Maybe I’ve been in the real estate industry too long. Scoffing at the business plan of yet another well-intentioned disrupter that’s going to reinvent life’s most important transaction.
“Too much data asymmetry.”
“You don’t control the buying decision.”
“Insufficient process control.”
“Too many regulatory hurdles.”
“You don’t understand the consumer’s psychology.”
“Uh, that’s illegal.”
Maybe watching the passing of the ESIGN Act in 2000, which was supposed to usher in a new era of digital closings, and watching the process limp along for the next 17 years, with minimal adoption added to my skepticism. “Lack of stakeholder readiness,” I said.
Cynicism increased witnessing the countless startups that attempt to disrupt real estate commissions flounder and fail, even though their mission appeared sound and logical. “Why wouldn’t I select only the agent services I need, and pay accordingly?” Yep, makes sense. Tell your friends you were ahead of your time.
“Ensure a seamless end-to-end transaction?” How? Only one of the stakeholders, the settlement/escrow provider, has all the transaction data, documents, and contacts. They are the data aggregator. If your goal is to provide a seamless end-to-end digital experience, and it doesn’t include control of that piece, go rewrite your business plan.
But all that’s changing, and at an accelerated pace. It’s all about control and tightening the grip on the transaction.
My first impression of Opendoor was that of a high-tech flipper.
I was wrong.
They have unprecedented control over the transaction experience because the company directly buys and sells homes. They operate mortgage and title arms. Now they can leverage technology to drive down the overall transaction cost, making it competitive with traditional brokerages. Will they succeed? I don’t know. But they have the POTENTIAL to succeed, and that hasn’t gone unnoticed.
Redfin has the same breadth of services as OpenDoor, operating Redfin Mortgage and TitleForward, and have now introduced Redfin Now in certain markets to compete with the “iBuyers.” These offerings are already competitive with the traditional brokerages if you factor in the carrying costs of a 60-day close, and will continue to get more so as they improve pricing accuracy and lower fees, which they can do from the efficiency of owning all aspects of the process.
On October 3rd, Fidelity National Financial announced they acquired a majority interest in SkySlope, a transaction management platform used by more than 1,500 brokerages across 5,000 offices and 140,000 agents to facilitate approximately 1.5 million transactions over the past year. The largest title insurer in the nation partnering with the system used to manage over 25% of annual purchase transactions. Where could this go? The fragmented technology of FNF may inhibit integration efforts, but the possibility is there.
And finally, the company that turns every real estate agent into a conspiracy theorist, Zillow. To be fair, Zillow’s acquisition of DotLoop in 2015 engendered this distrust. This was an interesting move by a self-proclaimed media company, that has now extended itself deep into the mechanics of a real estate transaction. Can Zillow “Uber-ize” real estate agents, by cutting out the middlemen, the same way Uber bypassed taxi dispatchers? Maybe. They still lack pieces of the end-to-end process, but it’s difficult to imagine them being satisfied with the less than one percent of the $100 billion brokerage system it supports.
Many approaches have been tried to improve the end-to-end process and no one knows for sure which one will succeed. But change is definitely coming. I’m a co-founder of JetClosing and we’ve taken a different angle, recognizing that we, as the company that aggregates the transaction data, can be the only logical facilitator of digital end-to-end transactions. We recently executed a successful beta test, integrating our API, which provides real-time access to transaction data, documents, and contacts, with a brokerage’s transaction management system. A small step in transforming the real estate closing experience, but providing something the big players above currently only aspire to. Ours is an open platform that has the potential to help everyone, from boutique brokerage to large franchise operations. Because from “iBuyer” to full-service, I think there’s a place for everyone.