This past fall, Zillow finalized its $500 million purchase of online scheduling platform ShowingTime, firing another shot in a long-running struggle over how people buy homes. The real estate and mortgage industries have always been complementary, but there’s been a continuing race to create one-stop shops where people can browse, buy and finance all in a single, automated funnel.
Companies with heavy financial backing are pushing an Amazon-like model of taking over the homebuying process from the initial search through closing. Traditional mortgage originators and Realtors are now at war with these “Amazonians” whether they know it or not.
It’s easy to vilify digital loan companies as predators waiting in the wings to kill your niche. Reality check: These brands didn’t necessarily create the problem. They responded to the changing needs and desires of the consumer.
Evolving borrowers
The profile of today’s borrower is changing rapidly. To compete in this market, mortgage originators should understand what is happening with potential clients and why these changes are occurring.
First, there’s been an increase in recent years in 1099 workers, or self-employed workers who are frequently part of the gig economy. These potential borrowers are unsure of their mortgage eligibility. They’ve heard that lenders want two years of steady, salaried work and a 20% downpayment before a mortgage application can be approved. As a result, many see mortgage originators as a “no” waiting to happen. Curious to find out where they stand, however, they are drawn to “instant” online applications that can provide them with fast, anonymous answers.
Many potential clients prefer self-directed experiences. Clients love that the digital heavyweights allow them to apply for loans at 2 a.m. while they wear pajamas and Netflix streams in the background. Hopeless? Not quite.
Stop being one of the mortgage originators who collectively stab themselves in the back by going to the giants for leads.
There’s a huge difference, for example, between getting a mortgage and buying a book. That’s why mortgage originators have maintained their brick-and-mortar offices years after in-person book and music stores have gone the way of the dodo bird.
People recognize that getting a home loan shouldn’t be as easy as ordering a pizza via phone. This innate knowledge is a secret tool that the mortgage originators left standing will smartly optimize. They will focus on positioning themselves as the go-to lender for digital home seekers in their market, providing answers to their questions and solutions to their problems.
Impersonalized service
The big shot fired at originators occurred in 2018 when Zillow acquired Mortgage Lenders of America, leading to the launch of Zillow Home Loans. Zillow now gets about 240 million unique visits per month, according to digital market intelligence platform SimilarWeb. So widely recognized, 40% of their traffic comes from people simply typing Zillow.com into their browsers.
For originators cozying up with Zillow, the cost is high. While the numbers aren’t widely published, mortgage leads typically cost between $20 to $60 each and can reach $100 or more. These leads convert at average rates of 1.5% to 4%. It’s undeniable that Zillow leads perform, but it can be argued that conforming to this funnel isn’t in the long-term best interest of independent loan officers and brokers.
Why are Zillow, Keller Mortgage, loanDepot, Redfin and similar companies so powerful? They control their own leads. But originators don’t need to fear this. This movement — real estate companies becoming mortgage companies — is not new. It’s been steadily progressing since the Great Recession. Despite this, more than a decade later, agents and originators are having their best years ever.
To compete in the future, you’ll need to develop a battle plan. First, identify what clients are left wanting when they use a highly automated or impersonalized loan factory. Do they feel like they’re able to get their questions answered and actually have someone working in their corner? Is there someone on the other side to connect them with the loan products that will increase their odds for approval? These things should be of value to you.
Identify the perks that you bring to the table that no “big box” mortgage company can. Set yourself apart. Control your own leads. Have a way to source and qualify leads that is completely independent from the gigantic real estate companies with huge conflicts of interest.
Independent originators who seek to protect their niches need to duplicate the Amazonian tactics on a scaled basis. In other words, you need to spend your advertising dollars to create a high-converting landing page. Put a process in place where a lead can go to your landing page and have the full self-directed experience they would expect from the digital giants.
Ample opportunities
Mortgage originators should focus on market opportunities to obtain leads while demand for homes is high. Ford hasn’t stopped its assembly lines in response to a report predicting that driverless cars are coming within 10 years. That would equate to billions of dollars forfeited during the lucrative period before the change, with the added mistake of not adapting to emerging trends.
Will many people move over to driverless cars? Yes, but there will always be a market for people who want the experience of driving. Both can be lucrative for companies that find their niches.
Home financing is no different. People are trying out online mortgage companies, but there will always be a remnant of consumers who want personalized service from a mortgage professional. These people will put the time and energy into communicating with you as long as they get superior service and someone who cares.
This doesn’t have to be a big group for you to make a healthy living. You just need a lead-generating system that connects with your client profile. Again, the goal here is not to compete with the Amazons of the lending world. But you can pull in steady business using your unique value proposition.
Be the mortgage provider who helps people in urban areas find financing for rehabilitation projects. Become the pro who teaches first-time buyers how to put down the smallest amount while still getting approved. Market yourself as the fast-track refinancing expert who tells people how to use a home like the asset it is. While you’re not offering a final product that’s too different from what the Amazonians are ultimately delivering, you’re helping each client to get the best fit.
Stop being one of the mortgage originators who collectively stab themselves in the back by going to the giants for leads — these originators are literally financing their own destruction by feeding the machine for short-term gain. The brands that control leads and data control the future of the industry.
Originators can carve out lucrative niches in their markets that are independent from the fast-food version of mortgage approval that others are peddling. Fight back in the battle for data. Have a way to find and qualify leads that is entirely independent from the competition. Yes, Zillow’s leads have value, but remember that Zillow can pull these leads at any moment. Utilize your own ads to generate independent leads. It’s the best way for individual originators to compete on a level playing field in their chosen market.
You cannot cold call your way to beating the giants. Automate your initial contacts and respond to them within five minutes of their query. Maximize the information in your database to keep your pipeline flowing now and into the future.
Fighting chance
Although it’s easy to get nervous about what mortgage professionals are seeing, note that every industry today is being shaken up by similar “Amazonifications” and convergences. The one thing seen historically is that every innovation presents new opportunities.
Is it possible that the home-financing process will someday be totally automated? Certainly. It’s also possible that everything from buying a car to having a package delivered will be 100% automated by the time that happens. The planners and decisionmakers in other industries are continuing to innovate based on what is currently happening rather than throwing their hands up in defeat about what may occur in 10 to 20 years. They remain profitable by optimizing current needs, demands and opportunities.
Remember, you don’t need to beat Zillow. Instead, divert a big enough portion of leads to keep your table set. There are companies out there that have poured resources into reverse engineering the lead-generating strategies of the opposing forces. These companies give originators a fighting chance in the consumer-direct model.
What is your battle plan for fighting the war of convergence? Target high-intent leads and treat each one like gold. Give them an experience to brag about and stop wasting time wondering if the Amazonians are going to take a bite out of you. ●
