AIPIS 101 - Christian Broadwell - Realty Pilot & Offer Runway

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Welcome to the AIPIS show for accredited income property investment specialists and those who desire to be. This is your host, Jason Hartman where we talk about increasing your income, your productivity and just generally having a better life while serving your clients better with America's most historically proven asset class income property. We have a great interview for you today and we will be back with that in less than 60 seconds. It's my pleasure to welcome Christian Broadwell to the show. He is the founder of Realty Pilot and Offer Runway and he has some unique products for the real estate industry, software products and cloud based software solutions and also some insight onto the marketplace as well. He's speaking on a panel at a conference that I'm speaking at as well. That is the IMN conference in Scottsdale, Arizona. Christian, welcome. How are you? Good.

Jason, how are you doing? Good.

Nice to have you on the show. Where do you want to start? Do you want to start with Realty Pilot? Is that sort of your broader product, the bigger product?

Yeah. So Realty Pilot is actually the parent company and so the products underneath that, which is off a Runway and then Concourse360 and Concourse360 is the virtual back office solution and it covers both agents and brokers all the way up to their franchise level. And then in addition to that, it also covers the asset management side which includes hedge funds, asset management companies and so forth. And then Offer Runway is the public facing offer management piece in which either the public or agents can make offers, send them out to or receive them through that process.

Right. Okay. I'm particularly interested in hearing how the more institutional type investors are using your products and you know what they're doing. You know, there's been tons of talk about private equity groups and hedge funds in the marketplace. Really? I think this cycle is probably the first time we've had that in such a big way. It's still, you know, in comparison to the market size in general, it's a relatively small impact because the market is so big. But what are they doing? You know, what are they doing with it? You mentioned hedge funds.

Yeah. So basically they, when they acquire assets or they dispose of assets, they also have to manage it during a time period. In addition to that, they have to value the asset. And when that happens to centralize all that data and have access to it along with various different levels of security, access to the information related to those assets. It takes a one stop solution really to manage that. Otherwise they're working off of spreadsheets and Salesforce and various other platforms, Dropbox and so forth, and it becomes very cumbersome for them to be able to jump from one to the other. And so Realty Pilots Concourse360 has been able to centralize that data and, and across the board, increase the transparency from asset to asset. And it allows them to efficiently manage, dispose and acquire assets along those lines.

Yeah. So when you say acquire, manage and dispose, do you have some insight into the direction these institutional investors are going? Are they still in big acquisition mode? Are they in disposition mode? Or what is the tenor out there?

Well, a lot of it is partly due to the way the market changes. And we saw the, we can, we actually see the market changing over time from a variation from our clients that are using it, but in addition to the offers that are actually made within the system also. And you know, several years ago we saw the market change where it went from the flipping market and then it changed over to the rent or the acquire and hold, allowing them for the rentals to build. And now what we're seeing is we're seeing much larger pools of property coming from various different entities. And then we're also seeing the smaller institutional investors that are coming in and buying these at various different levels. Now we have seen in the recent market a change in which fewer offers have actually come in. We've actually seen a decrease in cash offers. And so we are able to understand where the market is at a given moment versus when someone's actually looking at a market based off of historic data. And that's really, that really comes from the offer Runway piece, because when offers are made at that point you understand buyer sentiment. And if the sentiment is telling you that you're going to make a lower offer than what the listing price is, we can see that across the board versus when an offer is accepted and then the contract is closed and then the county records are then displayed to everyone.

So Christian, everybody is always wanting to hear what another person's crystal ball is, especially someone you know sitting in your chair with a lot of insight into the marketplace and Maybe the direction that it's going on. You know, what is your opinion of what's happening out there? We've, we've had quite a good run for several years now. Markets have arguably recovered quite a bit. What are your thoughts?

