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Mike Simonsen

A true data geek, Mike founded Altos Research in 2006 to bring data and insight on the U.S. housing market to those who need it most. The company now serves the largest Wall Street investment firms, banks, and tens of thousands of real estate professionals around the country.

In this episode of the Top of Mind podcast, Mike Simonsen sits down with Joe Curtis, Chief Operating Officer at Pango Group, to talk about how real estate transactions are changing, and which big technology trends, like cryptocurrencies and blockchain, are shaping the way Americans buy and sell real estate.

About Joe Curtis

Joe Curtis

Joe Curtis is the Chief Operating Officer at Pango Group, a family of companies that are the leading California-based settlement service experts. In this role, Joe is at the forefront of the evolving technologies in the escrow industry. In 2019, Joe was featured in The Top 100 People in Real Estate Magazine, and in 2018 named the Advocate for Social Good by Giveback Homes.

 
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Here’s a glimpse of what you’ll learn: 

  • How technology helped Pango Group pivot during the pandemic to drive growth
  • An in-depth look at the digital transformation happening with real estate transactions
  • Pango’s process for enhancing and securing real estate transactions
  • Ways to eliminate layers of complexity in purchasing and regulatory matters
  • How Bitcoin-funded mortgages are happening now - and how they’re not
  • Why NFTs are the technology most likely to impact the future of real estate transactions in the US
  • Why cash buyers are increasing this year in the competitive market
  • Why there is less fraud and fewer contracts failing now than ever before

Resources mentioned in this episode:

Brought to you by...

This episode is brought to you by Altos Research. Altos is the #1 market data company for realtors, title, and escrow. 

Each week, Altos Research tracks every home for sale in the country, all the pricing, and all the changes in pricing, and synthesizes those analytics to make them available before becoming visible through traditional channels.

Altos Research is a full-featured lead conversion engine. Our system uses real-time market reports to attract and engage prospective buyers and sellers. Designed to work with minimal setup, Altos helps you move leads through the funnel automatically, alerting you when they're ready to take action.

Schedule a demo to see Altos in action. You can also get a copy of our free eBook: How To Use Market Data to Build Your Real Estate Business.

Visit Altos Research at altosresearch.com for more information or set up a call with us here.

Episode Transcript

Intro  0:02 

Welcome to Top of Mind the show where we talk to real estate industry insiders and experts about the biggest trends impacting the market today. Enjoy the show.

Mike Simonsen  0:14 

Mike Simonsen here. Thanks for joining me today. Welcome to the Top of Mind podcast. This is where I talk to the smartest leaders, thinkers, and doers in the real estate industry. For a couple of years now, we've been sharing the latest Altos Research market data every week in our weekly YouTube video series. With a new Top of Mind podcast, we're looking to add some context to the data. So it context of the discussion about what's happening in the market from the leaders in the industry. Each week, Altos Research tracks every home for sale in the country, all the pricing, all the supply and demand, we do all the analytics on the changes in that data and we make it available to you before you see it in the traditional channels. So visit altosresearch.com for free consultation on how you can use market data in your business. So without further ado, let me introduce my guest today, Joe Curtis. Joe is the chief operating officer of the real estate escrow and settlement services provider Pango Group, based in Southern California as COO of Pango, Joe helps the chief the company mission running an exceptional Real Estate services business by being a driving force and keeping Pango ahead of the curve at the forefront of the evolving technologies in the settlement industry. We're going to talk about a lot of the technologies and where the industry is going today. In 2019 real estate magazine named Joe one of its top 100 people in real estate. So welcome, Joe, thanks for joining me.

Joe Curtis  1:58 

Thanks, Mike. Excited to be here.

Mike Simonsen  2:00 

All right. Well, we've known each other for a long time, we've done business together and Pango. But for our listeners who don't know Pango Group, why don't you give them a quick overview on the company? And then also, what are settlement services? And in California, there are settlement services? Why don't you tell us a little bit about Pango and the specific slice of the industry that we get to learn about today?

Joe Curtis  2:27 

Yeah, okay, I'll give you the 30 second kind of elevator pitch. So the Pango Group is a real estate settlement services company based out of Southern California and our primary business is running and operating escrow companies. So we're on the settlement side of the Title and Escrow kind of like business. We have a couple of other ancillary real estate services businesses like a notary company, and we do some document archiving and stuff like that. But our core business is really being that neutral third party in escrow and in providing the settlement portion of that title. So that's important to note because Title and Escrow aren't done the same kind of nationwide. And so, in the title world, you have the insurance part of title, which is ensuring the chain of title and making sure that the transfer property happens well, and then the settlement side is really the, you have closers or escrow officers, or closing agents and lots of and they're handling and balancing the file and making sure that everything is kind of like, done properly, making sure that things are transferred. And then they're having that signing the buyer, or the seller, depending on the market that you're in, and really providing for that kind of like customer-facing experience. And so that would be kind of like the settlement side. Now we settle and we disperse all the funds out for the property closest. So yeah, that was kind of give you the two sides of the insurance side of the business. And then you have the closing and settlements side.

Mike Simonsen  2:56 

And you guys have focused on this closing settlement side of business, California is you do business all over California.

Joe Curtis  3:56 

All over California. Yep.

Mike Simonsen  3:57 

And that's different. It's always fascinating to me, how the transaction customs are different all over the country. And you know why that is? Like how we ended up this way?

