Buying a home is typically the most expensive transaction in most people’s lives, and the process of securing a mortgage is undergoing a major transformation right now. As we all became more accustomed to purchasing online in 2020, more consumers are feeling more comfortable with the idea of completing their mortgage transactions online, too. The real estate industry must be ready to shift where the buyers and sellers are ready to go.
Thanks to historically low interest rates, more people secured first and second mortgages in 2020, and they will continue to do so this year. The digital process allowed them to maximize their time at home and remain appropriately socially distanced during the pandemic. This trend will likely accelerate into the future as consumers seek to buy, sell and refinance online as part of the “digital lifestyle” where anything that can be online must be online.
Here are the trends we’re seeing and how digital-first behaviors will drive the industry this year:
Customer experience is the top driver in this online-focused trend, and financial technology companies and real estate disruptors are taking notice. Consumers want reliable digital tools and information, better communication, and clear expectations set around the most important purchase in their lives. The companies that are able to step up and serve buyers and sellers in the best ways will win.
The most innovative solutions are trying to solve some of the issues that buyers and sellers already face in terms of down payments, fees and escrow. Many sellers, for instance, have a home they need to sell before they can buy their new home. New “trade-in” programs allow sellers to “buy before they sell,” which reduces the complexity of doing multiple transactions at once and eliminates the stress of lining up the timing and financing perfectly. Other programs are aiding consumers who want to make cash offers. Companies that provide a combination of high-tech, high-touch options to consumers will differentiate themselves in the market.
In our always-on, highly-engaged culture, speed has also become a major factor in buyers’ and sellers’ preferences, especially in markets where there is high demand and low supply. They want easy-to-find information, seamless processes and quick progress to feel comfortable about their decisions. Digital platforms and apps allow them to submit their information at any time of the day, receive communication from agents, and move forward at their preferred pace.
Of course, pacing is key. Anything that closes in fewer than 10 days can increase anxiety, according to data from Fannie Mae. At Reali, we’ve found that the “sweet spot” for customer comfort is about 14 days. Studies from Deloitte, McKinsey and JD Power found that average closing times in 2020 were 42 days, up from 39 days in 2019, partially due to the deluge of customers and quick pivot to work-from-home trends. In 2021, companies with a digital mortgage experience will need to find the balance between consumer psychology and individual customer hopes and expectations in the process.
Most importantly, the key consideration in every aspect of real estate is customer satisfaction. As much as the new digital options are exciting, companies need to stay focused on the customer-first approach. Historically, innovation has centered around the agent or broker — instead of the consumer. Today, it’s particularly important to elevate both the agent and consumer experiences to deliver that customer-first approach. This requires building better communication, more transparency across each component of the transaction, and a quality experience that consumers will remember for the rest of their lives.
The history of residential real estate transactions has sometimes been fraught with high anxiety and the “survival mindset.” New technologies and apps give us the opportunity to reduce that stress and meet — and exceed — customer expectations about the home buying, home selling and refinancing processes. As even more platforms open up this year, such as Google’s Lending DocAI, which allows mortgage lenders to quickly evaluate potential borrowers, we need to ensure that customer satisfaction is baked into each step of the way.
The borrowers are out there, and they are ready to become enthralled by the great value, speed and best customer experiences that are available this year. To do this, the dynamic shift toward digital must remain focused on making the transaction process work for the customers, not for the companies that will benefit. It’s our job to help them experience homeownership in the easiest, most comfortable way possible — and pass along the savings that will help them to feel secure and confident in the most consequential purchase they’ll make.