The outlook isn't great, but it depends on the space that you're in. If you are in the rental space, I still see an increase in values at this point, we do see a lot less cash offers. That means the market that has to absorb the difference from the institutional buyer must be the individual homeowner themselves. And so the institutions themselves have to actually look at, you know, who's, at who their, their audience is when they dispose of properties. And at the moment, one of the things we use as a crystal ball would be considered the off Runway system. And I know I keep going back to that, but just like a stock is on, a particular company would be on the stock market. When someone goes to sell the share of that company, the buyers can see how much the seller is willing to sell and the buyers are showing how much they're willing to pay. And eventually they come to a meeting of the minds and someone buys the share. Well, that's in real time. So when someone's actually placed an offer on a share, you're seeing that real time action happen. In real estate, it's been from the beginning of time of real estate, what we've seen is a buyer is making an offer on a property and based on the number of offers, a seller will choose one of them and then usually 30 to 45 days down the road that offer may close. And when it closes, no one knows that there are other offers actually made on that property and what those values were. And, and if you look at statistics statistically, one offer does not determine a market trend, but multiple offers can tell you basically where that market's going. So we actually kind of have a crystal ball as it happens when the offers come through the system. And so a lot of our clients rely on that data. And what we do is we disconnect, we disassociate the address from that offer information. Then we take that data and we compare it to like properties and we actually have that crystal ball in our coffer, we waiting to be delivered out based on what a client's asking for.

Very interesting, very interesting. So predictions overall, I know the prediction business is tough and I don't mean to put you on the spot, but certainly you have an opinion as to what's going on.

Yes, we have seen a decrease in offers in the past two months. And so that really just the volume of offers is a kind of dictates where the market's going next. And usually that's either flattening, the market will flatten or will turn down slightly.

Now that could definitely be seasonal though. I mean, and you're probably not doing seasonal adjustments, I assume.

No, we actually build our algorithms to build in based on the volumes year over year. So we have seen a decrease year over year at this point. And so we anticipate about a 10% pullback at the most. And that's just in the current forecast at the moment. But who's to tell until it truly happens?

When you say pullback, you're talking offer volume, right?

Well, we're talking both volume and value. So when the offer volume drops, the values normally follow directly after. And partly it depends on the offer to list price. So there's some deltas you have to actually look at. So the number of offers, then the offers related to the offer value related to list price, and then the sale price related to the offer also. And so there's also other things inclusive with that which also determine where the market's going. And partly when you see offers that are close to list price, but there's larger concessions involved, that's also another indicator that we look at.

Right. And so how do you know about the concessions? Well, you see them on the platform, but. And these are all resale properties, right? Nothing, nothing's brand new construction, I assume.

Correct. Either resale, auction or even volume purchases.

Okay, so they might be an entire portfolio, a tape or you know, an entire list of properties, right?

That's correct, yes.

Okay, where are they located? We got to talk geography because of course we all know there's no such thing as a national housing market in such a large diverse country. And I assume there's a big difference between judicial states and non judicial foreclosure states, as well as to where they are in their market cycle. What are your thoughts geographically, if you had dice that up a little bit?

Sure. We are still seeing a large volume. Like Illinois has had a large volume of REO still out there. And we're still seeing a large pool of investors on the east coast from Georgia, South Carolina, North Carolina, Virginia, Pennsylvania area, even Maryland. And so those areas are still pretty hot when it comes to the actual institutional investor. When you get back to the west coast, there's a lot more owner occupants that are purchasing or individual investors buying properties and very few flips as much. I mean, based on what we've seen in the past, but still it's more offer based. So California, we're still seeing a high volume of multiple offers. Arizona, we've seen a lot fewer properties have had multiple offers on it. And so that alone is kind of determining the starting point of a slowdown. Now, Vegas is a little bit behind Arizona when it comes to that, but still we'll see them following the same footsteps as what we've seen in Arizona, I believe.

Yeah. And this is certainly partially because the prices have just run up so high that that's something that you're, you're gonna have happen. You talking single family product condos, multifamily commercial properties too, or what, what do you have?

Well, single family, from condos all the way up to quadruplexis. So. So. And that's the area in which 99% of the volume of properties that run through our platform cover that category.

Okay. And just to give listeners what, you know, what size survey this is and use whatever metric you like just to give the listener some kind of reference point. But how many properties sell on the platform each month or year? You know, just to give an idea of what. When you say volume's down by 10% or, or offers are down by 10%, you know, what are we, what are we talking about there?