Joe Curtis  4:15 

I think that real estate being I mean, at least, we get asked why there are so many MLS that I think that real estate especially has been done kind of locally forever. And the title insurance businesses is based on like recording documents at a county-level courthouse. And so I think that that's probably a lot of the history of it. And so in each county, they're going to have in Louisiana, they called parishes, right? So you're going to have different customs that are going to be related to that state's regulated body and then you're going to have some regional differences. And so I think that's where you get lenders. Lenders have like a national, like federal regulation, whereas Title and Escrow are really regulated on the state level and I think that's where you get a lot of nuances.

Mike Simonsen  5:02 

Got it. Fascinating. Its Yeah. It's just amazing how different the expectations are and the transaction processes are. But so the fun thing about today is I'm interested in learning about how that is changing. And there's some real big technological forces on the horizon. So I'm interested in talking about some of those today and seeing what we can come up with. Let's start here, though, we call the podcast top of mind. It's now end of February when we're recording this. Well, it'll be available in March when we share it. But the markets been on fire. What's top of mind for you right now?

Joe Curtis  5:46 

Yeah, so the market has been on fire. It's insane. I was actually looking at so Altos has these great like regional or county-based reports. And so I look at those kind of, they're a little bit more macro level than the zip code specific. And I was looking at the San Diego market, and the market action index is like 97, the highest I've ever seen it like neutral is 30. And like, that's a 97. So, obviously, like, everybody's talking about what's happening in the market, where that relates to me is like a chief operating officer is I'm looking at the job market. And I'm saying like, that's really top of mind for me right now is like finding quality people, I think you can look at across sectors and segments around this. But that's really the one of the things that's top of mind for me. And the interesting thing is, is the nature of how we work has completely changed over the past two years because of the pandemic COVID. And there was a time when people had the thought that, hey, you have to have like a local closing office, right? Because people are coming in there. And that's what's really, really important. And we went through probably eight or nine months where we didn't have a client in our entire office, like at any office, in any office that we had. And so people were like signing at car, like in the parking lot or all these digital signings. So it's really around like, hey, how do we staff so like, not only finding people, but how do we kind of fit them in into this new kind of way that we're working whereas, it's less important to have like, somebody come in, and sit in a conference room, and have a bottle of water or a cup of coffee, and sign their own docs. It's changing the way that we work a little bit. And that comes into a lot of the technology that enables that. And it also just comes into kind of like the habits that we thought were important beforehand. And now what we think now.

Mike Simonsen  7:42 

Yeah, so big changes in the last couple years. But before we talk about the technology, and some of those, tell me about your team. So because top of mind is like, who do we put in this industry? Tell me about what's the team look like? And where are you going from here?

Joe Curtis  7:59 

I think we have one of the best teams in the business at Pango Group. And so that is going to go in a couple of different levels. And of course, I have to say that but I actually really believe that taking to look at the landscape. And so you have your core comm service providers are going to be your escrow officers, like your escrow officers are there, they're really managing, like a volume of transaction that we haven't seen in ever, or at least in the last 15 to 20 years that I've been in business. So you have this really like that customer interaction. We have about 55, escrow officer units kind of spread out throughout Southern California, and we do business all over the state. And our support team is really the leadership team. And I think like support and leadership kind of go hand in hand. And that team is really designed to say, hey, how do we support and make sure that this customer, right experiences good, so that we are making raving fans out of all of the people that interact with us, whether it be you know, the buyer and the seller who were paying our fees, whether it be the real estate agents who are referring us business, whether it be like the FedEx guy that comes into the office every day, kind of wearing a mask. And so he walks in and says, "Hey, there's something different about this place." And so our team is structured through kind of like a regional management kind of structure. And we spent a lot of time in the last few years really investing in kind of like leadership, because the way that we communicate today is different than the way that we communicated two years ago. And we're having to kind of rewire our brains a little bit in terms of like, you get these old pathways of saying, like, "Hey, here's how we communicate as a team to make sure that we're getting a great experience." And then all of these changes happen. And you kind of have to rewire the way that you think about even communicating internally, with all kinds of new tools like what we're doing right now through podcasts and like getting out great content and information that's valuable to people that can kind of take action on it, or how are you like reducing them. I mean, I used to get good examples. Like I used to get probably 200 220 emails a day. Some people were like," Yeah, that's nothing. I get 1000." Like some people like what? Well, we switched to Teams, which is kind of like the Microsoft version of slack. And my emails per day went down to probably 50 or 60 because all this internal communication that we're having to now manage on these different platforms. So it has been really, really good and kind of stretches your thinking in some of it's like, hey, whoa, I got another thing that I got to relearn. And, but what's good about all of it, and you asked about the Team is, I think the most important thing today for us is for our ability to be comfortable, being uncomfortable, meaning, like, we got to be learning, we got to be saying, like, hey, if I'm not, like, continually getting uncomfortable just a little bit, that means we're not really pushing ourselves as hard as we could to make sure that we're doing the best job for our people on the people that are paying our bills.

Mike Simonsen  10:51 

So there's a lot to unpack, there's some really good trends. So the changes, and we've been talking about there's technological changes in the process. But it's interesting that one of the first technological changes you're feeling is just moving to Microsoft Teams, like just shifting from email. So I know, during the pandemic, we already had Slack, we already did most of our communication via Slack. And, and the reason that those work is because there's a lot of overhead in email, every email said that gets eliminated and streamlined out. That makes a ton of sense to me. In our company, we have a global team, and we started doing more zoom calls, we're actually more connected now post COVID than we were ever in the pre COVID world. And so does that in your case, that translating into improved product or service in some way for customer?

