Propped Up on Data

Maiclaire Bolton Smith:

Welcome back to Core Conversations: A CoreLogic Podcast, where we dive into the heart of what makes the property market tick. I'm Maiclaire Bolton Smith, your host and curious observer of all things related to property — from affordable housing to market trends and the impacts of natural disasters to climate change — I want to converse about it all. Like many industries, the property industry is changing as technology goes from the exception to the norm. As data becomes more integral to the business, it's telling stories. And in the property industry, there are few tactics more powerful than a compelling story.

However, the transition from stories to on-the-ground projects is a process that is accelerating. Not only is it accelerating, but it's also requiring companies to handle larger and larger quantities of data, which can be difficult and pricey. Investing heavily into PropTech is not a change that occurs overnight, but solutions that leverage data are something that needs to be pursued in order for many companies to deliver on their climate objectives. As an example, the Center for Real Estate Technology and Innovation found that for companies to achieve their aggressive climate proposals, the real estate industry needs to invest $18 to $36 trillion over the next 20 years.

To explore how PropTech is influencing the property industry, as well as what the future of big data and AI might look like, we have CoreLogic's real estate tech solutions expert Mark Weaver with us. Mark, welcome to Core Conversations.

Mark Weaver:

Delighted to be here. Thank you for having me.

MBS:

All right. Well, why don't you start by telling us a little bit about your background and what you do here at CoreLogic before we get into our discussion about PropTech within the industry.

MW:

Sure. CoreLogic brought me into the business about three and a half years ago to try and help them understand how we align to, scale into and support a whole new ecosystem that was occurring really as part of our core markets, which is what we now understand to be PropTech. So how do we align to it, how do we scale into it, what's our product market fit into it and how do we create a business out of it, effectively.

MBS:

Awesome. Okay. Well, let's start there. Let's define PropTech. That's something that people may not be familiar with. How does that fit into the traditional property ecosystem?

MW:

Sure. It's a great question. And when I first joined the CoreLogic business I was trying to understand the definition of PropTech as it pertains to our business. And it pretty soon quickly dawned upon me that the way we structure our business into three divisions of Find, Buy, Protect, a lot of these PropTech businesses were trying to disrupt, inject technology and give consumers choice as to how they find and buy and protect their homes.

So, it was actually a completely relevant, glove fit to how we structure our business today. These PropTechs are trying to bring venture capital technology to the consumer to give them choice and flexibility as to how they either find a house, buy a house or protect the house.

MBS:

I like that. Because here at CoreLogic, those are really the things that we do say we focus on, is helping people find, buy and protect the homes and properties that they love. Here at CoreLogic we've got a lot of different things within our business as we support those three pillars. Many things may not be fully integrated with Big data solutions. So how heavily are we here at CoreLogic involved in this PropTech space?

MW:

Sure. Well, three and a half years on, we're now foundationally supporting a lot of the big players in the ecosystem and in the space. And to your point, you made a great point earlier in terms of we foundationally support the traditional industries of real estate insurance and mortgage with all the capabilities and solutions and products we bring to bear to those industries.

A lot of these PropTech businesses, while they might be trying to do the same thing for the consumer ... So an iBuyer still wants to help a consumer, for example, buy or sell a house, but how they go about it is very different. And a lot of the traditional solutions and platforms and workflow solutions that we serve up today to the traditional industry, these PropTech businesses don't quite need those same products and solutions. But what they do want to foundationally run and operate their business is a lot of data analytics and technology so they can build their digital experiences for their consumers. So, same business, different solutions there.

MBS:

Okay. One thing I think is really interesting and I'm glad you mentioned that, is when we think of CoreLogic here in our businesses when we support real estate, mortgage, insurance, those are industries that have been around for a really long time. But one thing we talk about in this podcast all the time is that innovation is really moving everything forward.

I think there's probably, I'm expecting a balance between straddling the foundational, supporting the legacy and the history, but also using PropTech to really move the industry forward too. Is that our position? Are we unique in how we do that? Or can you talk a little bit about how we at CoreLogic are maybe trying to even create turnkey solutions for the industry?

