New Technology Accelerates Fix-And-Flip Buying and Lending
Forward-Looking Investors and Lenders Will Be Beneficiaries
By Danny Byrnes
Ultra-tight inventory, strong demand and generationally low interest rates are the tailwinds driving today’s record home price appreciation. While these factors have created new opportunities for fix-and-flip investors and their lenders, they have also created new challenges. Properties that used to be on the market for weeks, now go in days, and in some cases, even without listing. For investors and their lender partners, this means making even faster decisions and doing everything within their control to streamline every aspect of the bridge mortgage process.
Technology, of course, is already playing an increasingly broader role in both buying and financing real estate. For example, investors are searching online for properties, using databases and AI to identify possible sellers and using lender portals to apply for loans and deliver documents. Lenders, meanwhile, are relying on sophisticated automated valuation models (AVMs) to make loan decisions in days and to price their risk.
Now technology is being successfully applied to new points in the buy-finance-and-service continuum, taking guesswork and speed bumps out of the process.
Let’s look at two new examples of technology enhancements.
Online Auctions
Online auctions of foreclosed properties have long been a major source of inventory for fix-and-flip investors. Being able to go online and get the basic details and sales history of individual properties saves prospective investors time in the initial search process. However, once they get this information, they still must make several critical assumptions about the ROI on repair costs, the future appreciation of the property in its repaired state and the overall direction of the surrounding neighborhood.
Recently, one online auction company, RealtyBid®, added a new level of insight for fix-and-flip investors. Partnering with Allan Weiss, one of the original developers of the Case-Shiller-Weiss housing price index (HPI), and Weiss Analytics, the company has developed new analytic tools to help investors examine the price trajectory of an individual property, as well as neighborhood and market dynamics.
Users can now see property- and ZIP Code-level data dating back 10 years on 80 million properties, as well as one-year-out value forecasts for the property and Metropolitan Statistical Area (MSA).
The site also gives investors access to property-level fix-and-flip comparables and repaired values, as well as the ability to run ZIP Code and property-level analyses. Fix-and-flip comps provide sale details, including first and second sales and hold time. This wealth of new information accelerates buying decisions and helps level the playing field between individual and institutional investors.
Lien Releases
The second innovation example involves a critical element in the closing process: lien releases.
Before a lender will make a bridge loan on a property, it needs to know that any previous loans on that property have been paid off. Similarly, when a fix-and-flip project has been completed, one of the final steps in the mortgage process is obtaining a lien release, which shows that the investor has paid off the bridge loan.
A delay in issuing a lien release can, in turn, delay the sale process. It can also delay refinancing the property with a longer-term mortgage in the case of a single-family rental. In either case, the results can potentially damage a lender’s relationship with investors and create reputational risk. Fix-and-flip lenders know that taking time and hassle out of all the aspects of the financing process is one of the major ways that they can build relationships and create repeat clients.
Nationwide Title Clearing (NTC), a leader in providing post-closing document services, especially lien releases, is the company providing the innovation designed to save time and eliminate these hassles for lenders. Recently, NTC® introduced PerfectDocs®, a new self-serve platform that gives lenders and servicers greater control of the entire lien release process. In just minutes, and with a minimal number of keystrokes, a lender can now create and electronically e-sign compliant lien releases and then e-record in more than 2,000 counties.
From a user’s perspective, the solution combines several complex processes into a single streamlined workflow platform, creating documents compliant with county requirements, agency and GSE guidelines and MERS requirements. It also automatically calculates accurate recording fees for every jurisdiction nationwide.
In the current market environment, leveraging technology to accelerate both decision-making and process efficiency has taken on a new sense of urgency and is driving innovation. Forward-looking investors and lenders will be early adopters and beneficiaries of these enhancements.
