Advancements in real estate technology have skyrocketed over the past few years. From 2015 to 2017, venture investment in real estate technology grew tenfold. And last week, capital firm Fifth Wall secured what it calls the “largest real estate venture fund raised to date” with more than $503 million in commitments toward real estate technology.
The real estate sector’s technological transformation, spurred by evolving consumer expectations, is leaving many real estate professionals uncertain about how and when technology should be leveraged for an optimal consumer experience.
For title & escrow companies, the digital landscape is especially uncertain. Regional differences and regulations make the universality of digital processes challenging. Additionally, most consumers find closings to be one of the most complicated aspects of the homebuying process, leaving title & escrow professionals to wonder if digital processes truly make for the best experience.
Consumer Expectations for Digital Across the Home Buying Journey
To understand what digital processes and tools a homebuyer expects at closing, it’s valuable to look at the home buying journey in its entirety. After all, a closing doesn’t happen in isolation — it’s part of a fluid experience that begins the moment a homebuyer starts the search for a new home.
Searching for a home
According to the National Association of Realtors (NAR), 44% of homebuyers start their home buying journey online and 93% use websites to gather information during some point in the home search process.
In the past, a real estate agent acted as a gatekeeper for housing listings. A homebuyer would need to contact a real estate agent to gather information about properties for sale. Today, consumers have information on-demand from their mobile devices. A homebuyer can quickly find photos, property specs, and neighborhood details with a quick search.
While a consumer is empowered through technology in the home buying process, digital tools have not necessarily eliminated the necessity and value of the real estate agent. According to NAR, 86% of homebuyers said they still communicated with a real estate agent during the home search phase — even if websites were used to initiate the home search process.
Loan origination process
While search platforms have not eliminated the necessity of real estate agents, home searching platforms are transforming consumer expectations in the home buying process toward a more digital, transparent, and seamless transaction. As a result, homebuyers are looking for an empowered experience when looking for mortgage options and completing the loan process as well.
According to a recent survey from Velocify by Ellie Mae, more than one-third of all borrowers prefer self-service websites during the mortgage research stage. Once the mortgage application phase commences, borrowers look for near-immediacy in their interaction with a loan officer. According to PWC’s research, 80% of borrowers say they expect a response from a loan officer within one day and 40% expect it within one hour.
When it comes to communication between borrower and lender, customers desire a one-to-one, human-centric relationship. According to the same PWC study, while customers may lean toward digital loan applications, they expect most of their interactions to involve some form of human contact. When PWC asked borrowers to plot their expected interactions with their lender, 63% included some-form of human interaction even if digital tools were involved (e.g. text or email). This means borrowers expected only 37% of their interactions with lenders to be “purely digital” or automated in nature.
The reality is that consumers don’t expect nor do they want digital loan tools to be completely self-service from start to finish. Loan applications are complicated —not to mention the loan itself is a massive investment and “lends” itself to many questions. Borrowers want digital tools to supplement traditional, in-person channels. They also want control in how and when they leverage guidance from lender experts.
The closing process
The closing is the last step of the real estate transaction— as a result, it is the final (and likely) most lasting impression a homebuyer will have of their real estate agent, lender, and title & escrow agents. With that in mind, it’s important for digital expectations established earlier in the process to be carried through to the closing.
According to the NAR, nearly 40% of homebuyers cite paperwork and closing documents as one of the most complicated aspects of the home buying process. In general, the closing is one of the most opaque processes in the home buying journey — so much so that 27% ALTA’s Consumer Title Insurance Shopping Survey respondents didn’t even know what title insurance was.
This data suggests the shift toward digital should not eliminate human interaction. Buyers want an integrated experience that effectively merges digital tools with expert consultation for a “choose your own adventure” – like process. In other words, digital tools should be used at the right time and with the right customers.
Last year, Tennessee Title completed the state’s first online closing, yet the company recognizes that online closings aren’t the best solution for every homebuyer. “We’ve found that some people desire efficiency and speed while others want the experience of being at the closing table,” says Josh Terry, partner at Tennessee Title. “At the end of the day, not every homebuyer wants a fully-digital closing. It’s important to have the flexibility to provide the type of closing the homebuyer desires.”
An Integrated Home Buying Experience
As technology continues to transform the home buying experience further upstream (in the home search and loan process), it’s important for title & escrow companies to be aware of how these advancements impact homebuyer expectations at closing. Title & escrow companies can begin to align with evolving homebuyer expectations by laying a solid digital foundation that allows for a flexible, “choose your own adventure” closing experience.