MW:

Yeah, I'd say we are unique in that respect because to your point, we foundationally support the traditional industries with the existing solution sets that we deploy into those industries each and every single day. At the same time, we're also innovating ourselves to facilitate innovation in the PropTech space by deploying our raw data and analytical assets and platform and technology solutions to enable these companies to be built natively in the cloud from the ground up.

So, we do have a very unique position in that we have all these assets that we serve up to the traditional industry, and now we're foundationally supporting this new burgeoning sector in this space known as PropTech. And we're uniquely positioned because we can bring all the best of breed and learnings from what we've been doing for the last 50 years plus, serving the traditional industry, innovate on top of those and enable a lot of these venture-backed tech companies to thrive and grow as well.

MBS:

Interesting. And so I know we recently did some research that really looked into ... Businesses were saying that where they're placing their financial resources, and Big data and AI are big ones. Artificial intelligence is something that's huge right now, and we talk about this a lot when we look at innovation in the industry.

even just a year compared to: 2021

MW:

That's a great question. And one of the things that I call the positive, one of the positive, unintended consequences of PropTech, is the fact that when innovators and pioneers come into an industry and they try and inject disruption or change or bring efficiencies, leveraging technology, or giving the consumer more choices as to how they buy or sell a house, for example. So that actually forces a pace of innovation in the traditional industry as these innovators come in.

For example, the PropTechs came in initially and wanted to leverage data science, analytics and AI to build their businesses natively in the cloud to offer the consumer a 100%-online, digital experience.

MBS:

Oh wow.

MW:

As to what, up until that point, had been a very human capital-intensive process. So anybody that's traditionally bought or sold a house, financed or refinanced the house or tried to ensure or claim on an insurance policy for a house, those processes, those experiences traditionally, have been very human capital-intensive. You're talking to lots of human beings to be able to get the job done.

As these PropTechs entered the space and wanted to make it more of a digital, online experience and make it more automated than people-oriented, leveraging data and analytics so the traditional industries as well started to think about, "How can we leverage these types of competencies in our businesses to do things faster, more efficiently, more effectively."

So, what we have seen is, without a doubt, is that the advent of PropTech emerging as its own distinct sub-sector. What's happened in our traditional industries as well, is guess what, they started investing in infrastructure and data scientists and the need for big data and analytics because they want to use those types of tools and competencies as well to run their businesses more effectively. There's definitely been a pulling effect of those early innovators and pioneers, and how that has then translated into the traditional industry and how that's bringing out emerging best practices in that part of the sector as well.

MBS:

Okay, that's really interesting. The theme of what you're saying is something that we are hearing over and over again on this podcast this year is really the focus on innovation, on moving things forward, on things becoming easier to do. Can you talk a little bit about how specifically CoreLogic is working with this and what we are doing to facilitate this being easier for the industry?

MW:

Sure. Like I just mentioned, PropTech and our traditional industries are going through profound amounts of digital transformation. All these PropTechs were born and natively built their businesses in the cloud. And so our traditional industries are increasingly migrating to the cloud and want to leverage data science and analytics and technology to drive efficiencies into their business and to deliver better customer experiences.

We've recognized that at CoreLogic. And these digital transformation programs, they're not easy, they're hard. The amount of time, money, resources and people to make these digital transformation programs a success are significant. So, we've responded to that. And for example, with the recent launch of our Discovery Platform, which is our own data science and analytics platform for the industry to accelerate these types of initiatives and to enable our customers to start to build out their core competencies, leveraging data analytics and data science practices, calibrated and configured for our core industry's use cases.

MBS:

Yeah, this is interesting. I want to talk about this a little bit more. Do we have any examples that we can share about Discovery Platform in use with anybody in the industry?

MW:

We do, across mortgage and PropTech. For example, in mortgage, we're helping a Tier 1 mortgage originator overhaul their entire target market and segmentation model. We're helping them anticipate and predict churn in their existing portfolio so they can retain more customers in their overall book of business. In the PropTech space, we've worked with a leading iBuyer as the market conditions started to change and their risk appetite changed. We helped a leading iBuyer overhaul what we call their "buy-box," so that now they're only going to make instant offers on homes under certain parameters and conditions that we help them refine and change as a result of the changing market.

