Transforming home buying through design thinking
Buying a house is said to be more stressful than bankruptcy or even divorce, even the catalyst for moving can be stressful - you’ve outgrown your current place, moving for work, need to downsize or your relationship has broken down. The place you once moved to with such excitement is now no longer fit for purpose, your hand is forced by the whole situation and you’re stressed before even starting, oh and you haven’t even started with the formalities yet.
And that's when the real fun starts.
LTVs, EPCs, mortgage fees, affordability, eligibility, saleability, mortgage advice, solicitor fees, how much deposit you need. The taxman, the agents, the lender, the surveyor, the buyer, the seller oh and the odd time waster.
Now yours might be a straightforward case, but there are plenty of instances where individual circumstances are complex. You might be one of the 4.8 million self-employed people in the UK, or be on maternity leave or have a poor credit history, god forbid, all three. The complexities are so daunting that it begs the question, why hasn’t more been done to help simplify the process? And why are we as consumers all still putting up with the status quo?
A good place to start is by looking at how people make big decisions. To solve life changing decisions we need tried and tested methods, but if you’re a first time buyer and you have no first hand experience of buying a home then you have no point of reference for the momentous challenge ahead of you. We ask family members and friends for advice and about how things are done. We listen to the highs, the lows and horror story after horror story, “we were gazumped”, “the house was on a flood plain”, “the chain collapsed”. And then, off we go, we embark on our own house buying journey in exactly the same way as all those people did before us.
So why has the process remained the same for so long what is being done to improve it? If we re-imagined the whole thing from scratch from saving up through to completing a sale, would it still look the same as it does today?
The pace of change within the industry is exciting, according to Venture Scanner, in 2018 investment in the sector was just shy of $20B.
Barriers to home buying are being challenged and expected behaviours becoming a thing of the past. We have noticed a number of innovators in the real estate market, each one borne out of a common barrier to home ownership.
The paperwork involved in buying a house is intimidating and full of legal jargon. First-time buyers are left not sure what they need to do or what is going to happen next. According to recent research by the New York Post, one in three first-time buyers have been reduced to tears , and according to Anxiety UK, over half (52%) of home buyers were made ill by the stresses of the process.
Habito aims to take the jargon out of house buying through simple clear user journeys. Daniel, their founder started the company out of frustration “I bought a house, and the experience was horrific…” he says in this post. “Not because of any one person, or any intrinsic malevolence working against me or my dreams, but because things which are important evolve complex systems around them with many stakeholders - from regulators to lenders, brokers to surveyors, estate agents, buyers and sellers.”
Finding the right buyer can be stressful too. Nested.com allows you to move before you have even sold your home and provides you with evidence proving your funds - making you a chain free buyer!
HM Land Registry supported startup Hipla, allows buyers to understand how their 'buying position' compares to other buyers looking in the same areas. Imagine never worrying about what the competition were up to and just being able to focus on getting a fair offer accepted.
Desperate to move into your dream home but can’t quite afford it? Well now you can, OK so it sounds too good to be true, but Unmortgage offer exactly that.
They buy the house with you. Instead of mortgage payments you pay rent on what you don’t own based on similar homes in the same area - and unlike most Shared Ownership schemes they do not offer this service for new builds, just existing houses in quiet, urban areas. If you over pay you can increase your ownership. It does beg the question however, if I can’t afford a mortgage then what are the chances that I’ll be able to afford their rent payments?
Trouble saving your deposit
Yolt is a platform built to give everyone the power to be smart with their money. Aimed at a young audience, they help users manage money better. The theory goes that if you track your money better, then saving is easier and you could have that deposit quicker than you expect.
What are estate agents saying?
I caught up with Simon Deen, an experienced director in the real estate industry with years under his belt. Deen spoke about the opportunities for the UK market and developments abroad:
“The current issue with the home buying process is that it's involves many component parts which need disrupting, not just one.
From an estate agency perspective we should be looking to the US for inspiration, where iBuyers such as Opendoor have disrupted the market, leading to property portals such as Redfin and Zillow to pivot in that direction. It remains to be seen whether Rightmove and Zoopla follow suit here, but I wouldn't bet against it.
However the company making the biggest waves in the US is Compass, who having raised $1.1 billion, and with a valuation of $4.4 billion are a real tech unicorn. In their words "We empower agents from start to finish by developing innovative digital tools and customised marketing strategies. Why? Because we know that when agents can spend more time building relationships with clients, everyone wins.”
Coming back to the UK, I believe that our market will, in time, follow theirs. The biggest change that I foresee is that buyers and sellers will be forging relationships with individual brokers over and above the companies they represent.
Digital marketing and social media is changing the ways we market properties, and the ability of individuals to create their own personal brand has never been easier.”
Every week there are new innovations and startups in this space, each one carving its own niche. With so many new offerings there is a concern that these services will simply add to the confusion for the consumer with each service promising to do something better or slightly different than the last. The biggest issue we see is how many of these innovations operate within silos. One area we’re excited to see more developments in is around Open Banking and Mortgage buying.
Open Banking is a secure way to give providers access to your financial information in return for improved services. Data from Open Banking and other sources could be the answer to reducing complex application forms, could how much I can borrow simply be constantly updated as my bank balances, outstanding mortgage values and current house value change? My personal details and employment details are known, so these could be securely shared to save me time filling in lengthy forms and awaiting decisions. Rather than waiting for credit decisions, work out credit scores in real time and ensure they are always available to me. A speedier process sure, but a more informed consumer too.
The more we learn about the impact our purchasing decisions have on how financial institutions perceive us, the better. When you really start to think about it, you realise how with Open Banking, banks and other providers could be working harder for us. Imagine if they started recommending ways to save money and get to that deposit quicker. If the average spend on energy per household for people in similar houses is known and I am spending over the odds, then let me know, help me switch! The sooner I have my deposit the sooner I can buy my dream home and the more loyal a customer I become, a win-win all round I say.
If you are working in this space or just fancy a chat about your frustrating house buying journey, please get in touch! Furthermore runs various research and experimentation programmes to solve all kinds of business challenges.
This little insight was brought to you by Steve Johnson, Managing Partner here at Furthermore.