Joe Curtis  11:53 

Okay, so this is a great, great question. Okay. So I thought about this a lot. And you have to understand, I think one of the things that if you take a look at our industry, our industry is like 100, and somebody at first American fidelity is going to give you like say no, it's actually this specific date when the title insurance industry started, but let's call it like 100 plus years. I was going to say like 120, but let's call 100 plus years old. Historically, we've been a little bit behind other industries in terms of the technology that we've adopted. I don't think anybody would get incredibly upset about me saying that, I just think that that's been my observation, which is why it's been easy to kind of implement some of the changes that we have. And so you ask the question about like, how does these changes impact the quality of the service? Like, does it actually really help? And I think that so the only, like, evidence that I have is when we ask customers, like, how did we do. We just close a transaction with you? How did we do? And so what does that look like? And I can tell you that, we work on a five star system, just like many other people, so it's really relatable and understandable to kind of see, and I can tell you that our overall company scores in 2020 was, like, lower than it is today. So we were doing less business in 2020, than we did in 2021. We did less business, the market grew is crazy. And like, there's lots of reasons for why that is. But if I look at our customer service scores, and we survey buyers, sellers, selling agents, buying agents, so all four constituents, and if you look at the scores across the board, over that period of time, when we did more business, we're like more stressed, like crazier, our customer service scores went up. And so if that's the case, either consumers expectations just dropped, which I don't think that's it. Or part of the technology that you're using the processes that we worked out, we're actually connecting with people on a level that was at the end of the transaction, they said, "Hey, I think that what you gave us was a great service."

Mike Simonsen  14:03 

That's really terrific. And I like to think that there are some of the technological changes that were forced upon us during the pandemic, that will stay because it's actually a better world, people are more competent with Zoom. And that's a really effective thing. It's good for a world. So, awesome. So that's a great way to measure it, the service scores are up. So let's talk about customer-facing technology. You mentioned digital signings. I refunded during the pandemic. And I didn't go to an office, but somebody came to my kitchen, and it's still a stack of papers that need ink on it. Yeah. So, let's talk about digital signings. And when does it happen? What's holding it up? And are there implications for better service for the consumer or better pricing or more transactions or what are the implications that we see once we finally move into a digital signings world?

Joe Curtis  15:05 

Yeah. So let's talk about first just what digital signing like actually needs, right? And so like, if you have the ability, and everybody is really familiar with DocuSign, right? So hey, I got something I Doc, you signed it like that's kind of like par for the course. If you bought a piece of real estate, more than likely you DocuSign your contract to send it over. And so that's normal, like that's what is different, that I think is going to kind of transform the customer's experience is this whole remote online notarization, which is what if we're talking about digital signings in the settlement world, and there's lots of different like variable terms, but let's talk about RON or remote online notarization. It's where we're notarizing documents that need a person, historically needy person sitting in front of you verifying that you're that person, you get the little thumbprint, and you put it on, they take out your driver's license and write it down and you write your name and a book. That process, right, which is the thing that required people coming into your office so that you can meet the notary there or like we have notaries and then we sign you up. Like that process, when that goes digital, when you and I can be on a camera like this, and I show you my driver's license on the camera and verify my identity, and then we can do that signing digitally, which is happening other places, not in California, because a whole host of reasons that we don't need to get into here. But when that happens, and people start having that, in that experience, where I can sit in my pajamas and like sign the loan documents from my house, I'm talking to somebody that's articulate the answer my questions while we're going through that.  It'll still take some time because you have questions. When you're going through your loan documents, you're looking at the term and you're like, is this right? And I want to make sure all that's good. When that happens. That's transformative. When that gets to scale like that is a really meaningful, like, once you do that, I don't think that you'd ever go back like why would I ever go and drive my car and sit in a conference room and wait for somebody to come in and like do the whole signing thing like that experience? from a customer standpoint, I think it's going to be really transformative. Now, you asked like what's holding that up? A ton of stuff? I think that you have like, so again, regulated by the states. So California hasn't gotten on board with remote online notary. So there's two things, you have regulators, and then you have lenders, right? Because lenders and states, so you have to notarize, the grant deed, write a piece of property that saying, hey, there's the transcript. And then you have like your loan documents. And so you have lenders that are requiring right now. actual ink on paper, like they don't even let you scan it and send it to them even once you got that on paper, because that's essentially a digital signature. It's just like a live digital signature that you digitized and then sent. Some are some aren't, but when lenders are saying like, yes, we will use this as the final verification. I think those are the two things that I think are holding up remote online notary and mass.

Mike Simonsen  18:15 

So state-level regulation and then lenders tend to be national level.  Is it also with the mortgage markets on the back end? Are they involved in this transition? Or if the lender is underwritten the loan like this Fannie Mae say, I want wet signatures on these 18 pieces of paper?