So, these are truly, truly needle-moving strategic initiatives. And if you think about how CoreLogic traditionally would do business, is we would send the customer a flat file of data or analytics and then wish them good luck in terms of how they then deploy and integrate that into their process. Now with these competencies around Discovery Platform and the whole support model around it, now we're actually able to understand with the customer, what are you trying to build, model, analyze, predict? What is the use case that you're trying to build against?

MBS:

Sure.

MW:

Identify how we can help by bringing our market-leading data and analytical assets and data science assets into those engagements. And help them get to an accelerated endpoint on that initiative faster, quicker, and better than they otherwise could themselves.

MBS:

Sure. That's great, that's fascinating. I guess one thing that comes to mind as we talk about this digital transformation, we know that it doesn't happen overnight, it takes time, but it also is not cheap. There's an expense associated with transforming to this digital transformation and technology moving forward.

And also, in the property industry, we'd be remiss if we didn't mention the current market conditions where we've got the interest rates and inflation are just rising so high. Is this added expense of digital transformation technology, AI, is it affecting PropTech in the investment space, or is it something that is fairly simple to do or easy to do from a financial perspective?

MW:

Sure. No doubt there are headwinds right now across all our markets, traditional and PropTech. Certainly, the private markets have also suffered the same contractions that we've seen in the public markets. A lot of these PropTech businesses are affected by that.

On the flip side to that, as I just mentioned, if you are now, for example, in the iBuying business, you better make sure that you're iBuying and you can certainly turn that transaction around at a profit, at an acceptable risk level. So while there is adversity in our markets, a lot of these digital transformation programs actually are being accelerated because of the type of efficiencies, especially around risk profiling and portfolio management. So while there are headwinds in the market, which is affecting all our industries and customers, a lot of these initiatives actually are still proceeding because of the efficiencies they bring, especially when it comes to understanding risk and opportunity in a challenging market.

MBS:

Thank you for that, because I think that's a really important part to mention as we dive into this a little bit more. I think the other thing too is that we think a lot of times in terms of the long-term, and you talked a little bit about that. What do you think the introduction of this big data, AI analytics and the industry, what do you think it'll look like in the immediate short-term?

MW:

Yeah. And to your point, that's the part that our customers need the most help with, because making these investments, executing against them and making them successful in the timeframes and the budgets that have been allocated, is challenging.

MBS:

Yeah.

MW:

Read any paper from Forrester or Gartner that covers this space, and a lot of customers get the strategy right, but they get the implementation and the execution of it is often where it falls down or it becomes less successful.

Because now we have these capabilities around data analytics, Discovery Platform, a data science collaborative layer as well that supports that, we can actually accelerate our customers' digital transformation programs as it pertains to our core industries, make them more successful quicker because we have deep domain expertise in data and analytics as it pertains to real estate insurance and mortgage. We were doing data science and analytics and building models before data science was even a known and widely-accepted term.

MBS:

Sure, yeah.

MW:

Because we have generational, multi-decades of experience in data science and analytics as it pertains to our core industries, and our customers are now getting on that trajectory to transform their businesses, there is a tremendous amount of institutional knowledge and capabilities that we have that can help them accelerate those journeys.

And we're doing it today, leveraging the Discovery Platform as the vehicle, the tech layer and the support layer to be able to accelerate those journeys. And our customers are appreciating it because it's making them more successful.

MBS:

Sure.

MW:

They're able to derive an ROI on their investments quicker and faster and more efficiently than they otherwise could themselves.

MBS:

And ultimately it is that return on investment that all businesses are after. Mark, you've mentioned iBuyer a couple of times. Can you just define to us what you mean by iBuyer?

MW:

Sure. An instant buyer, or an iBuyer, is a new way for a consumer to list their home for sale. The traditional model is obviously we retain a real estate agent, and we list it on the marketplace, and we wait for open houses to happen and for people to come and see and make an offer on the house.

The instant offer or the iBuying model is it takes all that risk, uncertainty and unpredictability around selling a home because now you can go straight to one of these so-called iBuyers, you can enter your address, property address onto their website, and they'll make you an instant offer, all cash, to close contingency-free at a timing of your choosing, seven days, 14 days, 30 days. So it alleviates for the consumer, just the uncertainty and the timing associated with listing a home the traditional way.

