In the Amazon era, consumers are more spoiled – and less patient – than ever.
Tap your phone and voilà – hot food from your favorite restaurant will arrive in minutes. High-end electronics appear on your doorstep within hours.
However, the mortgage industry has yet to deliver something like instant gratification.
The typical time from applying to closing a mortgage is 50 days, according to ICE Mortgage Technology, a glacial pace compared to most other things in modern life.
“The mortgage market is decades behind everyone else,” said Chris Boyle, longtime manager at mortgage giant Freddie Mac and now President of Home Lending at Roostify.
Boyle’s company is one of many that aims to speed up the mortgage process so that a day’s closing times can be measured in days instead of weeks.
Here are the trends to watch for in 2022.
n Mortgages: the quicker answer to “yes”
Digital players want to close their mortgage faster – although even the most optimists say the process will continue over a period of days and weeks rather than the seconds and minutes used as benchmarks in other corners of the economy.
One obvious obstacle, according to Beeline co-founder Jess Kennedy, is that mortgage giants Fannie Mae and Freddie Mac, who set the rules for most mortgages, have built in a minimum of seven days for many of their processes.
While proptech companies admit they can’t send the money within hours of your mortgage application, they are focused on another goal – to provide consumers with an instant response.
Beeline, a lender that operates in two dozen states, promises to keep borrowers informed of exactly where they are in the process at all times. “We compare it to Domino’s pizza tracker,” says Kennedy.
Roostify, which is working to speed up the mortgage process on behalf of lenders, is taking a similar approach. “You want to give the consumer security,” says Boyle.
Roostify focuses on saving time by automating paper-intensive parts of the process, like reviewing tax returns and payrolls. An actual human look at each document adds days and weeks to the schedule, says Boyle.
n In-house appraisal: analysis becomes virtual
The US real estate market is booming despite a bottleneck: there are simply not enough real estate appraisers to view and appraise all homes that are changing hands and being refinanced.
Hoping to at least partially solve this problem, the Fannie Mae and Freddie Mac supervisor will accept further “desktop ratings” in early 2022.
The Federal Housing Finance Agency announced in October that remote appraisals will replace some traditional appraisals that require appraisers to visit properties used as collateral for mortgages.
Paul Ryll, founder of Oscar Mike Mobile Appraisals in Greenville, South Carolina, welcomes the change. By not visiting a property in person, appraisers should be able to produce more appraisals, he says.
“There’s no reason why an appraiser can’t do this in 72 hours. It should drastically shorten the turnaround times, ”says Ryll. “As appraisers, we have to face change.”
Even if they do not conduct house tours, the appraisers still rely on a variety of data sources, including real estate photos, which are published on the multiple listing service.
n Cash offers: Your “rich uncle” wants to be a new type of company
During the real estate boom caused by the coronavirus, bidding wars became the order of the day. When sellers weigh multiple offers, they tend to prefer the safe offer of a cash offer over the slightly less secure offer that depends on funding.
As a result, cash buyers can often get a slight discount on buyers who are dependent on financing. and cash buyers might be able to get a harder bargain on inspection accidents.
That has resulted in a number of companies making cash offers on behalf of buyers who don’t actually have $ 300,000 or $ 400,000 in the bank. Companies like Homeward, Ribbon, Unlock, and Better.com make cash offers on behalf of borrowers who will later fund their businesses.
One of the new generation of “power buyers” has a clear view of what is on offer. “Think of us as rich uncles,” says Adam Pollack, co-founder and CEO of Accept.inc. “We want to turn every buyer into a cash buyer and every offer into a cash offer.”
These companies raised millions in 2021 and will continue to grow in 2022.
4. iBuyers: Still going strong after a setback
In 2020, when the pandemic first threatened the US economy, iBuyers, or instant buyers, slowed their role. Then, as the real estate market boomed, they became aggressive home buyers in the Sun Belt markets. In 2021, Opendoor, Offerpad, and Zillow Offers paid rewards to sellers for their homes.
Skeptics wondered whether Zillow’s generous offers and modest fees made economic sense. At the beginning of November, Zillow admitted that he was paying too much for real estate even in a market characterized by rising home values. Zillow made headlines when it closed its Zillow Offers unit.
Zillow, creator of the much-lauded Zestimates of Home Value, apparently learned the hard way that technology isn’t always the answer to a brick and mortar business like turning houses.
“They just overwhelmed themselves, couldn’t scale, didn’t understand the complexity,” says Ken Johnson, housing economist at Florida Atlantic University.
But the other iBuyers are still in business. Stefan Peterson, co-founder of Zavvie, a real estate technology company that works with brokers to help sellers compare offers from iBuyers, says the remaining iBuyers will take back the generosity.
“It was an open secret that iBuyers were making very strong deals,” says Peterson. “They seem to be getting back on the ground, but they’re still very close to 100 percent of (market value).”
5. Blockchain: Not coming into living yet, but maybe one day
Perhaps the hottest area of technology is blockchain, the innovation that underlies Bitcoin and other cryptocurrencies. Right now, the real estate industry is focused on more mundane tasks like reducing the deadlines for mortgage closings by a few days.
But Geoffrey Thompson, chief blockchain officer at proptech firm Roofstock, sees a growing role for the hot tech.
“Buying a home is very different from owning a digital asset, and navigating securities laws in this area can be difficult,” he says. “I expect new experiences to emerge in 2022 that connect blockchain to real assets and make buying real estate more seamless, efficient, and possibly even more fun.”
He even sees non-fungible tokens or NFTs expanding into old-fashioned real estate beyond digital art and collectibles.
“In the short or medium term, it may be possible to buy and sell real real estate in the form of NFTs,” says Thompson.
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