Joe Curtis  18:43 

Yeah, so that's a great question, Mike. Like, I don't know if I'm in a position to kind of like be able to articulate kind of what happens on the back end of like, the secondary mortgage market and like the compliance, but there's always a compliance component, right. So like, I'm in a compliance and heavily regulated business. So we're lenders. And so there's oftentimes lots of hoops that you have to jump through. And that's all about our risk. So like, what risk am I willing to take to be able to do something that's new that a regulator might see as oh, right, like, I don't know? So I think that you're going to have smaller lenders adopt this a lot more quickly than you have the Wells Fargo's of the world right. Somebody that Wells Fargo may, no, no, we have a whole department for that. And like we're working on that. And that's true. Like I'm talking about, like when you and I when we refinance their house or we buy a house, like that's the norm versus the exception. Right now, it's a great exception.

Mike Simonsen  19:41 

And you foresee a world or maybe how far out is the world where like an entirely online transactions.

Joe Curtis  19:52 

Yeah, I was going to say, I think there's a difference between entirely online transaction and a human-less transaction.

Mike Simonsen  19:59 

Oh, okay, yeah, for sure.

Joe Curtis  20:02 

So I think an entirely online transaction, like outside of notarizing the grant deed, and like in California notarizing, your note and deed of trust, for as required by the lender, like we're like word 97%. Like you can do most of the things digitally and transact digitally in a settlement. And those are kind of like the two friction points. So there's gonna be some friction points in the transaction. But yeah, that is a possibility right now, in other states, I think that you can do it completely digitally, and you can do a remote online notarization if you get a lender that can approve, especially if it's like an all-cash deal, and you don't have a lender, and you can do it completely digitally.

Mike Simonsen  20:49 

Right. And so that you can do it, but the fact is, like I still signed 200 pieces of paper in my kitchen.

Joe Curtis  20:58 

Yep. Well, you got to remember, like, a lot, you got to remember what all those are. Those are a lot of CYA documents. For lenders, and they say, "Hey, you acknowledge X Y and Z." I don't think that we can take loan doc, maybe you could. But it's all about risk. And having people acknowledged that there is risk in taking out a loan, right. Now, will it get to the point where you're like signing your iPhone iOS update, like User Agreement? That's the same, probably the same number of pages. But you're just like saying, yes, I agree. Like, it's easy to do that with an iPhone and your user agreement, because like, the stakes aren't a million-dollar house or a 700,000 or $400,000. Mortgage. So there's this balance of what we call speed and security, like, fast and secure, insecure, sometimes have like an inverse relationship. And so I think that it's just really finding that proper balance of fast and secure because consumers are gonna want fast, fast, fast, fast, fast, fast, fast. People that provide insurance wants secure, secure, secure, secure, or loans, right? And so how do you balance those two things where you get a great customer experience and provide the security and like the ability for companies that absolutely need to cover the risk, cover the risk.

Mike Simonsen  22:21 

Is Pango in a position to provide some leadership on that for both those constituents?

Joe Curtis  22:28 

Well, we got lots of ideas. Great, we always have lots of ideas. But yeah, I mean, I think like an area that you could, that we're again, California, I'm not sure why we're unable to do this in really any meaningful way. But like, one place that you can get something that's really secure that a lot of people are talking about, and companies are doing right now is like an earnest money deposit. An earnest money deposit is lower stakes, right than a payoff, just because it's 3% of the transaction, typically. And so if you could really make an earnest money deposit, there are companies that do this today. So like, it's just not widespread in California. So this is the context of what we're talking about. But that's an easy kind of like thing where you can really vet out, hey, what are the stakes? What are the risks? And can we go to this speed? Instead of like, seriously, you got to go down to your bank and like, fill out a form, like an actual paper form and sign it to do a wire? Yeah, I guess. That's my experience today. Whereas like, hey, it's $15,000. I mean, I can transfer it in between my accounts. Like, I want to be able to provide some type of Venmo experience for a buyer on their phone to be able to say, hey, it's secure, and it's fast, and they're lower stakes. Yeah, I think those are kind of areas that we could implore the regulators to allow more seamless or more creativity around that. And there's some really cool integrations that people are currently doing in the space and like payments, I think as a company and points doing this, right now, there's a couple of companies in Seattle that have done it, they're just integrating with, like, you know, plaid, and wallet and stuff like that. So

Mike Simonsen  24:12 

All right, that's super cool. So the other big looming technology in the transaction space is as we've had a lot of media coverage, a lot of speculation in blockchain but obviously, like not a lot of adoption, there's a couple of companies that are doing some work there. Do you have thoughts on blockchain and in specifically the settlement world that you live in every day? And it's okay to be skeptical. Treat me as a total novice in the space because I don't really know anything about the nuances. I've bought three houses in my life. That's what I know.

Joe Curtis  25:00 

Yes. So this is evolving. I think blockchain technology is amazing, the underlying technology behind cryptocurrency and NFT's, the underlying, like, decentralized ledger, in terms of like a one system of record that can, is immutable, is super powerful, like really, really, really amazing has the ability to be transformative. So then you're like, okay, how do we apply this to our business? And I think that there's two kind of like fundamental ways that people are talking about it. The first is like, how do I tokenize properties so that I can own fractional or some type of like, tokenization of assets? And so they were talking about tokenization earlier, and now they're talking about NFT's, and how do you do that, and there's a lot of like, legal hoops that you got to jump through. I know, like, Proppy is a company that's a leader in this space, that's doing a lot of cool, creative work around this and really trying to get into the transaction understanding and doing that. So we've done a little bit. We've taken as a company, been able to enable transactions using cryptocurrency, it's basically a crypto to cash transactions. We've done several of these transactions over the last couple of years. They were one of the first in California to kind of complete a couple where people buyers were buying a house with Bitcoin, but we were converting it to US cash.

