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It provides escrow and title insurance services to mortgage lenders and real estate companies
Editor's note: Save the date! We're hosting our inaugural Future of Real Estate salon on Oct. 11 to take a deep dive into tech innovations changing the way we live and work! Joining us will be Amit Haller, co-founder and CEO of Reali, Gary Beaseley, co-founder and CEO of Roofstock and more. Check out the event.
Real estate technology is a booming sector right now, and part of that has to do with how big the space is. Transactions have so many moving parts, so many different areas of inefficiency, that there's an opportunity for a multitude of companies to come in and punch up different aspects of the deal with technology to make them work quicker and with less friction.
Take Spruce, for example; it's a company that puts its focus solely on helping real estate transactions, such as buying a home or securing a mortgage, close faster.
Founded in 2016, the New York City-based Spruce works with mortgage lenders and real estate companies to provide them with title insurance and escrow services through its platform. Title insurance, as Spruce describes it on its website, "protects real estate purchasers and mortgage lenders against issues with the chain of title to real property," and from issues such as unknown liens, encumbrances or outstanding taxes.
Spruce's platform helps borrowers avoid paying certain fees, allows them to review all their closing documents through its online dashboard and uses encryption and ID verification to protect the borrower's data.
On Monday, the company, which has so far worked with lenders and real estate companies in 36 states, and plans to reach 48 states by the end of this year, announced that has raised $15.6 million in new venture capital from investors including Bessemer Venture Partners, Omidyar Network, and Collaborative Fund.
This new funding is in addition to a $4.5 million round that the company raised in May of 2017 from Bessemer Venture Partners, Omidyar Network, Third Prime Capital, Collaborative Fund and Notation Capital, bringing its total Series A financing to $19.1 million.
I spoke to Patrick Burns, co-founder and CEO of Spruce, about the funding, what his company is trying to accomplish and how the closing of real estate transactions can be done quicker and with more transparency.
VatorNews: What is the problem that Spruce is trying to solve?
Patrick Burns: We’re addressing the fact that there’s a lot happening in the real estate industry and the mortgage industry, caused by external factors. You have changing compliance issue, changing borrower behavior, changing interest rates and, essentially, it’s becoming harder than ever to be a profitable mortgage lender, or to attract these different demographics of customers. What Spruce seeks to do is really to enable mortgage lenders to become more effective, better serve their customers, and to do that more efficiently than they can today.
VN: How does Spruce solve these problems? What's your solution?
PB: Escrow companies have traditionally been the back end of the real estate transaction, and that hasn’t gotten a lot of attention over the years. Meanwhile, the way the rest of the transaction is done has evolved quite rapidly over the last five years, but the way we close these transactions hasn’t really caught up with that. So what Spruce does is taking the modern technologies and customer-centric approach that you’re seeing improve the mortgage application process, or the real estate discovery process, and we’re applying those technologies both within the company, to make ourselves more efficient, and we’re also applying them to the way we interact with our clients and individual homeowners and borrowers. These are things like a digital experience for closing real estate transactions for borrowers, where they can pay their closing costs electronically, so they don’t need to go to the bank. They can preview their closing documents and ask questions about them and get education about them before they’re asked to sign them. Likewise, the way we interact with banks and real estate companies is different - we do it via APIs, we do it via web interfaces, and really trying to drive process efficiency and experience.
VN: Who is the typical customer for Spruce? Walk me through some typical use cases.
PB: We think of our ultimate customer really as the borrowers and the home buyers that go through these transactions. Of course, these borrowers most often come to us because they’re getting a mortgage from one of the lenders that we work with, and so we’re normally introduced into the transaction by the mortgage lender, and we work really hard to make the process seamless and efficient for the mortgage lender on the one hand. when it comes to the borrower, we use some guiding principals, primarily around emphasizing transparency and convenience. When it comes time to closing, they’ll never be asked to sign a document that they haven’t had time to read and ask questions about. It’s really about enabling, or empowering, the borrowers to be confident in these transactions that are, frankly, at times quite scary. Even for sophisticated customers, it’s just not very often they do through these transactions, and so we need to get them everything that they can to allow them to feel confident in them. Of course, when we do that, it doesn’t so much reflect well on us as it reflects well on the mortgage lender because that’s who the borrower sees is taking them through this transaction. So one of our core advantages is we’re able to demonstrate to mortgage lenders that working with Spruce gives them happier borrowers.
VN: What kind of ROI have you been able to calculate?
PB: Everything starts with just a process workflow and we always say that the best technology cannot save the worst workflow. So everything starts by a consultation, essentially, where what we bring in the room is our operations people, but also our software engineers, and we really try and understand the process of the client, because it’s different problems for different lenders, or different challenges I should say, or different opportunities for improving things. For example, a mortgage lender might come to us and say, ‘Look, we’re closing refis in an average of 40 days. We want to get that down to 10 days. Can you help us?’ Of course, we can’t do that on our own, but we can be part of the process, where we come in and we listen to what the holdups are, we listen to why we’re losing days from communication cycles, we a craft a solution that involves removing double work, it involves removing losing days from scheduling closings and that kind of thing. What we really try to do is partner with the lender to deliver that value and, provided the lender is engaged and thinks about things in a workflow manner or process driven manner, creating that kind of ecosystem, you really can be very successful, whether that’s in lowering time to close or improving borrower satisfaction scores or simply reducing hard costs of origination.
VN: In the press release it said you will be spending the new funding on product development. What are some of the things that you want to do with the product that you can’t do currently?
PB: There are a few big things coming down the pipeline all within this strategy of delivering transparency and convenience and efficiency, to both the individual consumer and their clients. So to date that’s been things like this API, things like the closing experience and we’re going to continue to put a big focus on the mortgage lender experience. Another area for focus for us is going to be the experience of the broker. We’ve seen more and more realtors come to us with the kind of process driven mindset that we’re seeing more and more of in that market. We want to automate some of our back office functions, or we want to be able to provide our agents with transparency into the title and closing process. We can work with them and we can create these kind of experiences that we’ve been able to do on the mortgage lending side and that’s going to be a continued area of focus for us.
VN: It also said you'll be expanding your team. How many employees does the company currently have? How many add? What departments?
PB: The two big areas for team growth right now are scaling our software development team, so additional software engineers, and product hires. And then also on the operations side, that obviously will continue to scale as we scale up the business and will be an of our focus.
VN: Is there anything else I should know about the company or the new funding round?
PB: How we think about this funding internally is it was always part of the plan and think of ourselves as being very much on plan. What this funding allows us to do is to serve more customers, continue to scale, continue to develop. We’ve got a long road ahead of us, we’ve already achieved a lot, but we see this as real enabling moment.
(Image source: spruce.co)
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