In the Amazon age, consumers are more pampered – and less patient – than ever. Tap your phone and voila: hot food from your favorite restaurant arrives in minutes. High-end electronics appear at your doorstep within hours.
However, the mortgage industry has yet to offer this level of instant gratification. According to ICE Mortgage Technology, the typical time between applying for and consuming a mortgage is 50 days, a freezing pace compared to the speed of most other things in modern life.
“The mortgage industry is decades behind everyone else,” says Chris Boyle, longtime executive at mortgage giant Freddie Mac and now president of home loans at Roostify.
Boyle’s business is one of many efforts to speed up the mortgage process so that close hours can someday be measured in days rather than weeks. Roostify is part of a new generation of real estate technology companies, or “proptech”, which aim to bring home lending and real estate sales into the digital age.
Here are the trends to watch for in 2022.
1. Mortgage loans: get the yes faster
Digital players want to close your mortgage faster – although even optimists say the process will continue to unfold over a period of days and weeks, rather than the seconds and minutes used as benchmarks in others. sectors of the economy.
One obvious hurdle, according to Jess Kennedy, co-founder of Beeline: Mortgage giants Fannie Mae and Freddie Mac, who set the rules for most mortgages, have built in minimum terms of seven days for many of their processes.
While tech companies recognize that they won’t be able to wire the money within hours of your mortgage application, they are focusing on a different goal: to give consumers an instant yes or no.
Beeline, a lender that operates in two dozen states, promises to let borrowers know exactly where they are in the process at all times. “We compare it to Domino’s Pizza Tracker,” says Kennedy.
Roostify, which works to speed up the mortgage process on behalf of lenders, takes a similar approach. “You want to give the consumer certainty,” Boyle says.
Roostify focuses on saving time by automating paper-intensive parts of the process, like checking tax returns and pay stubs. Having a real human eye on every document adds days and weeks to the calendar, Boyle says.
But automation only takes lenders so far. The complexity of mortgage loan applications poses challenges for lenders hoping to fully automate their approvals.
Every request is unique, and loan applications from independent borrowers and real estate investors can block even seasoned loan officers. In other words, programming a robot to handle a loan of $ 300,000 per approval is not easy.
“Every app is a snowflake,” says Kennedy. “It’s really hard to create a system that can take into account every beautiful snowflake. “
2. Home appraisals: the analysis becomes virtual
The US real estate market is booming despite a bottleneck: there simply aren’t enough real estate appraisers to visit and appraise every home that changes hands and gets refinanced.
Hoping to find at least a partial solution to this problem, Fannie Mae and Freddie Mac’s supervisor will begin accepting more “office assessments” in early 2022. The Federal Housing Finance Agency announced in October that remote assessments would replace some traditional assessments. appraisals, which require appraisers to visit properties that serve as collateral for mortgages.
Paul Ryll, founder of Oscar Mike Mobile Appraisals in Greenville, South Carolina, welcomes the change. By not visiting a property in person, appraisers should be able to produce more appraisal reports, he says.
“There’s no reason an appraiser can’t do this in 72 hours. This should significantly reduce turn times, ”says Ryll. “As evaluators, we have to embrace change. “
Even if they don’t visit the homes in person, appraisers will still rely on a variety of data sources, including photos of properties posted to the Multiple Listing Service.
3. Cash Offers: A New Generation of Businesses Wants to Be Your “Rich Uncle”
During the coronavirus real estate boom, auction wars became commonplace. When sellers are evaluating multiple offers, they tend to favor the safe value of a cash offer over the slightly less certain offer that is dependent on funding.
As a result, cash buyers can often get a small discount compared to buyers who rely on finance. And cash buyers may be able to negotiate more difficult inspection contingencies.
This has led to a number of companies making cash offers on behalf of buyers who don’t really have $ 300,000 or $ 400,000 in the bank. Companies such as Homeward, Ribbon, Unlock and Better.com make cash offers on behalf of borrowers who later finance their transactions.
One of the new “power buyers” has a catchy view of the offer. “Think of us as a rich uncle,” says Adam Pollack, co-founder and CEO of Accept.inc. “We want to make every buyer a cash buyer and every bid a cash offer. “
These companies raised millions in 2021, and they will continue to ramp up in 2022.
4.iBuyers: after a setback, still going strong
In 2020, as the pandemic first threatened the U.S. economy, iBuyers, or instant shoppers, slowed their pace. Then, with the boom in the housing market, they became aggressive home buyers in the Sun Belt markets. In 2021, Opendoor, Offerpad and Zillow Offers paid sellers premiums for their homes.
Skeptics wondered if Zillow’s generous offers and modest fees made any commercial sense. In early November, Zillow admitted he was paying too much for properties, even in a market characterized by soaring real estate values. Zillow made headlines when it closed its Zillow tender unit.
Zillow, creator of the much-vaunted Home Value Zestimates, has apparently learned the hard way that technology isn’t always the answer to a brick-and-mortar business like flipping houses.
“They just got the upper hand, couldn’t scale, didn’t understand the complexity,” says Ken Johnson, housing economist at Florida Atlantic University.
However, the other iBuyers are still active. Stefan Peterson, co-founder of Zavvie, a real estate technology company that works with brokerage houses to help sellers compare offers from iBuyers, said the remaining iBuyers would be generous.
“It was an open secret that iBuyers were making some really good deals,” says Peterson. “They seem to be coming back to earth, but they’re still very close to 100% (market value). “
5. Blockchain: I’m not coming to housing yet, but maybe someday
Perhaps the hottest area of technology is blockchain, the innovation behind bitcoin and other cryptocurrencies. For now, the real estate industry is focused on more mundane tasks, such as reducing mortgage closing times by a few days.
But Geoffrey Thompson, blockchain director at high-tech company Roofstock, sees a growing role for hot tech.
“Buying a home is very different from owning a digital asset, and navigating securities laws in this area can be tricky,” he says. “In 2022, I expect new experiences to surface that connect blockchain to real-world assets and make buying real estate more fluid, efficient and maybe even fun.”
He even sees non-fungible tokens, or NFTs, expanding beyond digital art and collectibles into old-fashioned real estate.
“In the short to medium term, it may be possible to buy and sell real world properties in the form of NFTs,” Thompson said.
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