Mike Simonsen  25:08 

Before we go on, that's really interesting. So were they essentially cashing out Bitcoin? Turning it downpayment?

Joe Curtis  26:39 

Yes. Downpayment and or pay off?

Mike Simonsen  26:41 

And or pay off? And is there anything that there's a question? That's a pretty common question in the past year, although it's starting to fade a little bit now as the crypto markets have, have come down, but there's a lot of wealth generated since the beginning, since two years ago, in crypto. And so are there anything that consumers need to know about that? Or like, is there anything that have popped up as difficult or unusual in that space, like that got in the way? Or, I think we should know.

Joe Curtis  27:17 

Well, there's lots. I mean, we could do a whole podcast on this topic alone, right? Like there's a lot to kind of unpack. I think, for somebody that has and has created some wealth, using like Bitcoin, cryptocurrency, whatever it is, I think that the things that you need to think about is it's not US dollars, like you have Bitcoin, or you have Aetherium, or you have Litecoin, or you have Dogecoin, or you have whatever you have. And people want to interact and transact as if they have US dollars. That's just not the case. Like, you can have a lot of pesos, but you can't buy a house in pesos. It's just, you can't do it. Like, you may be able to get somebody to lend you US dollars based on the pesos that you have. But you can't. So in terms of like a currency, yes, it's more global. Yes, it's decentralized. It's all of those things. But there's still not really a great way. And you will find people who will be able to argue with me on this to transact using crypto because you have to convert, because a lender is not going to take a pay off. Like if there's somebody that has a house, and there's a like $400,000 loan on it. And you got to clear that lien on that house by giving Bank X $400,000, there's not a lot of banks, they're gonna say like, yeah, we'll take that in cryptocurrency and when you're doing that, you're doing that outside of a US regulated bank. So it just creates some layers of complexity in the transaction. The other thing you have to know is my belief is you have to, where the cryptocurrency is coming from when you're purchasing and transaction matters to regulatory books. So there's a lot of hoops to jump through in terms of like KYC AML that you don't if you just have money in a US Bank

Mike Simonsen  29:09 

KYC, know your customer. I know this is not fraudulent stolen Bitcoin. what's AML

Joe Curtis  29:17 

Anti-money laundering because if you got a bunch of like stuff that was illegal, and you were you wanted to convert a bunch of money, like cryptocurrency into US dollars, what better way than to like get into contract and a house and then cancel? I'm like, yeah, now I got all these dollars. They want to know. So there's just going to be if you have those assets, you just have to know like there's a lot of verification involved and some hoops to jump through and it's just different and takes a little bit more time than if you are buying with US dollars, just as if like if you had a bunch of pesos, you're going to have to convert, you have to onshore those into US dollars, and there's going to be the same type of scrutiny kind of played to that as well. So it's not a new problem

Mike Simonsen  30:07 

It's just a new technology on the problem but to get to a world where you could buy a home with Bitcoin or name your currency, you would have to have, likely have to have the homeowners, the sellers loan is denominated in Bitcoin.

Joe Curtis  30:27 

You can buy a home today with Bitcoins. Today, you can buy today, we'll do the escrow. Like no, no problem. The catch is you have to convert that Bitcoin into US dollars. It's like there's an exchange that has to happen. And there are fees associated with exchange everything Bitcoin to US dollars, and it can be expensive to convert.

Mike Simonsen  30:50 

But if I wanted to do a transaction in Bitcoin without that, you wouldn't have to be a world where the sellers has a mortgage denominated in Bitcoin. And that was a lender who was a federally regulated lender who could lend in Bitcoin, because even though there's like the crypto companies now that are trying to do lending programs like they are the SEC is like, these are securities and you got to be a bank.

Joe Curtis  31:28 

Especially if you're lending against it, right?

Mike Simonsen  31:30 

So there's a ton of infrastructure that has to happen before that does. But today, right now, the process is you convert it to dollars, and then you.

Joe Curtis  31:44 

And there's still a neutral third party. The other part of it is, so we're just talking about the transference of money for payoff, right? So that you can do it. The other part is like recording and ensuring a title. So there's this whole idea of like having a decentralized ledger, and I think Goldman Sachs came out with a study, I think it was probably in 2017 that says, hey, the Title industry is going to be one of the place things that blockchain will disrupt, right? Everybody's like, hits, it's forthcoming. I don't think it's forthcoming in the US. But I think like a country like Sweden, or if you get some company in Africa, we're like land registries are not real organized. And you have like one central place that controls the land registry. Land registry happens county by county, by county, by county, by county by county by county the entire United States. So like for us to wholesale convert to a decentralized ledger, that's one like immutable record or call it I mean, there's 56 counties in California 56, different ones like that is going to take a pretty significant movement in the regulatory kind of like, environment to make that happen here. So I think it's going to be slower here doesn't mean that it's not going to happen. I think there's going to be pressures for that to do it. Because the way that we do it now is kind of funky.

Mike Simonsen  32:56 

The property team who's been doing it, really leading on that in the US totally originally from Bulgaria, and in Bulgaria, there is a lot more fraud use cases that you have to worry about. And so you could understand why a blockchain would be useful for that, and in the US is significantly lower case of that. And so then maybe the tokenized version of things is like maybe the path forward in the US.

