The Internet has been called "the ultimate convenience store," because it offers choice and value, it's open 24 hours a day, 365 days a year, and you don't have to leave your desk to shop. It's no wonder that the 327 million people online today will grow to one billion by 2003 (according to Computer Industry Almanac). And it's no wonder that savvy consumers, now accustomed to shopping online for books, CDs, banking services, airline tickets and stocks, will look to the Internet when embarking on their biggest transaction ever—buying a home. The implications for real estate professionals are immediate. Our industry is notorious for belabored decision making (usually a two-year process) and, with the average age of REALTORS® at 55 years, there is sometimes a resistance for them to change. You might think you have the choice to sit back and let this e-commerce thing work its bugs out; but the truth is, those who don't log on will die off; those who don't retool might as well retire. This is a matter of survival: Survival of the Finest.
Creating an Internet Strategy
Every title company and real estate organization needs an Internet strategy. Your Internet strategy should answer the question that successful businesses continually ask themselves: What do my customers need and how can I meet their needs in today's environment? Whatever your answer, it should incorporate an Internet strategy, as there is no turning back from the power of this medium. I am not suggesting that the Internet is the one and only road to commercial success in the 21st century. Rather, I am proposing that the Internet be viewed as an additional way that customers can communicate with businesses. Because electronic technology can speed up and even simplify communication, the Internet has already become the preferred method of commerce for many successful companies.
There are two approaches to the Internet. You can decide to spend money on it (i.e., creating a Web site; advertising on related links), or you can decide that you want to make money from it (i.e., providing an online product, service, or process that others pay to be a part of). Our firm, Title Guaranty of Hawaii, Inc., has chosen the latter strategy.
Because the homebuying process is a very complex one—involving many vendors, much paperwork and heavy regulation—the Internet (with its estimated 10 million real estate Web sites) does not yet offer a seamlessly integrated real estate shopping and transaction experience. Lest that be more fodder for the "sit back and wait" types, I would warn you that, right now, there are components of the process that are being parceled out and perfected by forward-thinking firms and individuals. What you need to do is to create an online strategy that you can conceive of as a collection of Lego™ parts: both those that will plug into pieces that are currently operational and those that will integrate in the future. What can you proceed with today? When you consider that the typical closing takes four weeks and involves over 30 steps and stacks of paper being exchanged between a dozen parties, you can understand the potential for errors and the enormous expense in terms of time.
Clearly, the real estate transaction is not an easy process to standardize (i.e., "Web-ize") for the purpose of translating it to the Internet. Programs that currently exist tend to fall into one of three categories: customer relationship management (CRM) programs, order receiving programs, and forms router programs that capture and distribute data.
Where once real estate professionals were gatekeepers of information, REALTORS® are now interpreters of information. After all, with online consumers having instant access to millions of homes in the U.S. and with direct access to loan application Form 1003, information that was once guarded has been "set free." Recognizing this trend, savvy Land Title professionals are transforming themselves into data-driven online transactional experts (while still providing the high touch services that are called upon during the homebuying process).
Threats/Opportunities for Land Title Industry
A good economy has pushed homeownership in America to a record high in the first quarter of 2000 (67.1% of families, or 70.7 million Americans, own their own homes). This trend bodes well for the real estate business as proven by the 17,000 new brokerages opened in the last year and the nearly 30,000 additional real estate service providers, including new title search firms, inspection companies, and appraisers. (Realty Times, 4/12/00) It's important to realize that the real competition for REALTORS® is not other REALTORS®, but rather consumers, who are taking more of the process into their own hands, and the companies that cater to them. In the last two years, use of the Internet to find a home increased by more than 200 percent.
The biggest challenge is the FSBO (For Sale By Owner) which, in combination with the resources of the Internet and its access to buyers, is a threatening equation. The trend also presents a dilemma for title companies who are currently targeting lenders and REALTORS® but not consumers. The percentage of Internet-facilitated FSBO transactions will increase unless REALTORS® and other real estate professionals can provide more services to sellers and buyers. Remember, marketing to the consumer is very expensive.
Some title insurance under-writers and national lenders currently view themselves as at the center of the business-to-business process. E-commerce and technology have made the present way of doing business—contracting, selection of service providers, closing process—all antiquated. Land Title Associations and their members need to change now, or others will control the sales process sooner than anticipated. Within the next year, thanks to new technology, real estate professionals can begin to reposition themselves at the center of the transaction process, and regain the vital role they've enjoyed in the past. The land title industry must start anticipating and adapting now, so that it is ready when this revolution takes place. Put together an Internet strategy now.
