This article is part one of a multi-part series uncovering the benefits of attaching title. For part two of the series, “Why Attaching Title is The Path to Profitability” click here. Or to see the full series click here.
Over the past 5 years, real estate technology companies have exploded in growth. Funding to real estate tech startups quadrupled between 2015 and 2019 with more than $8.9 billion invested globally in 2019 alone.
In the residential real estate space, many of these well-funded technology companies are racing to build the ultimate end-to-end home buying experience for consumers. Real estate tech businesses that burgeoned in the early 2000s (think Zillow and realtor.com®) paved the way by opening up digital home search options for consumers. Now, these dominant players and newly-funded incumbents are aiming to deliver the same transparency and digital ease for consumers from home search all the way through closing.
And as funding toward new real estate startups grows, the race to get there is fiercely competitive.
Attaching closing services: the next frontier for real estate technology companies
The industry has taken impressive strides toward offering digital options for consumers during the homebuying process. Today, 93% of home buyers search for their home online and nearly half of homebuyers complete the entire mortgage application process online.
We’re at an inflection point where consumers expect digital options and consistency throughout the home purchase process. To achieve this, real estate technology companies are turning their attention toward the closing process—the final frontier for digitizing the home purchase experience.
Managing the closing process is not an easy task
Delivering a truly seamless closing experience at scale is a challenging task. A number of factors make the closing experience a complicated challenge to solve for new businesses looking to deliver an end-to-end, digital homebuying experience:
- Title & escrow practices are highly regionalized. Regulations and practices vary from state-to-state and can even vary on a county level.
- Siloed communication among many transaction partners. Of all the parties involved in a real estate transaction, title and escrow agents have the sole responsibility to manage all of the sensitive legal paperwork, government filings, and complex cash flow operations that happen during a transaction. They are the “quarterback” of the transaction, interfacing and coordinating with a variety of parties.
- Fragmented software systems. Because title agents are working with a wide range of stakeholders, they must also interface with a variety of software systems. Many of these systems don’t “speak” to one another, which can open up the process to redundancy and errors.
Strategies for attaching title & closing services
Qualia is an expert in title & escrow. We’ve built a secure, single platform for title & escrow businesses to coordinate with mortgage lenders, real estate agents, home buyers, and sellers.
Qualia works with real estate tech companies across the country to identify strategies for attaching title services. Three common strategies have emerged for businesses looking to innovate.
1) Wholly own and operate a title company
Many businesses have created their own title operations in-house. These businesses use Qualia as the core workflow software for their title operations. Of the three strategies, this one generally takes the most time because the company needs to get licensed and hire staff. The payoff for this strategy, however, is generally quite high. These businesses are able to competitively differentiate themselves through full control of the consumer experience at closing and also benefit from lower settlement fees per closing by taking title operations in-house.
Another similar strategy is to purchase an existing title company as a quicker way to get title operations up-and-running. Just like starting a company from the ground up, businesses using this strategy capture the economic benefits. Over time, the acquiring business can also shape the consumer experience to match the company’s overall brand and culture; however, this is not an immediate outcome of an acquisition.
2) Partner with an existing title company (joint venture)
Many other businesses consider partnering with a title company through a joint venture (JV) as a way to get title operations up-and-running more quickly than wholly owning a title company. This option affords less economic opportunity than owning because the settlement fees are split with the JV partner; however, there are still solid bottom-line margin improvements.
With this strategy, the business can also achieve partial control or influence over the consumer experience at closing.
3) Leverage Qualia’s ecosystem of digital closing partners
Businesses that work with Qualia can tap into Qualia’s network of tech-forward title & escrow businesses across the country by leveraging Qualia’s Partner API. Businesses that go this route benefit from little-to-no startup times, and a streamlined, digital transaction that is the same across any order. The consumer also experiences the same, on-brand digital experience in every market.
Interested in learning how Qualia can help your company? Request a consultation with our team by clicking below.