Friday Flash: Clear and true
No: 1196
I tweeted earlier this week that it was starting to seem like the real estate brokerage business was becoming nothing more than the mortgage industry’s marketing department.
I had lunch with an industry friend a day later who offered, with slightly less overstatement, that real estate was quickly becoming mortgage’s ancillary service.
It’s kind of been this way for ages — agents and brokers have always been an important marketing channel for mortgage originators — but we’re looking at a different beast now.
Companies are willing to do and lose a lot for the sake of capturing a mortgage customer.
Inman reported last week that Better, a Softbank-backed online lender planning to go public later this year at a nearly $8 billion dollar valuation, is going big on brokerage, with plans to have salaried agents in all 50 states by the end of 2022.
The company is currently testing a 0% listing fee program in Dallas, with plans to expand soon. If Better can “…match you with one of our buyers at a price you like, we’ll help facilitate the transaction for 0% for both sides.”
I give them props for transparency.
Here’s what Knock, the biggest of the “buy before you sell” companies, is willing to do to get a mortgage customer:
Killer deal, no doubt.
Loan Depot, the big online lender, went all-in on a referral brokerage/agent network called mellohome back in 2018. Last week they announced a “Grand Slam” package giving homebuyers:
I think they forgot “nightly turn-down service for your first year.”
Again, this general practice isn’t new. Lenders rebating part of the referral fee they take from partner agents to buyers has been done plenty. But this is an unusually flush offer.
Companies are doing a lot to get a mortgage origination, and betting heavily on the profitability of those originations.
Compass launched a mortgage company a couple weeks ago and will almost certainly be touting it to investors who have blanched at their losses to date as some sort of light at the end of the tunnel. Zillow seems to be banking on mortgage as a profit center adjacent to its iBuyer business (although both are losing money right now).
The question I am left with on all this is this:
What about those mortgage profits?
Well, they hit record highs last year, but that followed near-record lows at the end of 2018.
The long-term trend looks like this:
I dunno… I am not sure giving away the store to capture business in this sort of world, or counting on mortgage as the way you can eventually set the hook on an unprofitable real estate or proptech business, makes a ton of sense long term.
Of course, I could be wrong. I am not a finance or mortgage market expert. I look at these things through my small business owner lens. That’s me.
Maybe mortgages will redeem us all.
…
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That’s it for now. Have a wonderful weekend.