Joe Curtis  33:29 

Yeah, where you hold properties in LLCs. And then you tokenize the LLC, not the actual yeah, so it's interesting, there's a lot yet, I think, to be figured out on this topic. So I don't know for making any kind of like radical breakthroughs in this but like, for somebody that's just kind of like new to this conversation, it is definitely a conversation worth following and continuing to look at it's not irrelevant. I think that a lot of people would view blockchain crypto, all of these things as irrelevant three years ago, like that's not going to be anything, it's fine. It's just a fad. It's going to go away. I don't think that's really the case. How it's going to show up in our everyday life and use case in the United States is released for real estate, I think that there's a lot yet to be determined. And that's where it's going to be an interesting story to follow.

Mike Simonsen  34:17 

Well I really appreciate that lesson on there that's great. So let's leave crypto and blockchain there for now. We'll put crypto as the headline of our podcast so that we get a gazillion listens to it.

Joe Curtis  34:31 

I just got put NFT next to it.

Mike Simonsen  34:35 

Oh, that's really insightful. But let's switch gears, so you've done some transactions in crypto, but what other things are happening in the transaction right now, what are insights that you see that has been happening over the last couple of years? Anything that is notable that we should be paying attention to right now?

Joe Curtis  34:58 

Yes, you gave me this is like a prep question and like my little monkey brain has like 10 different things, I may narrow them down into something that's like, really, really good. I think that there's some market trends. And I think that there's some just general kind of like company and things that are happening. So like, let's kind of knock them down one at a time. So like market wise, it's interesting, like the market has been interesting. And so we use Altos Research data all the time. I mean, I even write like a monthly kind of like recap, using like a lot of your regional stuff and kind of overlay it with some of our data, our transaction data, that's closing data, because I think we're a statistically significant, kind of like, reflection of the Southern California market. And so we look at that. And one of the things that I would say is, in the last year, we had 66% of our non-refi deals. Right, so residential resale, did not have a loan broker, which means, like, 34%, were cash. That's a significant amount. So then you say, okay, how do you unpack that? That's higher than it has been? All cash deals are not that way. And I think that that is a result of a couple of things, right? So you have more investors in the market, you have commoditizing, the single-family homes and private equity companies getting into that business, which has been making news, you have things like i-buying, that's happening, that uses cash, like so they are all-cash deals, again, they're like 1.5%, of any kind of given market. They're not a significant outside of maybe Phoenix, but like they're not. And Mike, they'll probably does a great job of covering this segment. I'm a big fan of his and research.

Mike Simonsen  36:44 

Yeah, Mike knows it good, we'll have to have him on the podcast soon.

Joe Curtis  36:46 

Yeah, he's really, really great. But so that's a big chunk of the market. Unless they're getting that money to make an all-cash deal by borrowing it from some other way, whether it's a fund or something like that, it'll be interesting to see how interest rates play on that. I also worked up pay what percentage of our deals are bought by LLC, which is kind of a reflection of investors. So were the buyer was an LLC, now that they sometimes transfer afterwards, they sometimes feel this, this is an exact like, one on one. But we had over 7%, like, of our buyers are showing up as LLCs as buyers, that is also higher than what it's historically been. So there are a couple of just trends that we're looking at that are kind of like outside of like, who is buying these houses, what's happening. So all-cash deals and you wonder, like, once prices start to slow, which I think you and I are on the same page in terms of like in 2022, especially in California, you can look at globally, I don't think prices are going to take a dramatic hit, just have an inverse supply and demand issue that is not going to allow. But once that does happen, and if you assume that most of those cash buyers are investors, all of a sudden, if the equation gets flipped, what happens to that segment of the market? Right, which I think you could say, like some of it doesn't exist anymore. So I think some of those buyers go away. Money gets more expensive, home prices start to soften so that you can't turn around and sell. Now it's all going to depend on what the strategy the investor is whether a buy and hold, and they're renting them out at mass, or whether they're fix and flip folks. But it's about a math equation. So it's understanding like, what are the levers that they have the pole for them to make money on the transaction? And so interest rates play a part of that home prices play a part of that cost of labor plays a part of that, like that should be slowing things down? I don't see it happening, which is crazy.

Mike Simonsen  36:46 

Yeah, so that's great. So the 34% cash buyers, is really fascinating to me, because mortgage rates have been so low. So why are they paying cash? Is that are they getting cash from other sources, even cheaper financing?

