Playbooks for Adding Real Estate, Title and Other Non-Mortgage Services

Is there a secret to successfully adding real estate, title and other non-mortgage services to your game plan? It's all in how you go about it. Join a panel of industry leaders as they share the definitive playbook for creating profitable joint ventures with real estate agents, title companies, homebuilders and more. Discover how to forge strategic partnerships that expand your customer base, create new revenue streams and future-proof a business in a competitive market. Don't miss this opportunity to gain a crucial advantage and learn how to build a powerful ecosystem for sustained growth.

Transcription: 
Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record. 

Nicole Booth (00:08):
So one thing I want to say at the top is that if we have time, we'd love to take some questions from the audience. So while we're talking, just have those in mind so that we can send a mic around. Raise your hand if you have something that comes up that you want to ask. Okay. I think first, in order to set the table for the conversation, I'd like to have each of you talk about your role and how you have been helping your company pursue those additional revenue streams that we're talking about. So maybe John, if you could start.

John Wines (00:37):
Absolutely. My name is John Wines. I work for Atlantic Bay Mortgage. We're an IMB. We close about four and a half billion a year, and my role is looking out for the technology and the borrower experience. I started off at Atlantic Bay 15 years ago as a mortgage banker. I worked my way towards a regional sales manager, and then I was so annoying about the technology and the things we needed to do that they put me in a role to oversee it. I basically try to oversee that borrower experience as we look for new revenue streams.

Nicole Booth (01:04):
Okay, interesting. And then Chris?

Chris Stuart (01:07):
Yeah, Chris Stuart. I'm the president of Place. We are a PropTech platform and we provide a suite of services around our tech to help power the real estate businesses of today—nearly 11,000 real estate agents across the US. The idea is to expand the scope of services that we're providing to these real estate agents to help them expand their value proposition to their real estate customers. This year we'll touch about a hundred thousand real estate transactions. We also own our own direct lender and IMB, Envoy Mortgage, which we purchased a couple of years ago. We also have a title and settlement business that we acquired last year, Blueprint Title, and Southwest Land and Title is our insurance underwriter. The idea is to get into all the other lines of business: insurance, property management, home warranty, et cetera.

Nicole Booth (02:01):
And we were talking before this that you also had your own mortgage company prior to this, right? Could you say more?

Chris Stuart (02:09):
Yeah. A little bit about my background for context for this panel: 22 years ago, I started a mortgage brokerage. We became a correspondent and a full banker in the scope of about a couple of years. We were consumer direct, so we spent a lot of money on client acquisition. Early on in the growth of that company, we began selling P&C insurance. Then we evolved that into estate protection plans—basically trusts for our clients—and then ultimately solar electricity. We sold that business in 2009.

Nicole Booth (02:47):
It's so interesting. This topic of expanding into different areas is something that we've seen a lot of in our reporting lately. There are joint ventures with home builders and all sorts of things to really own the whole entire lifecycle of getting into a house. We are talking about "customer for life" quite a bit. John, could you talk about some examples of taking on a new initiative in this way and discuss some of the results you achieved?

John Wines (03:27):
Yeah, absolutely. We tried all the other things first to try to generate profit. We tried to reduce the cost of a loan and all those kinds of things. You get into that game where you can try to increase your margin, but if you do that, you're out of the market and you're losing mortgage bankers and loans. You could try to lower your margin to get more loans, but then you're closing loans without making any money. So we were looking for other ways to generate revenue. One of the things we looked into is tri-party arrangements with builders and realtors. We've gotten into title insurance, homeowners insurance, security systems, and different things like that. These are all little things we could do to increase the amount of revenue we make on a particular loan.

Nicole Booth (04:06):
That's really interesting. Can you tell me about examples of some of these ventures that surprised you? How did outperformance show up in those moments?

John Wines (04:21):
There were a lot of things we wanted to factor in. We didn't want to lose our core focus of being an originator or take away from our services there, but we did want to bring in these other revenue streams. We also wanted to be particular; we're a hundred percent retail. We weren't trying to disrupt our mortgage bankers or create a bad borrower experience where we're constantly hitting them with different things to make money. We were looking for opportunities to add these things on in a customer-friendly and loan-officer-friendly way, where they were actually embracing the extra things, not looking at them as Atlantic Bay trying to make more money again.