Technology-Assisted Online Transactions
Imagine an online Internet system that can assist you with all facets of sales transactions. This is not a pipe dream; the technology currently exists to provide an electronic transaction platform with all of the features that are critical and particular to the real estate business.
Moving from Title Office to Settlement Services Center
Title Guaranty decided to position its marketing professionals as "real estate advisors for life," implying a full-service, long-term relationship. We took a careful look at the actual costs involved in the property title and settlement pro-cess and identified opportunities for automation while, at the same time, recognized that information is more valuable when compiled into a database than standing alone. With the expertise of com-puter architects from CyberCom Inc., Title Guaranty set out to construct an online real estate center and created two tools toward that end: TGExpress and RealCentral.com.
TGExpress provides title and closing companies with the ability to provide "one-stop shopping" to real estate agents, lenders, and attorney clients. RealCentral.com complements TGExpress by providing sales and closing coordination. We developed RealCentral.com, an e-commerce transaction platform, to automate and speed up a range of tasks that, until recently, had to be laboriously performed by hand.
RealCentral.com's library of documents contains industry-related forms (both local real estate and national lender forms) such as sales contracts, addenda, proprietary forms, and hundreds more. Once the appropriate forms are selected, data are imported into "smart" worksheets so that the user needs to enter or download the information only once. Selection of service providers—ranging from banks and title companies, to appraisers and termite businesses—is automatic, and orders are routed electronically. Service providers receive only the information that pertains to them; they then confirm the order via e-mail and ultimately send back their reports via e-mail attachments. RealCentral.com insures that each order is automatically tracked and archived to a specific transaction, and up-to-the-minute status reports are available throughout the process. All of this is carried out in a secure environment that is log-on and password protected.
Benefits to Users
Users create their own profiles by selecting particular forms and particular service providers. These preferences are then stored for subsequent transactions, making the e-commerce transaction experience a highly personalized one. A real estate professional can give a client background information about a particular service company by clicking on an icon which is hot-linked to the organization's Web site.
By capturing information for all selected forms at the same time, all parties involved are literally working from the same page; and by inserting standard regional clauses (drawn from a "Special Wording Library"), misunderstandings can be avoided down the line. We created an e-commerce transaction platform that was designed as an interactive site which cannot only receive and distribute information, but can also "think"; it lets the user know when wording has exceeded available space (in which case it automatically creates and catalogues an Appendix). Its open architecture allows system users to be compatible with most title, listing and closing systems, including TGExpress.
Using Internet-based technology that allows wide access to a range of products and services enables users to be at the center of the sales and funding process and empowers regional businesses to compete with national firms.
Benefits to Web Site Owners
The uniqueness of an e-commerce transaction platform can be found not only in the site's features, but also in the system's administration. Administrators of the Web site determine users and are allowed to customize (brand) the features to meet the needs of their members Because the use of RealCentral.com is free for most users, it provides added value to users. Not only does the site increase revenue but it also can help to decrease expenses, when you consider the time that is saved in being able to pull up the latest forms—avoiding the inconsistencies that so often delay the closing process—and the forests that are saved when reams of paper are no longer wasted in copying and re-copying forms for distribution.
Making it Happen
The hardest thing to achieve when working with advance technology is simplicity. Thankfully, you don't have to be a techie to benefit from what land title professionals have produced using Microsoft-based state-of-the-art software. An e-commerce system is only as successful as it is easy to use. Within a two-hour training session, real estate professionals can learn how to become familiar with it using either system. Courses can be provided by qualified service providers such as your marketing representatives.
The Future is Here
Not since the creation of the Multiple Listing Service (MLS) have real estate professionals had access to a product that can address the actual costs of a real estate transaction in terms of time, accuracy, and confidentiality. E-commerce transaction platforms shorten the normal real estate processing time by 30-40 % and also make the overall transaction an easier and safer one. As with all new advances, this technology will become the industry standard sooner than anyone anticipates. As both computing and online access become faster, cheaper and more universal, the Internet will continue to impact the realty marketplace. In the near future, wirelessness will allow your customers to link the Internet with their cellular phone and, when that happens, there are no connection boundaries. As fast as the Internet user base has grown in the last five years, the Internet is not a mature medium; the majority of people, especially in our industry, have yet to go online. Having said that, the growth in e-commerce that is anticipated to emerge in the coming decade should beckon all land title professionals to heed the advice of the sage who warned, "E-Shape-Up or "E-Ship Out."
David T. Pietsch, Jr. is an owner of Title Guaranty of Hawaii, Inc. and manager of RealCentral.com, LLC. He can be reached at firstname.lastname@example.org or (808) 521-0217. This article is an excerpt from David's presentation at the 2000 ALTA® Annual Convention in Hawaii.