- 7 weeks ago
On today’s sponsored episode of Power House, Diego interviews Patrick Stone, chairman and founder of Williston Financial Group.
Patrick talks about regulatory challenges and the need for greater efficiency in real estate transactions, especially amid demographic shifts in homebuyers. He also talks about focusing on data sharing and process alignment to enhance the customer experience and reduce transaction fallout.
Here’s what you’ll learn:
Why the housing industry hasn't seen much disruption despite technological advancements
How regulatory challenges create inefficiencies in real estate transactions
The impact of reducing closing times on affordability and home ownership
Why younger generations expect more automation and education in the home buying process
The role of industry associations in fostering cooperation and progress
Related to this episode:
Patrick Stone | LinkedIn
https://www.linkedin.com/in/patrick-stone-2328a7261/
WFG National Title Insurance Company
https://wfgtitle.com/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
Patrick talks about regulatory challenges and the need for greater efficiency in real estate transactions, especially amid demographic shifts in homebuyers. He also talks about focusing on data sharing and process alignment to enhance the customer experience and reduce transaction fallout.
Here’s what you’ll learn:
Why the housing industry hasn't seen much disruption despite technological advancements
How regulatory challenges create inefficiencies in real estate transactions
The impact of reducing closing times on affordability and home ownership
Why younger generations expect more automation and education in the home buying process
The role of industry associations in fostering cooperation and progress
Related to this episode:
Patrick Stone | LinkedIn
https://www.linkedin.com/in/patrick-stone-2328a7261/
WFG National Title Insurance Company
https://wfgtitle.com/
HousingWire | YouTube
https://www.youtube.com/channel/UCXDD_3y3LvU60vac7eki-6Q
The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted and produced by the HousingWire Content Studio.
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NewsTranscript
00:00One of the key things, I mean, we're going to talk a little bit about how you can differentiate yourself.
00:05One of the key things in differentiating yourself is providing education and information to your clients.
00:10That's where you're going to have to go if you're going to be relevant.
00:20Welcome to Powerhouse, where we interview the biggest names in housing and ask them about their strategy for growth.
00:27I'm Diego Sanchez, president of HousingWire, and my guest today is a special one.
00:33It's Patrick Stone, the chairman and founder of Williston Financial Group.
00:38Patrick, it's so great to have you on the show.
00:40My pleasure. Thanks for having me, Diego.
00:42So you've been in housing for multiple cycles and administration changes.
00:49What are the biggest changes from your perspective that the housing industry has seen?
00:57And also from your perspective, what hasn't changed at all in the real estate transaction?
01:02Well, I think the biggest changes were really a byproduct of two major events.
01:08The first one that I witnessed was the S&L crisis in the early 80s.
01:13And basically, the bulk of loans back then was done by savings and loan institutions.
01:18Between 1981 and 1983, about 1,000 of them went under.
01:23And so consequently, for a period of time there, it was difficult to get a loan because there was no place to get a loan.
01:29Plus, interest rates went through the roof.
01:31My first – I've been at this 50 years.
01:34My first management job, the day I took over a company, mortgage rates were 15%, which is a little intimidating.
01:43They got up as high as 18%.
01:45The GSEs started getting more involved in buying loans.
01:49And the market stabilized and rates came down with Volcker's efforts to curtail interest rates.
01:59So we got through it.
02:00But it was dramatic and it was impactful and it changed the industry significantly.
02:06The other major event, of course, is the financial crisis, which I think everybody remembers too well because it wasn't that long ago.
02:13And really, that was a byproduct – people blame real estate.
02:18I personally blame Wall Street because they bought subprime loans in order to raise returns on securitized – by securitizing mortgages and throwing in some subprime loans to get the return rate up.
02:30Well, it got to the point where a lot of securitized efforts had 10%, 15% subprime loans in it.
02:37And, of course, when the market crashed, that went upside down and you had a mammoth foreclosure wave.
02:45And now we've had some regulatory adjustments, so we don't have that issue anymore.
02:51Right now, the biggest issue that I see is that we have very little coordination between regulators and a lot of talk about saving money, but no one quite knows how to do it.