Nicole Booth (04:53):
Right. And Chris, could you talk about your efforts in that regard, trying to grow into a new channel?

Chris Stuart (05:01):
In my experience building different businesses, it's been a blend of asking what's in the customer's best interest. In the case of the mortgage company 20 years ago, for the most part, in our consumer direct business, we were generating a lot of refis. People were calling just to try and save money. Then on the purchase side of the house, the insurance binder was a thorn in everyone's side before closing. We decided to solve both of those challenges. Now, our core customers at Place are top-producing real estate teams—more than 10,000 of them closing more than a hundred thousand real estate transactions. We're asking how we can help them expand their value proposition to their core real estate customer. We want to be the Shopify to real estate professionals. How do we operationalize a value proposition that helps them deliver a better experience for their real estate customers? I think that's the first thing: who is my core customer, and what can I do to add more value to them? Then, obviously, as smart business operators, how do you monetize that?

Nicole Booth (06:18):
I love the Shopify comparison.

Chris Stuart (06:23):
Yeah, we've got a long way to go, but that's the compass.

Nicole Booth (06:29):
When you're trying to do these kinds of things, what have been some things that you would do differently? If you could go back, what would you have done differently?

John Wines (06:48):
Well, we tried to avoid mistakes right out of the gate. The way we got started, we weren't trying to become mortgage or insurance experts ourselves. We weren't trying to become title insurance experts. The key is finding a good parent company. That's what we did to get past the mistakes and lean heavily on them, especially with a startup. For example, we partnered with Investors Title for title insurance. Each of our different ventures has been profitable in year one. We achieved that by leaning on that parent company, keeping costs down, and having someone at Atlantic Bay focused on driving the business. We found that formula really worked. We eliminated most errors by leaning on partners that have been there, done that, and walked us through the process.

Nicole Booth (07:33):
How do those conversations start when you're approaching one of these companies in another area and trying to form a partnership?

John Wines (07:45):
For us, we say it's marriage, not dating. You don't get into a relationship until you are ready to get married to this person. Once you're in, you're in. We spent a lot of time on the front end talking to different providers and making sure that the relationship was there. You have to have similar values. We're heavy into customer service, so our partners had to be heavy in customer service too. You couldn't have two people with different sets of core values. That was the biggest part for us—vetting what they believed and what was important to them, and making sure that aligned with what we value as well.

Nicole Booth (08:18):
Chris, it's interesting. In terms of your business, we see a lot of discussion about realtors becoming interested in mortgage. Can you tell us a bit about how that works and how much you're seeing that with your realtor partners?

Chris Stuart (08:38):
Across the industry, for the most part, the lending and real estate relationships are typically tethered between the mortgage company and the brokerage or the franchisor. We haven't really seen it be effective at scale with the actual real estate producers. Our core audience is the top 2% of real estate professionals because they do the overwhelming majority of the transactions. When you look at that cohort, most of them are organized as real estate teams because they create more leverage for themselves in the marketplace than an individual realtor might. They haven't really scaled other service businesses—mortgage, title insurance, property management—the way the brokerages have. Prior to Place, I was the CEO of Berkshire Hathaway's Global Real Estate Group. We did it at scale. In my opinion, it was a really effective part of our strategy: running our own mortgage company, title and settlement businesses, and insurance agency. But that was at the brokerage/company level. We exist at the layer we focus on because we believe if the top-producing agents are generating the bulk of the transactions and retaining the bulk of the revenue, that's where we want to show up and operationalize these different businesses.

Nicole Booth (10:26):
That's interesting, because you were saying earlier that some of these people have a set of tools from their brokerage, but they're going to you for an add-on.

Chris Stuart (10:40):
That's right. For the last 20-plus years, the commission economics shared on a real estate transaction have been heavily moving towards the agent keeping more of the dollars and the brokerage or franchisor retaining less. Therefore, the amount of money the brokerages and franchisors are simply able to retain impacts their ability to provide solutions, technology, and marketing—the things these top-producing agents really want and need to fuel their business. A lot of people in the audience may associate the real estate side of our industry with the agents we all know in our personal networks. I'm not talking about people doing four to six transactions a year. Those people are very well served by their brokerages. But the top-producing folks—our average team does about 180 transactions a year, and many do hundreds or thousands—need a more powerful operating system.

