s almost gone backwards in that the process is less transparent. It’s not as easy to read the contracts and the fine print as with hard copies of documents. I found that a bit scary.
We have been stuck for a decade with e-signing like a groove on a gramophone record for transaction management systems.
As a consumer, do you think I am more interested in electronically signing my deal, or seeing the status of my loan application at two in the morning? Call me anxious. Most consumers are.
My guess would be the latter. Once the money is taken care of, bulk of the anxiety over the whole process subsides.
What are we, as an industry, doing to improve this most important aspect of the homebuying transaction process? I would argue: Not enough.
The real estate industry is still hopelessly fragmented, and for most, buying and selling a home still involves a lot of inefficient and anxiety-inducing processes, some of that is driven by the competing politics of the different industry stakeholders. It’s often difficult to even get your real estate agent to answer the phone once you become a client.
If our industry adopted Amazon founder Jeff Bezos’ obsession with client satisfaction, we wouldn’t have any of these pain points or anxiety-inducing moments with our loan applications and refinancings. I may even be able to login at two in the morning and see which underwriter has my file, and what is holding them up. I could see an estimated time of completion for their work.
Even better why not have a “robo-underwriter” to approve or decline the loan applications? With our artificial intelligence systems programmed with all rules, and our financial data online, this isn’t in the realm of science fiction. All the information an underwriter needs today is in electronic form anyway (tax transcripts, credit reports, W-2, bank statements, signed mortgage application etc.) Machines can analyze and respond faster with lower error rates than humans. There needs to be minimum to no human intervention in the process.
Can we deploy transaction management systems enabling such transparencies at all levels? It’s formidable, but it can be done.
If the wave of consumer-centrism as advocated by the likes of Bezos persists, and some venture capitalist funds it, whoever scales fastest and pushes and reaches this point first will win the game and put everyone else out of business, a bit like Amazon.