Amazon is the Goliath no one can escape. According to recent data from intelligence analyst platform CBInsights, executives of public American companies mentioned Amazon more than any other company on investor calls in 2018. Regardless of industry, Amazon’s presence and influence is pervasive.
While Amazon has yet to enter the real estate industry (aside from speculation around an Amazon mortgage division), the e-commerce giant is impacting the space through its influence on customer expectations. Amazon’s customer-obsessed doctrine has revolutionized online transactions so much so that now, no matter the purchase, customers expect a click-button, streamlined experience.
This phenomenon, dubbed the “Amazon Effect,” has real implications for real estate. At the Real Estate Technology and Innovation Conference held in San Francisco last week, Qualia CEO, Nate Baker, sat down with Compass VP of Product/GM, Platforms, Max Henderson and Pango Group Chief Operating Office, Joe Curtis to discuss the application of customer-first best practices in the home buying transaction.
Exploring Customer Expectations in Real Estate
To kick off the discussion, Baker outlined the three parts of the home buying process: matching, financing, and closing. “There’s been quite a bit of focus on the matching problem,” Baker noted in reference to tech incumbents like Zillow who have empowered homebuyers during the front end of the purchase with accessible home listings. “However, to deliver a gold-standard customer experience, we need a better, more transparent closing process.”
Much like Amazon brings together many disparate parties (sellers, payment platforms, shipping logistics) onto one centralized platform, Baker believes our industry needs a solution to bring together lender, seller, buyer, agent, title & escrow companies, and underwriter onto one secure platform. From Baker’s perspective, title & escrow companies are uniquely positioned to transform the home buying transaction in the next few years. They are often “quarterbacking” more than 12 different parties in any given transaction and have the ability to bring together many siloed functions for a streamlined end-to-end purchase experience.
Real Estate Transactions of the Future
So what exactly would this consolidated future look like and what considerations need to be made in determining the best path forward? Baker, Henderson, and Curtis discussed this topic from varying perspectives and landed on four customer-centric themes.
1. Compressing Timelines and Paperwork
“At Pango, we’re thinking through how we can leverage technology to make closings less painful,” Curtis said. “We want to compress the closing experience to eliminate or greatly reduce the ‘paper avalanche’ customers face.”
In addition to the “paper avalanche,” transaction speed is also a top concern. The closing process takes upwards of 40 days, and title companies and real estate agents alike are contemplating what a faster closing would mean. “Speed is not necessarily the holy grail of the transaction,” Curtis noted. “We need to find a balance between convenience and security.”
Henderson echoed Curtis’ sentiments, likening the future of the closings to a Turbo Tax-like experience. “Faster isn’t always better. If you think about Turbo Tax, they’ve eliminated the friction of taxes not just through speed, but through greater transparency.” To that end, the future of the real estate transaction may not be a one-click-button experience, but rather a more streamlined and homebuyer-empowered experience.
As Curtis noted, security is just as important to the future of the industry as speed. Escrow accounts have become the target for cyber criminals who can imitate email templates to trick homebuyers into rerouting tens of thousands of dollars. “More important than speed, we must focus on driving the number of successful fraud attempts to zero,” Henderson said.
3. Lowering Transaction Costs
In midst of compressed margins across the industry, vertical integration has become a growing trend as brokerages attempt to make up costs with ancillary business. Curtis believes a more proactive motivation for vertical integration is thinking ahead to how a consolidated system delivers an improved customer experience.
At Compass, this proactive approach is resulting in opportunities for lower transaction fees. As Henderson noted, from Compass’ agent-centric perspective, a better experience for the customer results in more business for an agent and more opportunity to lower transaction costs.
“Closings don’t need to be a mind blowing experience,” Henderson stressed, “it’s more about making the process ‘less bad’ for the homebuyer.” According to Henderson, Compass’ best agents make closings as frictionless as possible by simplifying the details and educating the homebuyer throughout the journey.
Just like the final checkout will never be top-of-mind for an online shopper, the closing process will likely never be the most favorable or memorable aspect of the home purchase. And perhaps that’s the point. No one thinks about all the parties involved in getting a package delivered to their front door by Tuesday. Just the same, a homebuyer doesn’t need to think about the number of parties involved in the closing process; rather, he or she needs to understand the basics of the transaction and have real-time access to the progress of their closing timeline.
It’s clear that in the next few years, technology will ignite changes to the real estate marketplace. Those wanting to stay ahead of the curve must take Amazon’s cue and focus on customer experience.