MBS:

Yeah, it definitely takes a lot of the uncertainty out and really is something that's quite remarkable as the industry moves forward.

MW:

Yeah, 100%. In terms of how is PropTech disrupting real estate, we just mentioned iBuyers. So iBuyers are disrupting or giving consumers choice as to how they decide to list or sell their home. Because now, instead of doing it the traditional way, you can get an instant offer from an iBuyer for a contingency close date as near as seven days out.

MBS:

Wow.

MW:

In the mortgage space, we've got these things called power buyers. And what power buyers do is, in a situation where there's a contingent offer -- I have to sell my house to buy my next house and I have to realize the proceeds and the equity of my down leg to fund my up leg -- what a lot of these power buyers are doing is they're basically doing a clever bridge financing instrument in the middle of a contingent transaction to backstop and guarantee that your house will sell.

Because if it doesn't sell on the open market, we'll instant-buy it from you. A lot of these power buyers are also then releasing the net proceeds you can expect from the house as soon as you sign with them, so now you no longer have to sell your house to move into your next home. So what that's doing, of course, that's giving buyer and seller certainty.

MBS:

Wow.

MW:

The reality of a contingent-free transaction exists because these power buyers are assuming the risk, which also poses an interesting opportunity for the mortgage industry to maybe get involved in that interim power buying window as well because there's a pretty healthy margin to be made there.

And in the insurance space, we've all heard of InsurTech (insurance technology), so companies like Lemonade and Hippo that are now going to market direct-to-consumer. Now you can log online, you can type in your name and address and get an instant, bindable quote on a home insurance policy. You don't have to go and visit the agent anymore or do it more offline, whereas you can now do it instantly and online. So there will be three examples of how PropTech or InsurTech is providing consumers choices and flexibility as to how they actually buy or sell a home, finance or refinance a home or insure a home.

MBS:

Yeah. Wow. No, I feel like we could do an entire podcast on iBuyers.

MW:

Right, yeah. 100%, yeah, yeah. Yep.

MBS:

Okay. Just to wrap up, I have to ask this question because as I hear, we started by talking about the traditional real estate ecosystem and how everything from real estate insurance and mortgage have been around for ages and now we're moving towards this new industry with digital transformation.

Do you think that they can coexist, or will the traditional way just go away and we'll move towards just these new innovative digital ways? What do you think the future looks like?

MW:

Yeah. I mean, like lots of tech innovation when it enters an industry, typically what happens is there's a peaceful coexistence somewhere in the middle. Not all these venture-backed PropTech companies will survive, especially through this market. The data just tells us that venture capital investments tend to be relatively risky. At the same time, a lot of the best practices and the business models that do work and are sustainable will start to permeate into the traditional industry.

And you're already looking at some traditional real estate brokerages, for example, embracing iBuying as an option for their customers. We're already starting to see some of the mortgage industry adopt some of these quite clever bridge financing products that remove a contingent offer by a pseudo-insurance vehicle that sits in the middle of the transaction to make sure it closes on time.

So inevitably what I think is going to happen is that there's going to be a convergence. The lines are going to get increasingly blurred as all this comes together and melts together. And the best practices pioneered by PropTech permeate the traditional industry either through merger, M&A activity, or through just replicating the successful practices from that side of the sector. Ultimately, all this stuff will converge and become one anyway. And in a decade or so, we won't even remember who started from where.

MBS:

That was really helpful. But yeah, no, this is really interesting and thank you for that. And I think one thing that's really important is that, and that you really highlighted today, is we are all familiar with the traditional way of these industries. Real estate, mortgage, insurance have run for, I was going to say decades, but it actually is centuries already they've been around. But how they can coexist with this new digital transformation and the new digital way of doing things.

So, Mark, thank you so much for joining me today on Core Conversations: A CoreLogic Podcast.

MW:

Pleasure. Thank you for having me.

MBS:

All right. And thank you for listening. I hope you've enjoyed our latest episode. Please remember to leave us a review and let us know your thoughts and subscribe wherever you get your podcast to be notified when new episodes are released.

And thanks to the team for helping bring this podcast to life. Producer Jessi Devenyns, editor and sound engineer Romie Aromin and social media duo, Sarah Buck and Makaila Brooks. Tune in next time for another Core Conversation.

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