First American & Endpoint: Building a Differentiated Home Closing Experience
Last month, First American announced the launch of Endpoint, a mobile-first title and escrow company built in partnership with BCG Digital Ventures. By partnering with BCGDV, First American was able to develop a totally new approach to closing on a home — here’s how.
By Scott Martino, Chief Executive Officer at Endpoint
Transforming the Real Estate Closing Process, a ~$90B Opportunity
Real estate is the largest asset class in the world — and yet it has also been one of the slowest to adopt innovative, new technologies. As Millennials now make up the largest portion of the home-buying market (36% in 2018), it has become increasingly important for the industry to evolve alongside a consumer-base who are accustomed to mobile-first, on-demand, and personalized experiences in every area of their lives.
Over the past few years, this is exactly what has begun to happen, as a new wave of PropTech companies have entered the market. Fueled by more than $10B+ in VC investments since 2017, these upstarts are leveraging technology to fix the complex processes associated with home buying and selling.
The majority of investments we’ve seen, however, have been concentrated on the front end of the transaction. Led by companies like Zillow, Trulia, and Realtor.com, the first wave of technology adoption helped drive consumers’ use of the internet during the home search process to >90% today, fundamentally changing how buyers and sellers interact with real estate. But, much of the friction that takes place is actually felt after a buyer has been found and the contract is mutual — those 30+ days in escrow when mortgage and title companies do most of their work.
In the US alone, the mortgage origination and title and escrow industries represent at least a ~$90B annual revenue opportunity combined; ~$70B and ~$20B respectively. So, for the companies that get it right, there is a sizeable prize available — at least ~30x the original market Zillow, Trulia and Realtor.com addressed.
Operating on the front lines of the title and settlement industry for the past 130 years, First American saw first-hand just how enormous this opportunity was — not just to tap into a significant pool of revenue, but also to enhance the customer experience throughout the closing process.
Building an Advantaged Startup to Tackle the Opportunity
When First American started out on its path to innovation, it understood that to build a different kind of business, it would need to undertake a different kind of process — one that could match the best of its industry knowledge and expertise with the best startup talent and thinking out there. To that effect, BCG Digital Ventures has proven itself to be one of the most experienced venture builders in the market with an unmatched track record of bringing together the assets of the world’s leading corporations and building advantaged new startups around them. So, the decision to partner was an easy one.
Together, the First American and BCGDV multidisciplinary team conducted thousands of hours of interviews with all of the parties involved in a residential resale transaction. No stone was left unturned as they gathered valuable insights from buyers, sellers, real estate agents, loan officers, and title professionals. With this knowledge, the team was able to understand the issues from all sides.
Endpoint: An Effortless Closing Experience for all Parties in the Real Estate Transaction
Endpoint is a full-service title and escrow company, meaning it offers everything a traditional title and escrow company does. So, what sets it apart? With Endpoint, real estate agents and their buyers and sellers gain access to a full suite of mobile and web apps to guide them effortlessly and securely through the transaction — tools which were developed in direct response to the frictions uncovered by the Endpoint venture team.
These tools help users in a myriad of ways, including:
- Stay organized, track progress: Users are provided with a simple overview of where they stand in the process and what’s coming next. Everyone is kept in the know as the transaction progresses from one stage to the next, and real estate agents are alerted when their buyers and sellers complete actions and tasks with real-time push notifications.
- Documents Simplified: Endpoint has broken the transaction down into eight bite-size milestones, each one explained in plain English so that everyone, even people new to title and escrow, can understand them.
- Convenient Signing: Documents can be e-signed directly in the application. Where wet signatures are required, based on local or lender requirements, mobile notaries can be scheduled in the app; as Remote Online Notarization is legalized and supported by lenders, this option will be provided.
- Digital Earnest Money: There are many different use cases to solve for when it comes to fund flows throughout the escrow process. Endpoint started with the earnest money deposit since it is the first step for a buyer. Earnest money can be deposited directly in the application by linking to your bank account, no need for an expensive wire, or to hand-deliver a check.
- Answers at Your Fingertips: Endpoint enables secure stakeholder communication through an in-app messaging service, all of which sits behind a two-factor authentication layer for enhanced security. This is an effort to reduce the amount of communication that happens via email and is targeted for fraud. The application itself also sits behind this secure layer to ensure maximum security.
Critical Challenges that Have Become Competitive Advantages
Building Endpoint was a very exciting undertaking for all those involved, but it was not without its challenges. Over the past two years, there have been many learnings as the team has refined and iterated their product — first at BCGDV’s Manhattan Beach Center, and then live in the Washington state market.
Of those learnings, three stand out as critical challenges the team had to overcome, which have now become significant competitive advantages for the Endpoint business:
- Blending Startup Thinking with Industry Know-How & Expertise
From the beginning, it was clear that one of Endpoint’s long-term differentiators would be its ability to build a foundation of title and escrow expertise coupled with best-in-class product, design, and technology talent. These are not two worlds that have typically collided in the past. But, by drawing from First American’s best people and partnering with BCGDV during the initial incubation — and then continuing that by founding the company with a mix of top industry and technology talent, Endpoint now has a core team very well positioned to win.
2. Designing an Escrow Process & Product Which is Scalable Across Markets
In order for Endpoint to truly change the way title and escrow are delivered, building a more standardized escrow process that is scalable across markets was critical. Throughout the build of Endpoint, the team continually asked how they could simplify and standardize the process. Luckily, the team had the benefit of being able to access the First American network, with deep experience in title and settlement nationally, to test how something they had designed in one market could be applied to another.
3. Building Something Truly Differentiated vs. Traditional Title & Escrow
All too often, startups apply technology to existing processes and ecosystems without giving enough thought as to how they are differentiated from traditional businesses. This is particularly true in highly regulated industries like title and escrow. With First American as an investor and a board who know title and escrow inside out, the Endpoint team was constantly challenged to define how what they were building was really different from the traditional business.
A Differentiated Home Closing Experience
At its core, Endpoint represents putting the best parts of First American together with the best parts of a startup to deliver a title and escrow service that a traditional incumbent or startup cannot match. By doing so, First American is pioneering a completely differentiated title and escrow experience, capturing a great deal of value while fundamentally transforming the complex home-buying process.
As technology continues to transform the way real estate is bought and sold, First American remains fully committed to continuing its history as a leader in the industry. Endpoint represents one of many initiatives First American is currently pursuing to ensure they remain the go-to title and settlement service provider for many years to come.