Well, we're into the just over 10,000 offers that are placed through the platform each month. And in addition to that, across the board, we're actually in the middle. We've partnered up with a recent partner called ziplogix. And now with ziplogix, we have access and are offering free, the offer management piece to every single realtor in the country, not only through Offer Runway, but also through ziplogix. And so they're the largest form provider out there. And when someone actually builds an offer in zip forms, they can now submit it through Offer Runway. And the reason why they'd want to do that is because of the automation that's built into it. And it not only maintains that information, but anytime a secondary offer is made or an offer is accepted, the system automates the entire control of that so the agent doesn't have to pick up a phone and call someone, say your offer was declined or it was accepted. The system does that for them. Or if a higher offer is made, it then turns around and actually notifies the other offers that there's another offer that's been presented and it may or may not have better terms. Now, that's an option that can be turned on or off, but we have seen over the past three years on average, properties with that option turned on have actually their resale values increased by 14% over those that have not had that option turned on. And it's the automation that actually entices a buyer to emotionally approach their maximum price at the time when they make the offer. And so if they know that there's additional offers on that property, you will see the value go up.

Very interesting. Okay, good. Well, what else would you like people to know about the way your platform works and what if any, services they can avail themselves of?

Well, the platform, it's post 2006, so a lot of the coding and the way the structure is set up up in this, it's modularity and we also connect through what we call automated program interface. So the capability of connected to any type of system out there where that's just API, right? Yeah. So we can connect directly to anyone's system that has that capability. In addition to that, there's a lot of customary functionality that's built into it for the user. So, so tasking, full workflow management, transaction management, documents, photos. We also have an app that someone can use for broker price opinions and also inspections when they go out to a property. And one of the connections we've done recently with an app that actually interfaces the consumer with the agent, we're placing our offer button onto their app so that an offer can be captured along with choosing an agent or directly sending it right to the listing agent when the offer is made. So these are some of the new technologies that are evolving in the market and other things that we are gearing up with. There's a company out there that's actually collecting data on all, all the internal operations within the house, such as your types of appliances and the paint codes and things of that sort. And that's coming into play where it's connecting with us also. And so when a closing happens, that information is given to the buyer and it's, you know, and they also have a connection through our offer Runway system on that too. So a property may not be for sale, but an offer can be made on it and then notification would be sent to this, to the homeowner. So they know that there's a possibility of.

Oh really? That's, that's, that's really, that's really interesting. So, you know, the comparison I'll make here, which is very interesting about that is I'll compare it to the world of online dating and online job hunting.

Yes.

You know, everybody is always available to date. Ask Ashley Madison. And everybody is always available to be hired. You know, it's just a different world in which we live. You know, people, employees just constantly have their resume out there. You know, it's. It's a little hard to keep people loyal. And, you know, same with marriage, obviously.

Yeah. And we, and we don't leave the professional out either. I mean, when, when an offer is made, there's an option for them. If they've already had a relationship built with a agent or broker, they can choose one of their. One of their choice.

But that's really interesting. So you can just see a home on a street and say, you know, you like that property and, and just go through and make an offer on an unlisted property, and it'll just, it'll just contact the owner and say, hey, someone made an offer. Is this working yet? Or did you say this was to come?

No, we are actually in the midst of completing that connection and when that. So we anticipate the first quarter next year that will be available. So any, any property that's on the app, the homeowner one can build the. All the information within the app about their house and have it readily, readily available for them. And notifications are also sent out based on that information. And then anyone that's actually searching and going through that app, they can at that point say, hey, I really like your house and everything that's connected with it. I would love to make an offer on it. And at that point, the seller or the homeowner would understand really what a buyer is willing to pay and give them an option to actually sell if they wanted to.

Yeah, very interesting, Very interesting. Okay, what else? Tell us more about different services your platform does.

Well, the evaluation portion of it's quite unique. So with our institutional institutions that actually manage their properties on our system, we have a direct connection to MLS nationwide. And through that connection with evaluation themselves, they're able to actually pull down data to compare to subject property. So when they are completing a broker price opinion, you know, using an agent network throughout the US or if they're just running an automated value model, an avm, they simply are using our platform for that. So everything is centrally located. And those particular tools give them the capability of looking at title, county records, MLS data. And a lot of it has to do with transparency. When an agent completes evaluation or an appraiser presents an appraisal through our system, they're able to data pull that information and verify the data based on that poll.

