In the age of Amazon, consumers are more pampered — and less impatient — than ever. Tap your phone, voila – hot food from your favorite restaurant will arrive in minutes. Sophisticated electronic devices appear at your doorstep within hours.
However, the mortgage industry has yet to offer anything like this level of instant gratification. The typical time from filing a mortgage application to completing it is 50 days, according to ICE Mortgage Technology, an icy pace compared to the speed of most other things in modern life.
“Mortgage contracts are many decades behind everyone else,” says Chris Boyle, longtime CEO of mortgage giant Freddie Mac and head of mortgage lending at Roostify.
Boyle is one of several companies aiming to speed up the mortgage process so that closing times can be measured in days rather than weeks. Roostify is part of a new breed of real estate technology, or “proptech,” companies that aim to attract home loans and property sales into the digital age.
Here are the trends to watch in 2022.
1. Mortgages: Get to Yes Faster
Digital players want to close your mortgage more quickly — although optimists say the process will continue to deteriorate over days and weeks, rather than the seconds and minutes used as benchmarks in other corners of the economy.
One obvious drawback, according to Jess Kennedy, co-founder of Beeline: mortgage giants Fannie Mae and Freddie Mac, who set the rules for most mortgages, have included a seven-day minimum for many of their operations.
While proptech companies admit that they won’t be able to transfer money within hours of your mortgage application, they are focused on a different goal – giving consumers a yes or no right away.
Beeline, a lender that does business in more than two dozen states, promises to let borrowers know exactly where they are in the process at any given moment. “We likened it to Domino’s Pizza Tracker,” Kennedy says.
Roostify, which speeds up the mortgage process on behalf of lenders, has a similar approach. “You want to give the consumer certainty,” Boyle says.
Roostify focuses on saving time by automating the paper-based parts of the process, such as checking tax returns and payment slips. Taking an actual human look at each document, Boyle says, adds days and weeks to the timeline.
But automation is only taking lenders so far. The complexity of mortgage applications poses challenges for lenders hoping to fully automate their approvals.
Each application is unique, and loan applications from self-employed borrowers and real estate investors can baffle even seasoned loan officers. In other words, programming a bot to take care of a $300,000 loan through approval is no easy feat.
“Every application is a snowflake,” Kennedy says. “It’s really hard to create a system that can count every beautiful snowflake.”
2. Home Ratings: Analysis goes by default
The US housing market is booming despite a choke point: There aren’t enough real estate appraisers to visit and appraise all the homes being changed out and refinanced.
Hoping to find at least a partial solution to this problem, supervisor Fannie Mae and Freddie Mac will start accepting more “desktop assessments” in early 2022. The Federal Housing Finance Agency announced in October that remote assessments will replace some traditional assessments, That requires appraisers to visit real estate that acts as collateral for mortgages.
Paul Reale, founder of Oscar Mike Mobile Appraisals in Greenville, South Carolina, welcomes the change. By not visiting the property in person, appraisers should be able to prepare more appraisal reports, he says.
“There is no reason why an appraiser can’t do this in 72 hours. It should drastically reduce turning times,” Riel says. “As appraisers, we need to embrace change.”
Even if they don’t tour the homes in person, appraisers will still rely on a variety of data sources, including property photos published in the multiple listing service.
3. Cash Offers: A New Breed of Companies Wants to Be Your “Rich Uncle”
During the coronavirus housing boom, bidding wars have become commonplace. When sellers consider multiple offers, they tend to prefer the sure thing for a cash offer over the less certain one that depends on financing.
As a result, cash buyers can often get a slight discount compared to financing buyers. And cash buyers may be able to make a more difficult bargain around inspection contingencies.
This 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 such as Homeward, Ribbon, Unlock, and Better.com offer cash offers on behalf of borrowers who subsequently finance their deals.
One of the new breeds of “power buyers” has an attractive advantage in presentation. “Think of us as a rich uncle,” 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 ramp up in 2022.
4. Online buyers: After the setback, the business is still going strong
In 2020, when the pandemic first threatened the US economy, iBuyers, or spot buyers, slowed their business. Then, as the housing market boomed, they became strong homebuyers in the Sun Belt markets. In 2021, Opendoor, Offerpad, and Zillow Offers paid sellers premiums to purchase their homes.
Skeptics questioned whether Zillow’s generous offerings and modest fees made business sense. In early November, Zillow admitted it was paying too much for real estate, even in a market marked by high home prices. Zillow made headlines when the Zillow Shows unit shut down.
Zillow, the vaunted creator of home value Zestimates, appears to have learned the hard way that technology isn’t always the answer to a brick-and-mortar business like flipping houses.
“They just got over their heads, they couldn’t scale, they didn’t understand the complexity,” says Ken Johnson, a housing economist at Florida Atlantic University.
However, other iBuyers are still in business. Stefan Peterson, co-founder of Zavvie, a real estate technology company that works with brokerages to help sellers compare offers from iBuyers, says remaining iBuyers buyers will return that generosity.
“It’s been such an open secret that iBuyers have been putting in very strong bids,” Peterson says. “It looks like they’re down to earth, but they’re still very close to 100 percent of (market value).”
5. Blockchain: You haven’t come to housing yet, but maybe someday
Perhaps the hottest area of technology is blockchain, the innovation that underlies Bitcoin and other cryptocurrencies. Right now, the real estate industry is focusing on more casual tasks, such as reducing a few days of mortgage closing timelines.
But Jeffrey Thompson, chief blockchain officer at proptech Rovstock, sees a growing role for the hot technology.
“Buying a home is very different from owning a digital asset, and navigating the securities laws in this area can be challenging,” he says. “In 2022, I anticipate the emergence of new experiences that connect blockchain to real assets and make property purchases more seamless, efficient, and perhaps even fun.”
He even sees non-fungible tokens, or NFTs, expanding beyond digital art and collectibles into old-fashioned real estate.
“In the short or medium term, it may be worthwhile to buy and sell real-world properties in the form of NFTs,” says Thompson.
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