Joe Curtis  39:20 

I'll tell you my theory. Now, I don't know. It'd be interesting. I'm trying to figure out how you get the data to validate this. But my theory is a couple of things. So one other point of data that you need to know is if you'll get close ratio, so how many deals open and then actually close? Because some deals like fallout. And so one of the reasons why our industry did so well in 2021, or at least I'll just speak for the Pango Group is our closing ratio went up by over 10%, meaning like on an average year, like in 2020, we closed 71% of the resales that we have right. Normal yours between, like 73 74 75%. So 2020 was a little low. I think we all know why. 2021 over 78%. So we had to open this, like, just think about that. So if you're closing 78%, instead of 71, you can open the market can do the exact same thing. And you're gonna do a ton more revenue, because you've now closed a bunch. So why is that? Why are the deals not falling out? And so this goes back to what we're talking about with cash, I believe, I don't again, we're talking about like, hey, we have evidence, we have data. And so we draw conclusions on those data, they can be right or wrong. Because that's what it is, right? It's, it helps us inform some of the opinions or like beliefs that we have. So I believe that closing ratio is really driven by like, if you get the opportunity to buy a house in California, the deals not gonna blow up, because the buyer just said, now I got a better offer. Like, that's not happening today. Right. The other thing is, I think the cash makes it more attractive to sellers. So I think that you're going to see because of the competition in the market, like you're going to see more cash deals. If you can figure out a way to get a cash deal in the mix of the 20 other deals, like you maybe put a little bit higher on the list of acceptance than if you weren't, and you were going through traditional financing, and how to do the 17 day, financial contingency and all of the things that you're doing. So I think that that plays, I think the competition, the market, the low inventory, like with the demand, like equal those two things, and I think that like deals aren't falling out. Because once you get the place finally, after the three years of looking and getting outbid 870 times and you make it happen, right. And if you can put yourself in a position to be all cash, whether you're using one of these companies that will help you facilitate that all cash, and there's a lot of programs that are doing that, like you do, because if you can be more competitive you will be I think those are things again, I'm looking at information that I'm getting from the market. I'm saying, Okay, I think that this makes sense. I think that there's a correlation here. I'm not sure if it's all causal, but like, I think that there's a correlation between those things, which is really driving up the cash buyers.

Mike Simonsen  42:30 

I buy that. That makes a lot of sense to me. Cash offers, not because I have more cash or because the loan is bad, just because it helps me get the deal done. And then maybe I do the financing later.

Joe Curtis  42:45 

That's what would be a really interesting thing to figure out. And I don't know how you'd get like to validate that data. It's like, hey, how many all-cash deals that closed in the last month got refinanced in the next 90 days? Like I would be super interested in seeing like that kind of conversion. But like we could geek out on the data all day long.

Mike Simonsen  43:04 

For sure. another data point that I'm interested, you may not have this off the top of your head, but maybe you do is that the time to close from offer to close? Did that come for us?

Joe Curtis  43:15 

Not dramatically. So we looked at that as well. It hovered. Even during like the pandemic, like we were still looking in like the high 30s, like and so like, on average, that when you get an accepted offer where you open escrow, and then you close that deal, and I don't have the exact number like today over the trailing 12 months. But I've looked at this number several times over the last two years. And it really hasn't fallen much out of between 34 and like 39 days like that. That is kind of the area, you get outliers, you obviously get outliers, it's a contract piece. Some people say I want a 45 day escrow because of blah, blah, blah, blah, blah, they want to move out later. But I don't see it north of 40 much in our residential resale business. And I thought I was gonna see a bigger move in that. I thought we'd be like 50 days, plus, it's going to take a longer time, like, all of this, like COVID was going to slow everything down. And I just didn't see the data. And it didn't move it significantly.

Mike Simonsen  44:20 

Sometimes the competitive offer says, hey, I can close the 15 day, I'll do all cash and I can close 15 days. But that didn't happen significantly, either.

Joe Curtis  44:28 

No, I still think it takes time to do a transaction. You still have to say like, am I getting what I, I just watched it for 15 minutes, and I had to make an offer by like two o'clock. Like, you still have to inspect the house and make sure it's not. You know what I mean? I think that there's some time that you have to go through in a transaction that you can't again, it's that speed versus security. I would consider like getting what you think you're paying for as part of that security part of the equation. I don't know. Like yes, mechanically, you can make a deal happen in four days. like we could close a real estate deal on cash in four days, like we could do that. Right? Do you want to? Should we? Yeah, like, if I'm buying my mom's house, right, that I've lived in and know everything that's wrong with it, and it's not a complete stranger that I'm buying from, it's like, yeah, I can see us like, making it work.

Mike Simonsen  45:20 

Awesome. That's really, really insightful. So that's actually useful for me, because we track the active market and the new listings, and then the full active market. It's the house gets listed today, it gets an offer in March, it then closes in April, then you start seeing that data in May.

Joe Curtis  45:38 

Totally, that's why I love your data. That's why I love the Alto data is because it's like, it's actually what's going on the market now.

Mike Simonsen  45:47 

Yeah. The one time that did compress, was in coming out of the bubble burst. We had a homebuyer tax credit that expired. It was April 1 of 2010.

Joe Curtis  46:04 

Okay, so I was just going to say this is like nine, 10.

Mike Simonsen  46:07 

Yeah. And what happened was, it pulled a lot of demand forward, and it pulled a lot of closings forward, because I got to get it in before April one. And we watched a compression of our lead time on the day that happened at that point, but we really haven't seen it right now. That's great insight, I really appreciate that.

Joe Curtis  46:27 

We see that on an annual basis, too in December. There's like a lot of incentive for a lot of folks to get deals closed before the end of the year. So we see the big closing month in December, often when you wouldn't say like, hey, why are these? And so December is always like a pretty it's that race to the finish before the end of the year because of whatever potential tax changes or anything that may be coming forward. I know that was a big deal this year.

Mike Simonsen  46:51 

Yeah, for sure. And then, of course, as we go into a rising rate environment, we're doing fewer refi. You guys are mostly purchased? Yes, yes. Oh, we can take a breather. So as the business is focused on buyers, anything else on that front that we should be paying attention to, anything scary?

Joe Curtis  47:17 

In terms of the rate stuff?