Nicole Booth (12:13):
Yeah, that's interesting. John, could you speak to how Atlantic Bay cultivates relationships with realtors?

John Wines (12:25):
We are a hundred percent retail. We have mortgage bankers that go out there and generate their own business, but we're trying to give them the tools and resources they need to make sure it's a smooth transaction. We're very high on the borrower experience and the realtor experience. During the transaction, we make sure we're aware of every piece of communication that comes from us to them to ensure it's timely and contains the information they need.

Nicole Booth (12:48):
That's definitely an important part of it. Regarding forming JVs with home builders, what is your advice to lenders thinking about doing these things? You pointed out it's like a marriage, but what else is important?

John Wines (13:12):
First, you need a strong legal team to make sure you're setting up the arrangement correctly. We have a good legal team that spent a lot of time on that; it was probably the longest part of it. Once you're in this marriage, you have to meet regularly and stay aligned on goals. Review the goals frequently to make sure you're on the same page with your partner. Ensure they're happy, you're happy, and see where you can improve. We have regular GRC meetings to ensure we're all staying compliant. Definitely set aligned business goals that you're all aware of and tracking on a regular basis.

Nicole Booth (13:47):
Chris, what advice would you give to a lender trying to expand based on your past experience?

Chris Stuart (14:00):
Focusing on the financial rewards ahead of getting the customer value proposition dialed in is a big mistake. As an example, we bought Envoy Mortgage two years ago. It's a distributed retail company. We inherited a bunch of their LOs, and they just didn't quite understand what we were building. They didn't understand this relationship with a network of realtors and felt like they were just going to be some consumer direct originator. We focused a lot of time on explaining that we're actually building an operating system that allows you as an originator to have a better value proposition for your real estate customers, work more closely with our referral partners, and use a system that makes all of that easier. If you focus on who you are trying to serve and get the value proposition right, the economics tend to work out as you scale.

Nicole Booth (15:22):
It's all about communication and sharing the mission when taking on new ventures.

Chris Stuart (15:32):

That's the biggest thing. Personally, I've failed at this a lot. We think about our businesses and strategies so much that in our own minds, we feel like we've communicated it already. You think about an idea for a year, then you gather a group to execute it, and you assume everyone knows what we're doing. They don't. I remind myself and our team all the time: in the absence of communication, hallucination happens. People are going to tell themselves their own stories. Sometimes you launch a new business or make an acquisition, and everyone at the shop back home wonders, "Are we out of a job?" or "Are we doing this now?" Communication—literally being sick of hearing yourself talk about things—is the standard. Then maybe half the room gets it.

John Wines (16:39):
You have to say it seven different times.

Chris Stuart (16:41):
Exactly.

Nicole Booth (16:43):
You both mentioned title insurance. Broadly, what are you seeing in that space? A couple of years ago, we were writing about attorney opinion letters and title waiver pilots. What are the current trends?

John Wines (17:08):
That was our first venture into alternative revenue streams, and it's been great. As I mentioned, we partnered with Investors Title; they've been a fantastic partner. They help us in many ways, like putting on continuing education events for realtors about 1031 exchanges and doing things the right way. For title insurance, we promoted someone at Atlantic Bay to be in charge of that division. We have one person that thinks about it all day. We have an account executive that goes to different settlement agents' offices and encourages them to send information to us and offers services to answer questions. We've been more successful than I thought in terms of getting loan officer buy-in. Because they're constantly at events building those relationships, they've really bought in. They go to settlement agents with the account executive sometimes to ask them to send the business to us.

Nicole Booth (18:03):
Great. Chris, what would you add?

Chris Stuart (18:09):
We acquired a title and settlement business, but we don't really have a focus on monetizing that right now because of the regulatory landscape. Instead, we're focused on making it an easier process and creating more transparency for our originators and real estate partners—taking some cost out and integrating the technology. That's our emphasis so we can steer clear of all the uncertainty from a regulatory standpoint.

Nicole Booth (18:48):
Okay. Q&A: if anyone has any questions, please raise your hand and we have a mic. Julian's got one.

Audience One (19:14):
Chris, I'm curious about monetization. I appreciate how Place positions itself to both the consumer and the realtor. You own a strong mortgage brand and other businesses. Monetization-wise, do you have a set of priorities? Where is the best money?

