The real estate industry made significant movement this year toward improved communications between all the professionals and consumers that are required for a property sale. At the core of this is a concerted effort by the title industry to apply technology to modernize and upgrade the closing process.
One may even look back at the Fidelity National Financial Q1 2017 earnings call to pinpoint a specific event that solidified the importance of the industry’s investment in technology. Bill Foley, Chairman of the Board, highlighted the value of consolidating transactions to a single technology platform while discussing strategies “to develop an end-to-end program from the time the Realtor gets the listing to the time when the transaction closes and we interface with the lenders.”
In the not so distant past, technology powerful enough to drive the real estate industry’s impending step-change evolution would have only been available to the largest enterprises and institutions. Today, however, thanks to advances in how technology can be built and distributed, it is available to businesses of all sizes.
In the year ahead, real estate professionals operating in disconnected silos simply cannot afford to continue with business as usual - the risk of losing a substantial amount of business is just too big. Digital transactions that provide connections between transaction parties have slowly become not only a normal way of doing business, but the requirement. Case in point, Zillow, a cloud-based product built to help buyers and sellers find each other online, has more than 160 million monthly users, over 100 million homes in its database, and has quickly displaced traditional methods for starting a home search.
The ease at the front end of the transaction from products like Zillow heightens the pressure to improve the actual operations of a transaction on the back end. It’s what is expected. For title companies specifically, slow adoption of the latest technology brings a significant risk of losing business. Partners and customers will abandon companies providing legacy settlement service levels for a better experience. The most frustrating part of this risk to those slow to adapt is that they won’t even see their relationships with lenders and real estate brokerages slipping away until it’s too late to rehabilitate them.
Title companies should look hard at being the drivers behind a unified real estate transaction platform if they don’t want diminished control of their business. Leaving it to the lenders or brokerages to “own” a shared system that manages transactions puts the title agent at significant business risk.
Title companies would see a deteriorating bottom line driven by these following pressures:
- Market consolidation: Margins will compress as larger national title operations that previously relied on the refi business pivot towards consolidating the purchase market.
- Lead consolidation: As information about transactions become more accessible and consumers drive more of the purchasing decisions, there will be an increasing consolidation of the source of leads that slip away from being exclusive word of mouth referrals.
- Margin compression: The fees currently charged by RealEC, Ellie Mae, and many eMortgage software products are good examples of the type of margin compression to expect.
It’s important to point out here that “owning” the real estate transaction platform of record isn’t only about the players supporting the property sale. The consumer will play an increasingly influential role in consolidating transactions to a single technology platform.
Companies that focus on customer first experiences will quickly gain their unfair advantage and expand their market share. According to a recent American Bankers Association survey, two thirds of Americans use digital banking channels which is representative of the indisputable trend that consumers and service professionals alike want easy, fast, and digital. They’re managing their credit, savings, and checking accounts online and increasingly venturing into cloud-based lending. Lender products such as Blend, Roostify, and Encompass Consumer Connect are evidence that consumers are fully engaged in the trend.
While digital mortgages will play a big part in the consumer first transition (and especially in the marketing around it), adoption will remain below 1% of the market throughout 2018 as service providers test out the waters.
Title companies must explore taking the lead on implementing technology that drives the real estate industry forward. If they don’t, the coming year will be one that marks the beginning of business challenges that will remain with companies for years to come rather than one that marks a time they expanded their presence while taking the customer experience to new heights.