Mike Simonsen  47:18 

Yeah, rates and I don't know, like, so one of the things I'm interested in with, when I talked to my guests here is, are there things on the horizon that are going to derail this train that we haven't seen, things that you see or that you're afraid of, things we should be paying attention to?

Joe Curtis  47:39 

So I again, this is shot, I feel like I've been terrified for like the past five years, because the markets been so good. So that I'm like, just kind of like going like, no, but there's something going on? Like when's the other? And I don't know, if you just get desensitized to it. I think that market psychology is really interesting. Because when you think things are good, you think things are always going to be good. And when you think things are bad, you think things are always going to be bad. Actually that's not actually what happens if you look at the data. But that's how people think and make decisions. So we're concerned. So if I'm looking at from my business perspective, right, so it's like, if we look at our industry, like what we're most concerned about, is market velocity, right? So I care about how many transactions are happening in any given year, not what home prices or interest rates are, like, those are only indicators of what the number of transactions will be, because, like a million-dollar deal versus a $500,000 deal, our fees not dramatically different. So it's different, but it's not dramatically different. It's not like half, because there's risk, there's just baseline risk with transaction. And so, you scale up from there. And so I'm not concerned about home prices, I kind of want home prices. My answer this out loud, I kind of want home prices to kind of soften a little bit, because I think affordability is an issue and you want people to be in good financial scenario and not be house poor, and all these other things which we talked to our employees about, you know what I mean like, how do we financially plan really well. So I am interested in seeing how the Fed handles inflation, because that's something that we haven't really had to deal with in a long time, in any kind of meaningful way. And that's more part of the dialogue and conversation right now. Interest rates have been really low for really, really, really, really, really, really long time. And so it'll be interesting to see how that impacts market velocity, if it will obviously impact home prices, right? It has to, it has to there is an inverse correlation like relationship between interest rates and home prices. Now in little micro markets where there's just so much demand and people don't borrow money to buy houses, like different Corona del Mar, it's not really going to affect or some really, really fancy places, but for the most part of the market, I think you're gonna see some softening there, does that mean less houses will be sold. That's why it's like inventory is a problem. But if you have it, and that's just the net inventory that exists today, but if you have a bunch come on and a bunch come off and a bunch come on and a bunch come off, like I'm okay with that, because the market velocity is still kind of going, it just means that homes are transacting and it'll level where that slows down, that's where we need to take a good look and say like, okay, well, what is that causing? What causes the actual market velocity to slow? Right. And that typically, is external factors from the real estate market itself. COVID, I mean, that went down and then wound back like, Mike don't pretty call it like a checkmark recovery. He was exactly right. I mean, it was like, boom, and it came back with a vengeance. And by the way, we did not lay one person off during that time, we are so thankful, because like, we were like, I don't know how this is going to last could just last forever. You don't know, right? Like that market psychology thing. And man, we are grateful we stuck it out.

Mike Simonsen  47:47 

Good for you. That's really great. It was really hard. We've held on to everybody, but it was scary for people.

Joe Curtis  51:14 

Super scary. Super scary.

Mike Simonsen  51:18 

Yeah, that's really interesting. So the external factors. And those, of course, we can't predict. But there's some external factors happening right now in the world that are frightening. So Joe, this has been terrific. This is exactly what I was hoping to get out of it. Like, really dive into the, the geeky parts of the transaction and where the world is going. And like, you know, what we need to pay attention to. And so such really great insight, so I really appreciate it. To wrap up, where should listeners go find you interact with Pango? We talked to a lot of realtors, and a lot of Southern California in this business. So where should we reach you?

Joe Curtis  52:01 

So pangogroup.com is our website, it kind of gives you a pretty good overview of kind of what we do, what our brands are, what kind of companies that we're running. I'm active really on LinkedIn, that's kind of like my go to kind of like business interaction. I use a lot of your data to kind of make commentaries on the market, because I've just found it to be really, really valuable. I mean, you and I have been in business for well over 10 years, I think, and it's been a great, I feel like partnership, you've added a lot of value to our business. And I think that we try to give your data away as much as you may hearing this, but we want to give it away as much as possible. Because I fundamentally believe that like a more informed customer, like with good data is a better customer. And so like we just want to be like given out like, like if we want to interpret it this then we're like, okay, let's, let's see how this impacts us and our business. But to find this go to pengogroup.com, you can reach out to me on LinkedIn, we'd love to engage. I'm a data geek like Mike, so I'm always interested in hearing like really interesting, diverse opinions about kind of what they think is going on in the market. So I'm a big fan of Mike's. And Mike, you've been a great sounding board over the years in terms of like what's going on the market and how to kind of dig into the stuff. So I've been just really grateful and blessed to be part of the journey with you. And I look forward to many more years.

Mike Simonsen  53:21 

Joe, thank you so much for your time today and your insight on the transaction. It's a real thrill a specialty and so, like I said, I've only bought three houses in my life. And so it really, really useful for me to pay attention here. Okay, thank you, everyone. That's all the time we have for today. Thanks for joining on the Top of Mind podcast. As a reminder, you can go to altosresearch.com to get a free consultation on how using market data in your business. How Joe uses the market data in his business

Joe Curtis  53:52 

Call me. I'll tell you.

Mike Simonsen  53:54 

That'd be terrific. Thanks. That's all we have time for today.

Outro  54:00 

Thanks for listening to Top of Mind. See you again next time and be sure to click Subscribe to get future episodes.

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