Chris Stuart (19:48):
I believe in an abundance mentality. When we all share and get better, we provide a better experience for our end customers. So I'm an open book. Let me clarify the question: where is the better money?

Audience Two (20:06):
In your one-stop-shop operations, is the secret still that origination and servicing are the best?

Chris Stuart (20:18):
Not so much. We'll do 600 million this year in revenue. We launched five years ago. Less than two-thirds of that is coming from outside of our real estate business. We're not necessarily focused on margin management in terms of transactions between our enterprise and the consumer. As a distributed retail player, we're responding to the margin dynamic we compete against every day. We're competing against brokers and the leanest IMBs. We're not really trying to print money in all of our businesses, but rather accumulate market share. We'll do a little over 1% of the US real estate market share this year on our platform, and my goal is to get us to 10% as fast as possible. We just focus on our customer. We're trying to generate a balanced set of economics. Does that help?

Audience Two (21:34):
Yeah, diversification to take the cyclicality out.

Chris Stuart (21:37):
That's the whole name of the game. That's it. On the title side, for example, we're not looking to optimize margin, but rather grab market share and take costs out for our operators and our end customer.

Nicole Booth (21:54):
One thing I love to ask: get out your crystal ball. What role will additional lines of business play in the future? What lines will be trending? John?

John Wines (22:14):
I see us continuing to expand the ones we've gotten into. We've talked about branded credit cards and getting into other little lines. We're really trying to bring the customer closer to us as a brand for retention. Once we've closed the borrower, we want them to be as tied to us as possible. By offering things like their security system or homeowners insurance through us, we stay relevant. Nobody really knows who their title insurance is through, but if they have a branded Atlantic Bay credit card in their wallet, they see the logo every time they go to the grocery store. We're using these lines to bring the borrower closer to us in the process.

Nicole Booth (22:55):
Just seeing the name all the time.

John Wines (22:59):
Be present all the time. Beyond the servicing statement, be in the credit card statement, be all over the place.

Nicole Booth (23:03):
Very interesting. Chris, what are your predictions?

Chris Stuart (23:07):
The way we think about the future is that many players and most of the hundreds of millions of dollars invested in this industry are not aimed at elevating the value and expanding the incomes of real estate professionals and loan originators—just the opposite. We are focused on serving that niche of folks that really want to build practices around providing great real estate advice. We want to show up for them and continue to add to our portfolio of services to allow them to expand their value prop and monetize wherever they can. That's our focus. It's not to say there won't be other business models that completely digitize these experiences, but that's not our play. Our play is to focus on the professionals and give them the operating system that allows them to compete and build great businesses.

Nicole Booth (24:28):
John, could you speak about home builders? We still talk about the "lock-in effect"—people staying in homes with low rates. Lenders are turning to home builders for new inventory. Where do you see partnerships with home builders going?

John Wines (24:54):
That's been a great partnership for us. We had a relationship with a home builder that we tried to take to another level. We had a tri-party agreement with a real estate firm, the builder, and ourselves. The biggest thing is that a builder is a builder. They don't always "get" the mortgage industry or all the red tape we have to go through. Their patience level is shorter. When you bring in realtors as well, you're trying to play referee and slow everyone down to let them know that the mortgage industry is a whole different animal. But it's been a really great partnership for us.

Nicole Booth (25:33):
Last call for questions? Andrew Martinez from National Mortgage News.

Audience Three (25:51):
I'm a reporter still looking for my first home. In this process, what do you hear from borrowers, LOs, and agents about the biggest headache? What part of this—title, homeowners insurance, or real estate services—clears up that headache?

John Wines (26:18):
For us, it's the homeowners insurance piece. You need it on every single loan. We used to find that our operations team would go nuts because the loan would be ready to clear to close, but the borrower hadn't decided on their insurance yet. We'd be waiting for quotes at the last minute. By having our own affiliated insurance company, we can be more proactive in getting that upfront and early so it's not the one last thing we're waiting on. All loans have it. Whether they get a security system is up to them, but they're going to have homeowners insurance. We want to make sure that part is as smooth as possible for them.

Nicole Booth (27:01):
All right. Well, thank you both. Thank you, Chris. Thank you, John. Really appreciated having you here today.