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With all the changes afoot in home lending, real estate agents risk being schooled by their clients — or losing them — if they’re not prepared to explain the pros and cons of the options available to them, including cash offer and “buy before you sell” products.
Agents attending the Mortgage Connect track at Inman Connect Las Vegas Wednesday got tips on partnering with lenders and alternative financing providers to land more clients and overcome obstacles that can derail deals in fiercely competitive markets.
In three back-to-back sessions, moderator Clelia Peters picked the brains of top executives at some of the biggest — and most innovative — players in home financing, including Better, Flyhomes, Rocket Mortgage, UWM, Own Up, Reali, and OJO Labs.
Instead of seeing home loans as a commodity, agents should think about home financing as a strategy to help their clients achieve their objectives, said Tim Cooke, director of sales for Flyhomes for Agents.
Flyhomes’ cash offer product lets agents get their homebuyers pre-approved for a short-term loan and make a contingency-free offer. If the offer is accepted, the homebuyer then refinances into a long-term mortgage provided by Flyhomes.
The overwhelming majority of homebuyers start searching for homes before they think about financing, Cooke said. That often leads to panicked phone calls at 5 p.m. on a Friday, with the client wanting to switch to a cash offer.
“It’s too late at that point,” Cooke said. “If you’re thinking about strategy from the beginning, you can go with the lender that offers a cash offer.”
Agents, Cooke said, “are supposed to be the know-all, be-all, end-all source of information.”
But too often, he said, sellers and buyers are doing their own research.
In those cases, “it’s the customer leading the agent down this path,” he said. “That is not the ultimate selling or buying experience.”
“Don’t rest on your laurels,” Cooke advised. “Always be pushing yourself to be learning about new products and companies, because then you are back at the center of the buying and selling process.”
The days when homebuyers seek out a real estate agent before looking into financing could be numbered, said Better’s head of sales and operations, Sarah Pierce.
At Better, “Most of our customers came to us, because they wanted to see how much they could afford before searching for a home,” Pierce said. “Historically, you found a real estate agent first.”
Today, the ability to get pre-approved almost instantly online means “affordability and financing is one of the first things they want to think about.”
With borrowers increasingly coming to them first, many lenders are either partnering with real estate agents and providing them with leads, or becoming real estate brokers themselves. So a company that’s an ally one day could be a competitor the next.
Better, which started out in mortgage lending and is now a top 10 lender, also operates a real estate brokerage with 500 agents in 22 states, Pierce said.
“When we started in lending, we realized partnerships with real estate agents were critical,” Pierce said of the decision to launch Better’s brokerage arm, Better Real Estate. Initially, operating a real estate brokerage was a means of providing referrals to other agents.
Although Better still provides leads to partner agents, “we launched our own real estate agency to build a holistic experience with customers in core markets,” Pierce said.
Following in the footsteps of companies like Flyhomes, Orchard, and Homeward that enable homebuyers to make cash offers to better their odds of winning a bidding war, Better Real Estate recently rolled out a cash offer program to its real estate brokerage clients.
Better also provides title and settlement services, and Peters said the growing prevalence of integrated platforms that provide end-to-end services has her envisioning a world where, in five to 10 years, “real estate brokerages are the loss leader, and people are making money on mortgage.”
“You’ve got our business model right there,” Pierce said. “We’re already there.”
Even as Better continues to perfect its mortgage offerings, she said, “we can treat other services as essentially loss leaders.”
Better Real Estate is now offering a “zero percent listing fee” in select markets in Arizona, Colorado, Florida, Georgia, Illinois, Michigan, New York, North Carolina, Pennsylvania, Texas, Virginia, Washington, New Jersey, Oregon, and Tennessee.
That program, which Better piloted in Dallas, does not apply to the cooperating broker’s fee. But if Better Real Estate handles both ends of the transaction, Better Real estate charges a buyer’s broker’s commission equal to 1 percent of the home sales price. So sellers represented by Better are incentivized to accept offers from buyers represented by Better.
“With real estate, mortgage lending, and insurance services all under the Better umbrella, we’re able to keep our costs low and pass the savings to you,” the company says on its website. “Because Better Real Estate Agents don’t work on commission, they don’t benefit from charging you the typical 3 percent to list your home. Those savings go right back to you.”
Flyhomes also provides end-to-end homebuying services, including a “buy before you sell” product, through subsidiaries that include FlyHomes Brokerage, FlyHomes Mortgage, and FlyHomes Closing. Like Better, its agents are salaried, but Flyhomes collects standard commissions.
