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Xome_StrategyBefore he became chief operating and chief financial officer with Xome, Kartik Ramachandran had purchased three homes in five years. He wasn’t a real estate guy—he was in the merchant and product technologies business with Groupon—but he had just received a crash course on real estate 2.0 after his career took him and his family to several different cities.

He was impressed by the progress in real estate tech that had taken place from one purchase to the next. In San Francisco, he compiled a list of prospective homes with ease using Zillow while he and his wife used Google Maps to find each one. More recently, he found that he could use Redfin while house hunting in Seattle to coordinate tours that fit into every nook and cranny of his schedule. “If I had 25 minutes between meetings, visits to open houses were done with two clicks,” recalls Ramachandran. “I could Uber there and Uber back to a meeting in no time. That was cool.”

But once he’d gotten into a contract with the seller, his breezy experience came to a screeching halt. “The whole system broke down—there was nothing about it that was at my fingertips or fun and easy,” he explains. “It started at ground zero with the lender. Scheduling was difficult with the title company. And I had to drive all over the place to sign 65 pages of physical paper.”

The convenient digital process had abruptly returned to the 20th century. But what excited him was the opportunity he saw, and the common thread of tech companies leveraging traditional agents. “My agents had experience, and that human touch was totally irreplaceable.”

Real Estate 3.0
Among the 60 companies that made the cut for Fortune Magazine’s “Unicorn List” of tech companies valued at $1 billion or more, there isn’t a single real estate company to be found. Of course, buying a home is considerably more complicated than hailing a cab or renting a room for a weekend, but it is remarkable that the $50 billion real estate industry doesn’t have its own Uber or Airbnb. It wasn’t for lack of opportunity: Ramachandran found out firsthand that vast swaths of a real estate transaction had yet to be fundamentally impacted by technology beyond the initial search and discovery phase.

If online listings defined real estate 1.0, Xome, with the backing of Nationstar Mortgage, is poised to help usher in real estate 3.0. The Xome Pro app, unveiled in mid-November, aims to simplify the work that agents and brokers do by streamlining 14 routine real estate processes and integrating leads from other platforms. It will effectively centralize all the tasks in the real estate transaction and communication between agents and homebuyers. Beta testing is on the way, so most agents won’t have access to it yet, but the company is able to reveal quite a lot about its functionality.

“Everything can be ordered online, the title and the appraisal, and you can sign disclosures and the contract with the app,” explains Mike Pinto, senior vice president of Broker Services at Xome, and a 20-year veteran of the mortgage industry. “There’s been an age factor in the uptake, admittedly. Millennials seem to love it, but for those a little older, it’s a tougher sell. But in my experience, it’s incredibly convenient. And it always, always comes back to the customer and the agent.”

Pinto has just summarized some of the key factors that have prevented a swift maturation of real estate tech. A brutal housing market in the mid-2000s made it immensely difficult for aspiring agents to find enough business to build a career amidst more experienced competition chasing the same scant opportunities. Those established agents had tools they were comfortable with, so there was little urgency to incorporate tech into their practices, or demand for it. That changed as the housing market recovered; new blood entered the market that grew up with tech on the agent and consumer side.

But many tech companies got it all wrong in the meantime. “Technology will get you in the door, but if you don’t embrace relationships, it will fall apart,” Pinto says.

That’s why many so-called “online brokerages” have failed or pivoted. Eliminating agents from the process simply didn’t work. “Real estate 2.0 tried to take them out,” adds Ramachandran. “But this is a home people are trying to buy, not a book. There are things that can and should be digitized, but the human experience factor is something you can’t codify.”

While it intends to break through with a tech-integrated, end-to-end home-buying experience, Xome’s leadership is focused on fine-tuning a tech experience that serves both homebuyers and agents. An understanding that both parties have to be completely involved with the process now and in the future has driven their approach to the creation of their Xome Agent Network and Xome Pro app, slated for a Q1 2016 release, that will enable agents to guide buyers through a home purchase with their mobile devices.

Right now, both buyers and sellers can use Xome. The buy side starts with a search by a prospective homeowner on Xome’s site, which covers 85 percent of MLS listings in the U.S. They’re pre-qualified and connected with a local agent in the Xome Agent Network after they’ve selected a home they want to tour.

Part of Xome’s strategy is to appeal to agents by offering these qualified leads with no up-front cost; agents only pay if the transaction closes. “There are so many types of lead bases out there because they want to grab an up-front piece of the agents’ money,” Pinto says. “We do it differently. We want to prove that we’re partners and that this isn’t a typical lead generator.”

To do that, Xome vets their leads. “We call the customer up-front before they’re handed off to make sure they’re serious and ready for an agent,” Pinto explains. “Then we call the agent to make sure they understand the process, and then we pass them the lead.” Afterward, Xome’s system follows up with both of them.

So far, it appears to be working. Ramachandran recalled a trade show conversation where he was speaking with an agent who told him that he liked Xome, but it had only landed him three leads that month. “So I asked him, ‘How were the calls? Were they real customers—did they convert?’ And he says, ‘Yeah, all three are great, but I get 400 calls from my other source per month.’”

When Ramachandran asked him how many of those were active, the agent replied that none of them were. “I looked at him and says, ‘Well, isn’t that awesome? Three-for-three versus zero-for-400? Who do you want at the plate?’

“He laughed and told me I was right, but he still wanted more leads. For us, that ‘ah-ha’ moment was super invigorating.”

You Pay for What You Get
If and when the deal closes, the agent pays a flat fee of $300 if the purchase price is below $300,000. The fees are higher for larger purchases, up to $1,000. “It’s below the industry standard of 25 to 35 percent of the agent’s commission,” Pinto says. “Compare it to Zurple or zip code-based lead generators where you pay as much as $1,000 per month regardless of whether or not the leads you get convert. Early on, when we met with a bunch of brokers and agents, they loved the concept of getting vetted leads, but not the fee structure we started with. We lowered it and now this is where we’re at.”