03:00Yeah, and if you look at the real estate transaction, despite billions of dollars being spent on disruption in real estate, it still comes down to a real estate agent working with a loan originator, working with an appraiser, working with a title agent at the end of the process.
03:27That hasn't changed very much, has it?
03:29It hasn't changed at all.
03:31And, you know, I applaud your use of the word disruption, but I haven't seen any in the real estate industry.
03:38I mean, it hasn't changed very much at all in my 50 years.
03:42And I do think that is because you have different regulators overseeing each aspect of it with no internal coordination or no efforts to actually work together.
03:54That has to change.
03:55If FHFA is really serious about reducing costs, then they need to take some time out of the process.
04:04They also need to make the process more efficient.
04:06It's a horribly inefficient process for almost everyone involved, in part because there's no coordination between realtors, lenders, and title companies, and appraisers, if you will.
04:17We have a tremendous duplication of data.
04:21We don't align our processes to make it more efficient.
04:25When I started in this business, it took an average of about 45 days to close a real estate deal.
04:30Now it's down to 39 after about $100 billion worth of tech improvements across the industry.
04:35I mean, it really has not changed very much.
04:39In some places, it's still much higher than that.
04:41So I think it's really the separate regulatory oversight that creates a problem.
04:48We still do not have the level of interaction, integration, and mutual effort among the players to make the process more efficient.
04:56What if you had a magic wand and you could wave that magic wand and fix some of these regulatory issues and confusion at the regulatory level?
05:09What would you do to make changes?
05:11Well, I think, you know, first of all, we need to change some of the rules so we can share data, have a common data vault, common data source, and use that, you know,
05:22so we don't re-key data on every transaction 50 million times, right?
05:27I do think the getting regulatory interaction is going to be difficult, but I do think the associations, the ALTA for the title industry, MBA for the mortgage industry, NAR,
05:41even though they've had some disruption, NAR for the real estate industry,
05:45I do think if the associations put a coordinated work group together,
05:49they could make recommendations to the regulators that would have a significant difference and, you know,
05:55maybe encourage a little bit more coordination of the efforts.
06:00I mean, here we are, this huge industry, and it is still as disparate and as dysfunctional as it was when I started 50 years ago
06:08because we're regulated by different entities.
06:11And the title insurance industry, because it's an insurance industry, is regulated state by state.
06:16And then underlying that, and I'm ranting a little bit here, forgive me, but underlying that,
06:22you have different quality data in different places, you have different business practices.
06:27It is a really convoluted industry at this point in time.
06:33So we talk a lot about margin compression and reducing costs,
06:39but some savings come from reducing the time that is spent on task.
06:44From your perspective, what would it take to reduce the time to close and how would that impact affordability and access to home ownership?
06:55Well, I think, you know, reducing time would really be a function of aligning the processes and sharing the data.
07:03The processes aren't aligned.
07:04I mean, we do not sit down with lenders and realtors and figure out what we can all do to make it like a linear process.
07:11So I think aligning the processes would help, sharing the data would help.
07:16But if we could get the average closing time from 39 down to even 21, that would be mammoth.
07:21But more importantly, what would happen is you'd have a lot less fallout.
07:26You'd have a lot less canceled transactions if you reduce the time.
07:30And that is a tremendous expense for everybody, right?
07:33And we factor that into our fees because we do a lot of work that doesn't actually close or generate revenue.
07:39So if you reduce the time, I think the biggest impact would be a drop in the amount of canceled transactions.
07:46And as a result of that, you would save a tremendous amount of money.
07:51Do I see the costs coming down?
07:55No, I'm not overly optimistic about that.
07:58But I do think we could increase the efficiency and eliminate the need for the costs to go up.
08:04Absolutely.
08:06And you've talked about this in this conversation previously, but let's dive in a little bit.
08:13Leaders in different verticals of housing often have a limited understanding of one another's processes.
08:22How can our industry foster better communication and collaboration across real estate, mortgage, valuation, and the closing process?
08:35Well, and I don't mean to come across as being cynical here.
08:39I don't think that's going to come from the regulatory side.