Helping consumers understand their options
Although intense competition in many markets has made cash offer and “buy before you sell” services popular, it’s important to remember that 85 percent of all transactions are still done with traditional mortgages, said Own Up CEO Patrick Boyaggi.
Boyaggi said Own Up aggregates data from 16,000 lenders to help consumers find out what they should pay for their mortgage. Although Own Up plans to connect to cash offer product in the future, Boyaggi is not convinced that option will be popular in the long run.
“We may very well be in a buyer’s market in a few years,” Boyaggi said. “If that’s the case, is making a cash offer all that important? The dynamic may be very different.”
From the consumer’s standpoint, Boyaggi sees most “power buyer” programs — which let existing homeowners buy before they sell — as more like insurance products than a bridge loan, with homeowners paying a fee in exchange for certainty.
As for the growing number of platforms that are vertically integrated in order to own the entire process, Boyaggi thinks that, “at the end of the day, the winners will be those that focus on what’s best for the consumer.”
Consumers are also “true north” for OJO Labs, said Jerimiah Taylor, vice president of real estate and mortgage services. OJO Labs blends machine intelligence and human expertise to guide consumers to services they might not have been aware of — potentially enabling transactions that wouldn’t have happened otherwise, Taylor said.
The OJO Select Network connects top agents to homebuyers and sellers when they ask to be connected to an agent through OJO’s Movoto real estate listings portal.
Reali offers what CEO Tyler Baldwin describes as the “only concierge marketplace,” with unbiased home advisers helping consumers find the best rate and the best lender.
“People like to go to LendingTree or Bankrate to figure out options, but the problem with that is, Kayak will tell you the cost of flying from Boston to Las Vegas — that’s easy to determine,” Baldwin said. “But with a mortgage, you want to talk to a mortgage expert.”
Tyler claims that Reali “will always beat the market average, and at least one of those offers will be in the top 10 percent of all offers.”
Reali is also a real estate brokerage, giving its agents full visibility into every loan’s status.
“Technology is great, but it’s always a combination of technology and humans — that equation always leads to a better outcome than humans alone or technology alone,” Tyler said.
Big lenders want agents’ purchase loan business
As rising rates cut into their refinancing business, the nation’s two biggest mortgage lenders — Rocket Mortgage and United Wholesale Mortgage (UWM) — are actively courting real estate agents who can bring them purchase loan business. Rocket, UWM and other lenders are appealing to agents by promising speed and certainty, and providing tools that let them track loans through the origination process.
Rocket Mortgage’s agent tool, Rocket Pro Insight, lets agents adjust their client’s approval amount, upload documents, and access personalized marketing materials anytime.
UWM’s Blink+ CRM tool lets mortgage brokers invite real estate agents into loan transactions to keep them informed at each step of the process.
For agents, the most important factor in choosing a mortgage lender is certainty that a transaction will close on time, and how quickly they can preapprove clients, said UWM’s Allen Beydoun, executive vice president, sales.
The technology UWM has developed allows the independent mortgage brokers it works with to pre-approve borrowers in as little as 15 minutes, and the company says it can close most loans in 18 days or less. In addition, mortgage brokers working with UWM also have access to options from dozens of other lenders, giving borrowers a wide range of options that retail lenders can’t match.
As the nation’s biggest wholesale lender, UWM has been championing mortgage brokers, and “we feel like that’s where a lot of the momentum is going in this market,” Beydoun said.
Although Rocket Mortgage may be best known for its sleek, direct-to-consumer loan origination process, Executive Vice President Jes Fields pointed out that the company also works with mortgage brokers through its wholesale channel (UWM’s controversial refusal to do business with mortgage brokers who send borrowers to Rocket or Fairway Independent Mortgage was not discussed).
“Those are the table stakes,” Fields said of expectations that top-flight lenders will prequalify borrowers quickly, close transactions without a hitch, and provide tools that provide transparency into the origination process.
Fields touted the fact that Rocket Mortgage services its own loans as another advantage for real estate agents and their clients. Like real estate agents, Rocket wants to do repeat business with borrowers when they refinance or buy their next home, so it has incentives to find solutions if they run into financial hardships.
Beydoun said that with the exception of jumbo loans, UWM also handles its own servicing.
Asked by Peters if they were looking into adding products like cash offers or bridge financing to compete with startups like Ribbon and Knock, Fields said Rocket is “talking to innovative companies to make sure we have the right panel of options.”
Beydoun said UWM is “finding a conditional approval is just as good as a cash offer.”