The real estate industry has long sought to transform the real estate transaction from a complicated, stressful process to a simplified, enjoyable experience. Along the way, various business models and strategies have emerged, aiming to deliver an optimal homebuying experience.
In recent years, “vertical integration” has surfaced as a promising model to improve homebuying and counteract the trend of decreasing profit margins. This strategy involves consolidating multiple stages of the real estate transaction—such as property search, mortgage financing, and settlement services—into a single experience. By combining these traditionally separate components under one roof, vertically integrated companies aim to simplify the closing process and create cost and operational efficiencies for their business.
At Qualia’s 2024 Future of Real Estate Summit (FORES24), leaders from two vertically integrated companies, Jeffrey Heighton, President of Title & Escrow at Compass, and Brad Miller, Chief Operating Officer at One Real Title, spoke to Qualia’s Senior Director of Title Strategy, Alex Brown, about strategies to create greater connectivity between transaction stakeholders during homebuying.
Strategies for vertical integration
Mortgage and real estate brokerages that vertically integrate title & escrow services into their operations typically do so by either:
- Acquiring boutique title & escrow companies in markets they serve (e.g., Compass)
- Building a title function in-house and expanding operations market-by-market (e.g., One Real Title)
In both cases, the real estate agent is the primary driver of title & escrow operation expansion because the agent is what Heighton calls the “primary referral partner.” In other words, the real estate agent typically builds the relationship with a title & escrow company, then recommends the selection of that company to their client (the end consumer).
Heighton explained that Compass’s acquisition model aims to strengthen the real estate agent experience in local markets. “We go to our agents and ask: Who are the [title & escrow] companies you love to use?” His team then focuses on opportunities to acquire those title & escrow businesses and maintain them as independent brands. Compass’ acquisition targets are typically not businesses that want to sell their company outright; instead, they want to maintain autonomy and be brought into the Compass ecosystem in order to grow their business.
Compass’ acquisition strategy also prioritizes revenue opportunities. Heighton’s team examines title & escrow companies with a sizable share of business in local markets. “We think about revenue and the quality of that revenue in the title space [as a strategic priority] because the margins are higher than any other space,” he explained.
One Real Title’s strategy for building and expanding title & escrow operations also prioritizes the real estate agent to encourage organic growth. Miller’s team identifies agents in One Real Title’s markets who are interested in incorporating title & escrow services into their offerings. By collaborating with these champions, Miller ensures initial enthusiasm and commitment from agents—a crucial factor in successfully entering new markets. However, Miller mentioned that agent buy-in is only one piece of the puzzle for growth. In some cases, expanding title & escrow operations to new states doesn’t initially make sense due to the investment costs required to enter that market. For example, expanding title & escrow operations from Florida (a title state) to Georgia (an attorney state) might require additional resources to set up new processes and navigate unknowns.
Unifying workflows with technology
Both One Real Title and Compass have integrated the closing process into their agents’ native workflows through Qualia. For example, Compass’s proprietary agent platform integrates all third parties (mortgage, title, etc.) into one place so that agents can interact with these stakeholders within a single system. “A Compass agent working in a market where we have a settlement partner can open that order in their workflow process and watch, through Qualia Connect, the order work its way through to clear-to-close,” he explained.
The benefits of a fully integrated workflow are twofold:
- Efficiency. Bringing title & escrow operations into the real estate agent workflow reduces redundant tasks and unnecessary extra steps, such as rekeying information from one system to another.
- Business development. An integrated system helps real estate agents better engage with less back-and-forth so they know what to expect from start to finish. Ultimately, this improved business relationship creates more referral opportunities for title & escrow businesses.
When exploring opportunities to connect real estate agents and settlement operations through technology solutions, Heighton and Miller agreed that personal relationships are still vital. This applies to both vertically integrated companies and independent title & escrow companies. “Technology drives service levels. Think about what technology you can invest in to drive that service level [and deepen relationships], and you’ll find greater efficiencies,” Heighton said.
Miller added that feedback loops enable title & escrow companies to enhance service levels and strengthen business relationships. “Listen to [real estate] agents, ask them what worked well with the technology and what didn’t, and then modify it on the backend,” he said. For example, his team works with agents to customize their experience in Qualia. They build tailored templates for each agent so they feel empowered and know exactly what happens when they complete an action, like sending out a title order.
Organization-wide buy-in will move innovation forward
Integrating traditionally siloed operations and adopting advanced technology to do so requires effective change management. Heighton and Miller agreed that solid communication determines whether a business will successfully manage change or fail.
Heighton encouraged leaders to define the “why” behind changes early and often and communicate them to every business stakeholder. “You’re often so far into it and you know the why every day of your life, but you can’t assume everyone understands,” he said. “Usually, that communication problem is why you don’t have stakeholders saying ‘let’s go!’ [when it comes to change].”
To hear more from Heighton and Miller, watch the FORES panel discussion in its entirety.