08:42If that's going to happen, that's going to be a result of the various associations working together to try to figure out how to do that, how to make the process more linear and not repetitive.
08:53If we can eliminate rekeying of data, if we can make the process linear so that every time you do something, it's a logical next step in the whole process, we can take a lot of time and cost out and consequently reduce the amount of cancellations and just improve the experience for everyone.
09:11If you get right down to the nuts and bolts of it, I think educating through some cooperation among the associations, identifying opportunities by cooperation between the associations, that's what it's going to take.
09:28There's going to have to be some outreach there where the different associations put people together and really work on this diligently in order for it to have credibility.
09:39I've been, you know, not to rant, but I've been involved in a few efforts to do this from a capitalistic point of view, like, okay, let's invent a new product here and charge for it.
09:50But it's really hard to get an adoption from all the players if the initiative is coming from one of the participants and it's a competitor.
09:59So I think it's going to require the associations to get more engaged.
10:03So I'm Gen X and my generation, millennials and Gen Z have entered and are entering the housing market with really different expectations in terms of process and speed and customer service.
10:23How do you see, you know, how do you see, you know, how do you see those demands reshaping the housing industry?
10:34Well, here's an interesting thing, and I think there's been a lot of conversations and concerns over the newer, the younger generations requiring more automation.
10:46And that will occur, but I will tell you this, that right now that's manifesting itself by people using the Internet and online access to find properties, more so than the transaction.
10:57I think once they go through a transaction one time, the second time they buy a home, they're going to want to do a lot more of it on an automated basis.
11:06So this hasn't had an overall impact as quickly as I originally thought, but it has had an impact on finding a property.
11:14And I think the next cycle, the next time that individual or those individuals buy a home, they will expect a heck of a lot more integration and automation in the process.
11:24You know, we talked earlier in the conversation about the real estate transaction not changing that much.
11:31You know, it's still all about the real estate agent, the LO, the appraiser and the title agent.
11:37And it also turns out that my generation, millennials and Gen Z want to work with local experts.
11:45Yeah. You know, and it's one of the key things.
11:49I mean, we're going to talk a little bit about how you can differentiate yourself.
11:52One of the key things in differentiating yourself is providing education and information to your clients.
11:59And, you know, I think you're absolutely right.
12:01Younger generations are more attuned to that.
12:04They're more demanding and they expect it.
12:06So, you know, that's where you're going to have to go if you're going to be relevant.
12:10So, you just brought this up and so it leads right into my next question, which is mortgage lending, title, real estate brokerages can be perceived as a little bit of commodity businesses, right?
12:27Where consumers don't see a lot of differentiation between the different competitors in those verticals.
12:36What do you think business leaders, brokerage leaders, mortgage lending leaders, title company leadership, what do you think they need to do to really differentiate themselves from their competition?
12:49Well, my own experience, and I think it's relevant to the question, is that you need to provide education to people.
12:57You need to make sure they understand what is happening, why it's happening and what happens next.
13:03And so, if you can status your clients, and you can do this online, we have a My Home product that does this and it's gotten really, really good usage.
13:14People can sign up and they get status during the transaction 14 times so they know what's going on.
13:20And I'm going to, if I may, I'm just going to share a quick story with you here.
13:24I invented copper wire fighting over pennies.
13:27So, I'm pretty tight sometimes, and I got real excited about the idea we're going to save, we're going to status people 14 times automatically out of the closing system without any individual effort or interaction.
13:40So, in other words, this doesn't take any time or effort on our people's part.
13:45And I got all excited about the time and money I was going to save us.
13:47What I missed was people come to the closing understanding what happened.
13:52They didn't feel like they were in the dark the whole time, and they're happy.
13:56They come in with a smile on their face.
13:58The realtor and lender get a referral.
14:01Holy cow.
14:01Is that okay?
14:02Yeah, that's okay.
14:03That works pretty well.
14:04So, I think to your point and to kind of where a couple of questions went here, if we let people know what's going on, we can use online, the online capability to status people, keep them informed, keep them educated.
14:20And that's critical.
14:21So, statusing and education.
14:22And then the other thing I would recommend everybody do is have some sort of professional feedback on your service.
14:30Okay?
