By Meghan Hall
Innovation is happening across the national real estate industry, with numerous technologies coming to market to help real estate transactions happen in a more efficient manner. For those at Qualia, a digital real estate closing company, 2020 is expected to be a year of opportunity, with innovation happening not just in major tech or real estate focused core markets, but around the country. The Registry spoke with Qualia’s Co-Founder and CEO Nate Baker on his outlook on the national real estate industry in the coming year.
Please tell The Registry a little bit about the national lending market at present. How are you finding buyers and lenders are navigating the market?
Today, the national lending market is evolving to meet the growing sophistication of borrowers and lenders. In a world where you can get anything delivered to you in a matter of hours, borrowers increasingly expect an immediate, one-click digital experience. To remain competitive, lenders seek to one-up the competition by meeting these consumer demands head-on. There is a big opportunity for technology to create efficiencies throughout the closing process. If utilized properly, modern technology can increase processing productivity, drive down closing costs and ultimately create a seamless user experience for both buyers and lenders.
In your opinion, why has the closing process of a transaction been historically complicated?
Closing a real estate transaction has historically been a complex and inefficient process due to the overwhelming amount of paperwork, record keeping and communication required. There’s over a dozen people involved in the closing who aren’t necessarily aligned from a process standpoint. These parties include the buyer and seller, the real estate agent, the lender, the title and escrow agent, the appraiser, the surveyor, the title insurance underwriter and more. Coordinating the various parties, ensuring all the documentation is completed correctly and transferring all funds securely are collectively an enormously arduous task for all parties involved.
Why haven’t more technology companies put resources towards making closing processes easier?
Streamlining the closing process and making it seamless for the consumer is a difficult problem to solve. Deep industry knowledge is required to navigate the various regional differences, paperwork, escrow laws and other complexities of a closing. Many real estate technology companies have instead chosen to start at the beginning of the home buying process leading up to the purchase and sale agreement. Their solutions revolve around improving the search process for consumers and lead generation mechanisms for real estate agents, among other things. Recently, we’ve seen many of these companies move towards providing a closing solution such that they can improve the consumer experience from start to finish.
Qualia recently hosted its first Future of Real Estate Summit. In your opinion, what were the biggest takeaways from the event? What do they mean for the national real estate industry at large?
Real estate has and always will be a cornerstone of the American economy and cultural identity. It has long been synonymous with the growth and prosperity of the American middle class. However, home ownership rates have declined significantly in recent years, especially among millennials. Flat income growth coinciding with rising property values, and high closing costs are a few of the many reasons for this trend, and represent a major burden for potential first-time homebuyers. There is a solution to this complex problem, but it requires the entire real estate ecosystem to work together. We designed our summit taking these elements into account.
What are the biggest trends and innovation that you expect will take off in 2020?
New business models are emerging in real estate that leverage new technology and fundamentally change how homes are bought and sold. These business models include iBuyers like OpenDoor, Zillow Offers and other that provide instant bids on homes; low-cost, centralized brokerages like Redfin that aggregate and empower strong agent networks; and referral brokerages like Realtor.com’s OpCity, Zillow’s premier agent program, and HomeLight that generate targeted leads for real estate professionals. I anticipate these business models will continue to grow rapidly.
Additionally, another growing trend in real estate is that innovation is no longer centered solely around big cities like San Francisco or New York. High growth businesses are increasingly focusing on locations that enable more affordable lives for their employees, provide better services for business, maintain less onerous policy frameworks, and offer room to grow. Cities like Austin are increasingly attracting talent and are becoming technology hubs. In 2020, we anticipate that Austin will be the best real estate market of the year.
Are there any challenges that you expect could inhibit the growth of the real estate market in 2020? Why or why not?
One factor that will continue to impact the growth of the real estate market in 2020 is the persistence of urban land use regulations that constrict housing supply and labor mobility. These zoning restrictions limit the potential for new construction, a large source of available inventory, pushing up real estate prices and pricing out first-time homeowners and existing residents. Meanwhile, in cities that have less strict land use regulations, the real estate markets continue to rapidly grow.
Over the past five years, Qualia has become one of the fastest growing title and escrow software providers, and is behind 15 percent of real estate transactions across the U.S. What types of transactions is Qualia working to support?
We support the entire closing process from the start to finish for both residential and commercial transactions. Our platform helps power closing and post-closing operations for purchases and refinances nationally. These processes include:
- Conducting title searches, generating commitments, resolving title issues, issuing the title policy and premiums
- Signing and recording documents
- Receiving and disbursing funds to and from an escrow account
- Reconciling escrow accounts in compliance with regulations
- Collecting, sending, and tracking trailing documents
- Transaction accounting and auditing
Our focus has always been and will continue to be: investing in product development to serve our customers, driving efficiencies for our customers to bring down closing costs, and ultimately making it easier to buy and sell homes.
At the Future of Real Estate Summit last month, we launched Qualia Post and Qualia for Enterprise. Qualia Post is the first integrated product for lenders and their title & escrow partners that tackles improving the closing and post-closing process. Qualia for Enterprise is the only cloud-based real estate platform purpose-built for large and growing title & escrow operations that combines a title production software, client communication portal, and vendor management product suite. Recently, Iowa Title Guaranty (ITG), the state entity that operates all of Iowa’s real estate transaction operations, chose Qualia as the enterprise platform of record for its 1,400 participants.
Going forward, the lender and enterprise audience will continue to be a growing priority.
At the end of 2019, Qualia raised $55MM in Series C financing. How will Qualia use this money moving forward?
We are growing rapidly and are using this funding to hire top talent in our product, engineering and go-to market teams, with a focus on accelerating growth and building strategic partnerships.
Is there anything else you would like to add that The Registry did not ask or mention?
Wire fraud is one of the biggest problems in the real estate transaction. The combination of the complex workflows and numerous counterparty interactions required and the sheer amount of dollars that flow through the system result in real estate being a prime target. We’re working to solve for that by bringing all parties involved in a real estate transaction together onto one simple, secure platform. Together with ALTA, we are the first digital real estate closing technology platform to join the Coalition to Stop Real Estate Wire Fraud and are committed to continuing to build awareness in this area.