Interesting. Good stuff. This is offer Runway.

We're still talking about that portion is through Concourse360. Yeah. And we do have an additional piece that's built on Offer Runway. That's a value disposition service. And what it does is it actually takes the information from an offer that's actually submitted through us, and then we actually look at and run it through some algorithms and the information comes back and at that point it can actually tell a client, is this a good offer? Should I accept it? At this point, it could be based off of volumes or inventory, many different things that it's determining that, okay, at this point, this offer is good, or wait for the next one to come through. And so those are some of the things that we're going to see in this market that clients are going to want to be ahead of the game. And this is going to be available starting January next year.

Good stuff, Good stuff. Give out any website you want, Christian.

Sure. Realtypilot.com is our main site, and then offerrunway.com is our offer sites. And. And then one of the sites that we're building in the offer button directly into and should be available within the next 30 days is called realstir. And that's s T I R. And so you can actually make an offer through there based right from the app on your phone.

Fantastic. Fantastic. Just out of curiosity, when you make an offer, what financial information does the buyer have to provide? And also, do they make a deposit? Do they put down money? Does money change hands through the site as it does on crowdfunding sites?

Yeah, so that's an interesting question because there's two different types of offers. There's a soft offer, and that's an offer that's actually coming from a buyer that may not have signed documents. And then there's an actual hard offer. And that offer would be one that the buyer has actually signed and it's been uploaded along with the offer data. Now, if a soft offer is made, then they either work directly with the listing agent with a dual agency concept, or they choose a buyer agent. The buyer agent then fills in the offers, have the buyer signs it, and then makes a counteroffer with the proper documentation. Now we actually are in the midst of building out a new concept in which when an offer is made and then if it's accepted, the earnest money, then at that point can be deposited directly through our system. And we anticipate to see that in full operation starting in February. There's been a few large brokerages out there that have requested this and they wanted to streamline this information. This process itself so that the buyer doesn't have to, you know, drive across the city to make a deposit at a particular title company. They can do it directly through us, and then it gets rerouted to the title company or into the broker's escrow account.

I mean, you know, buying a house is not like buying a widget online. You know, you know, there's credit information if there's financing. And you know what I have never understood. It absolutely boggles the mind. And I think you'll agree. And maybe you're trying to think of the next technology for this, but why is it you can walk into a car dealership, you can walk into a yacht dealership, you can walk into an airplane. Well, I don't want to say dealership, but, you know, you can walk in and buy a plane and all of these movable objects that depreciate in value. You can get financing right on the spot. Spot. Yet for a house that doesn't move and probably usually doesn't depreciate, it usually appreciates, you know. Why does it take three weeks?

Well, the three. Yeah, that's again, you know, the CFPV and, and Dodd Frank and, and all.

Well, government regulation, sure. I can't stand government regulation. It's totally intrusive. But you know, it's always been this way. I mean, you know, before Dodd Frank, it was still their way.

That's true. That is true. And you know, that's a question that would be actually more served to someone in the financial industry. And I mean, I am a practicing real estate broker also. Partly this entire platform was built by practitioners and my real estate brokerage in Arizona was used as the beta broker to really test market the system. And what's, what's interesting is my business partner, John Murray is the number one, was for three in the last four years was the number one agent in the US based on Wall Street Journal's list themselves. And with that he attributes the success from Realty pilots concourse 360 and off Runway. And so, you know, we see anything from cash purchases to financing and you know, it used to be where, you know, maybe in three weeks you can close a loan with financing. And there's a lot of hoops that they have to actually jump through to achieve that. And you know, really it's government regulations, but now I know that a minimum of 30 days is required. So it's not just getting, it's not getting shorter, it's getting longer now.

Yeah, right. Yeah. And the pendulum is always swinging. But I tell you, it ought to be a lot simpler. Well Christian, thank you very much for joining us. I look forward to seeing you at the IMN conference and keep up the good work and advancing technology in the real estate space. It's great to hear about this.

I appreciate it Jason, and thank you for the opportunity.

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