14:30We do an NPS score at our company.
14:33And I'm going to share something with you.
14:34Yeah, you want to know if you're doing a good job or not.
14:38Of course, you want to market the idea that you're doing great.
14:41But here's the interesting thing.
14:43We started doing this NPS score.
14:45We shared it with our people in a nonjudgmental way.
14:48That NPS score has gone up dramatically because people take pride in what they do.
14:52And if they get feedback, they try to improve on it.
14:55So, your employees will self-regulate to a large degree in the quality of work they do if they have a feedback loop, an independent assessment of how good the quality was, someone that interviews the clients.
15:08This is really critical to improving the quality of your service.
15:12Yeah.
15:13And your answer is so on point, especially with first-time homebuyers where, you know, if you surprise and delight a first-time homebuyer during the transaction by keeping them informed and by educating them throughout the process, wow, you're probably going to get a lot of referrals from that.
15:32Yeah.
15:33I mean, it's had a dramatic impact on our business and it's had a dramatic impact on our employees' pride and feeling of success.
15:44Our employees take a great deal of pride in that score and the fact that it's going up, right?
15:50I mean, it's self-motivating and it's good for management to know, you know, how you're doing.
15:56But it's really great for the employees to have a feedback loop like that.
16:00So, you're very experienced in this industry.
16:04You've been working as an executive for a long time.
16:08If you could set one priority for housing, for the housing industry over the next five years to improve efficiency and expand access to home ownership, what would that big priority be?
16:22I think working on aligning our processes so that we share the data.
16:30You know, one of the things that we are very focused on doing is getting in with our clients and acting a data vault so we share the data.
16:39You know, if you – I did a survey.
16:42This is – it's a little out of date.
16:44Forgive me.
16:44It's probably 20 years old now or 22 years old to be precise about how many time name and address were entered in a typical real estate transaction by all the participants.
16:54At that time, it was over 80 times.
16:56And that's just ridiculous, right?
16:59So, if we can share data, the time and effort spent in rekeying data goes down, amount of errors goes down.
17:06And if we can focus then on interactive processes so that we align our processes and don't do – you know, if you do one thing and then you have to go back and go forward, go back, go forward, which really happens a lot in all the players, if you can align the processes, it would be complementary and you wouldn't have repetitive processes.
17:27You could take a significant amount of time out of it.
17:29And I think the other thing here that's going to make it happen is not going to come from the regulators.
17:35It's going to have to come from the associations.
17:38Our associations need to get together.
17:41There is very little interaction among the industry associations.
17:45And that's a shame because, you know, we're all in the same business together, right?
17:49We're all working for the same purpose.
17:53We all get paid when a transaction closes.
17:55So, we need to align our processes.
17:58And I think that's going to take some effort by the associations to identify it, to make sure that we share data, that we align our processes and operate more efficiently.
18:08Again, taking time saves us money.
18:11But what it really does is it cuts down on the fallout.
18:15You know, at any given time, you'll see different numbers, anywhere from 30% to 40% of the transactions don't close, right?
18:22I mean, what kind of industry, after all this time and all this money spent on automation, what kind of industry has a 30% or 40% fallout?
18:32The real estate industry is.
18:33And this is stupid and it's expensive and it needs to be addressed.
18:37Sorry, I'm ranting.
18:38You mentioned that survey that you did over 20 years ago, but I bet it hasn't changed very much in terms of people having to key in the same data over and over in the process.
18:51It may have changed a little bit, but not a lot, right?
18:54I mean, every participant, I mean, whether you're a realtor, a lender, an appraiser, an inspector, a title company, whoever, everybody, you know, goes about entering all the data themselves.
19:06And the re-keying of data is mammoth.
19:12Well, Pat Stone, what a pleasure chatting with you today.
19:17You just have a wealth of experience and knowledge about the housing industry.
19:21Thank you so much for joining me on Powerhouse.
19:24Diego, thank you for having me.
19:26Delighted to participate.
19:28I think we all want the same thing.
19:30We want a more efficient process, a higher closing percentage, and a more satisfied clientele.
19:35So we're all in this together.
19:37Cheers to that.
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