It’s no surprise that real estate professionals are worried that so-called disruptors, like Zillow and Opendoor, will eventually eat their lunches. But has anyone considered that lenders are just as worried about the same thing?
At the Mortgage Bankers Association’s (MBA) recent convention in Washington, one panel discussion focused solely on the latest developments impacting real estate agents and how they might impinge on lenders’ ability to run a successful purchase origination market.
The conclusion: There will always be a need for loan officers, just as there will always be a need for real estate agents. Perhaps not in the same roles they now enjoy, but their expertise and experience is something some consumers will crave, no matter how they buy and sell their homes.
Why lenders care…
Why does all this matter to lenders? Because referrals are the lifeblood of their businesses, said moderator Rob Chrisman, a former mortgage professional who now publishes a widely read trade journal, Mortgage News Daily.
“If that goes away, and it might, [lenders] could become extinct,” he warned as the session kicked off.
Zillow already owns a mortgage company, having purchased Kansas-based Mortgage Lenders of America last April. Zillow also said at the time that it is moving into the iBuyer market, first in the Phoenix and Las Vegas areas.
“We expect to be operating a larger and stronger business that is integrated into the consumer’s entire home life cycle,” Zillow CEO Spencer Rascoff said during a conference call with analysts.
Now firms such as Opendoor are looking to enter the mortgage market in one way or another, the company’s general counsel and chief member experience officer told Inman after the MBA session ended.
“We’re still trying to figure out what we want to do on the financing side,” Nick Harbeck told me. “There’s a possibility we build our own program, partner with an existing lender or acquire one.”
Either way, though, Harbeck said his company will work either directly with borrowers or through their real estate agents, just as it does when people are selling their current residences and buying another.
“There will always be a role for everyone,” he said, noting that “a very large number of real estate agents already partner [with] Opendoor.” But, he added, a “large swath” of consumers want to handle their transactions on their own, and “our intention is to facilitate that.”
Opendoor is the largest and most advanced player in the buy-and-flip space now occupied by more than a half-dozen outfits. The iBuyer currently buys and sells homes in 15 markets, having just recently opened in Denver, and expects to be nationwide by the end of 2019.
One lender that is not waiting for the other shoe to fall is loanDepot, a Southern California-based direct, retail and wholesale lender that is licensed in all 50 states. A year ago this coming January, loanDepot expanded beyond mortgages with a newly formed venture it calls mellohome.
Rather than connect buyers to lenders, mellohome connects borrowers with real estate agents. It works on the premise that the majority of would-be buyers seek financing before they go searching for an agent.
According to CEO Chris Heller, the firm’s modus operandi is to put together pre-approved buyers and sellers with a verified agent and home improvement pro in their area. The system is designed to create a seamless, end-to-end journey that delivers excellent customer service at every step within the homebuying and home improvement process.
“We’re seeing a dramatic change in consumer behavior,” Heller told the MBA meeting. “Instead of realty agents generating leads, it’s visa versa for us. And it will impact everything downstream.”
“The one thing everyone knows for sure is that things will be dramatically different,” he added. “We don’t know yet what the end result will be, but we do know that in five to 10 ten years, everything will be totally different.”
The customer matters most
Both Opendoor’s Harbeck and mellohome’s Heller stressed that above all else, customer service at the lowest cost will win the day.
“We’re using technology to drive down the cost of selling,” Harbeck said. “In any industry, you let consumers tell you what they want. Consumers are looking for the best service at the lowest possible cost. We listen to our customers and try to service their needs, whether it’s a no-hassle sale or closing whenever they want.”
“The only thing that matters is the consumer experience,” Heller added. “We are taking them offline and uniting them with a consultant, and that really works well. The key to survival is to do what you do really well. The ones who think something will never happen will be the ones having problems. Their heads are in the sand.”
Up your game, and you’ll be safe from disruption…
A third panelist, Katie Johnson, general counsel at the 1.3 million-member National Association of Realtors (NAR), said she “strongly believes that neither lenders nor real estate will go away as a result of all this disruption.
“Technology may interrupt, but you can’t replace trust, local knowledge and experience,” said Johnson, who remembers when listings were on 3-inch-by-5-inch cards and published in thick, printed multiple listing service (MLS) books.
Still, she added, if agents and lenders want to remain relevant, they’ve got to work faster and harder than their competition. The disruptors “are going to change the landscape in some way,” she said. “All of this competition will force all of us to up our game.”