A feed of multiple listing service-based property information to lender-branded Web sites may appear to be a direct conflict with the National Association of Realtors’ battle to keep national banks out of the real estate brokerage business.
But Steve Kropper, the founder of Bank on Real Estate, is banking that this business model will be a win-win for lenders, real estate brokers and consumers.
Real estate brokers who partner with Bank on Real Estate agree to share real estate information with lender-branded sites through MLS-based broker information exchange (IDX) agreements. Brokerage companies that receive contacts from prospective home buyers who partner with Bank on Real Estate agree not to promote competing loan products to those prospective buyers. The goal of the company is to boost lead-generation for lenders and real estate brokers while offering new MLS-based online venues for consumers to search for homes, said Kropper.
“Almost every home buyer is a mortgage-loan prospect and almost every mortgage-loan prospect is a home buyer,” he said.
Lenders have a bad track record in securing repeat business from clients, as most purchase-loan referrals come at the direction of real estate agents, he said.
“The Realtor basically tells the consumer, ‘Use this (loan officer) — he’s got good rates.’ The Realtor is at the center of the transaction around financing as well as buying a house,” he said, and an estimated 90 percent of direct lending pre-qualifying home buyers are diverted by Realtors to use local loan brokers.
Before this latest venture, Kropper founded online home-price comparison site Domania.com and served as senior vice president of Equinox, a company that works with major U.S. lenders to outsource mortgage processing operations to India.
Kropper said the Bank on Real Estate property-search sites function like a “private-label national MLS. For years lenders have recognized that the MLS is the Holy Grail for purchase-loan marketing,” and the company’s partnerships with brokerage companies supply lenders with branded property-search sites.
“It is built to harvest lender sites on behalf of a real estate broker,” he said. “We will go to a lender and we will offer them a site which will let their borrowers see all of the (IDX) listings.” The system is designed to be compliant with MLS rules, and Bank on Real Estate makes its money from fees charged to lenders and real estate brokers.
The company is paid by lenders “in a RESPA-compliant way,” Kropper said, referring to the federal Real Estate Settlement Procedures Act, which outlaws kickbacks that increase the cost of settlement services in real estate transactions and requires certain disclosures during the transaction process. He said that the company charges a fee equivalent to 30 basis points prior to an actual decision by loan applicants.
The company charges real estate brokers up-front lead fees and additional fees for leads that generate closed transaction, and he said the completed transaction fees are less than 35 percent of the commission.
The business model is designed to carefully navigate the strict regulatory framework for lenders and brokers alike, he said. “We’re like a ship going down the Panama Canal, with 8 inches on either side. One side is the real estate world — one side is the lending world. If it’s too close to either side, you get whacked.”
Kropper said that this balancing act was a critical focus in building the business model.
Bank on Real Estate is targeting large regional real estate brokerage companies and national lenders at this point, he said. The company is operating in about 55 major metro areas, with a larger number of MLSs
Kropper said that while lenders and real estate brokers often have pieces of the customer-acquisition puzzle, it isn’t often fully integrated. His company seeks to function as a one-stop shop for generating and incubating leads, he said, as well as qualifying leads at a call center. “Every single lead goes to the call center before it gets distributed,” he said.
Don McCredie, owner of Exit Acclaim Realty in Portland, Ore., said he is hopeful that the Bank on Real Estate model will drum up more business for his company, which has about 30 agents.
Banks, he said, are “a natural conduit for real estate — we work hand-in-hand with lenders all the time” in transactions. “It’s a symbiotic relationship.” There are still clear dividing lines in the mortgage and real estate operations, he said, as there is no referral money changing hands between lenders and real estate brokers, for example.
Real estate agents have a tendency to steer clients to certain mortgage loan professionals or companies, he said, and the Bank on Real Estate model provides assurance that consumers who searched for homes at an affiliated lender-branded Web site will not be “poached” by an agent who receives a lead through that site.
“It cuts down on the poaching aspect. The Realtors have a lot to gain — they have a great source of potential purchasers,” he said. “It works for the banks in that they’re going to have a much higher ratio of closing.”
Bank on Real Estate effectively provides a “doorway,” McCredie said, for lender-branded sites to channel business to real estate brokerage companies in exchange for access to property information. “We just make the inventory available to them so that we could actually be the gatekeepers.”
He said a challenge in building out the Bank on Real Estate site is finding national lenders who are willing to cooperate.
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