Online mortgage adviser wants to enter market
This week, the founder of an online mortgage adviser seeks advice on how to break into the D.C. market from our experts at the Dingman Center for Entrepreneurship at the University of Maryland’s Robert H. Smith School of Business.
— Dan Beyers
The entrepreneur: Ori Zohar got a taste for entrepreneurship in college, buying used caps and gowns from graduates and selling them to the next year’s crop of seniors. After he graduated, he decided not to strike out as a “rogue entrepreneur,” but instead to hone his expertise in marketing. Zohar moved to New York to work at the big advertising agencies. After nearly seven years in different roles, he wanted to focus his skills on his true passion: start-ups.
Through his network, Zohar connected with co-founder Nick Stamos and the investors that would give them the funding to launch Sindeo, a startup set on disrupting the mortgage industry.
The pitch, from Zohar, Sindeo’s co-founder and senior vice president of digital marketing: “A mortgage is one of the biggest and most meaningful financial transactions people make in their lives, yet it still feels like booking a flight through a travel agent in 1990. It’s very relationship-based. It’s very low-tech. It’s very fragmented, and the terms and process are not accessible to consumers.
“We created Sindeo— in Greek it means ‘ to connect’ — because we want to be the best at connecting borrowers with the right loans for them. We are a marketplace of 40 lenders offering more than 1,000 types of mortgages. Borrowers work with one of our unbiased mortgage advisers: We do the shopping and comparisons, then we guide borrowers all the way through closing and funding of their loan.
“Our whole philosophy is about simplifying the mortgage process and removing the bias. Our advisers are not incentivized to recommend one mortgage over another. Their compensation plans are based on customer satisfaction — they get a salary, benefits, low flat fee for every loan that they close and bonuses based on customer satisfaction. We are trying to change how compensation drives behavior and change the way that relationship is built.
“We just got licensed in Washington. In the next few years we hope to be a national company, synonymous with providing a comprehensive service and support throughout the homebuying process — from planning to shopping to qualifying to closing their loan.
“Right now we have mortgage advisers based out of San Francisco and licensed in D.C. that can originate loans there, but we hope to open a local office soon.
“Sites like Bankrate and Lending Tree and Trulia are just helping borrowers find the right bank; they aren’t helping people figure out the right type of loan in the rigorous way that we are doing, walking borrowers throughout the process using tools that we have developed to transform it into a much more personalized experience. We figure out what type of borrower you are and which type of mortgage you need, based on service, capabilities and loan types. Then we shop our network and show you the different ways you can structure your loan, with all costs and fees clearly explained. We focus on connecting borrowers with the right loan, which could save them significantly more money.
“Our focus is on millennials, a new generation of home buyers who are considering the best way
to approach this important decision. There is a meaningful shift as all of these digital natives begin looking for their first home.
“How do we scale and introduce ourselves into newmarkets? We need to roll out the red carpet because we have very limited awareness in D.C. What is the most efficient way to grow our presence quickly and cheaply in a market where there are a lot of big players with big marketing budgets?”
The advice, from Brice Leconte, entrepreneur-in-residence at the Dingman Center for Entrepreneurship and founder of iUnit, a developer of “smart” energy-efficient, socially connected apartments:
“The real estate industry is ripe for disruption, but it is also an entrenched industry. (I know it well; my current start-up is in the real estate space.)
“The mortgage industry is such a big industry that it’s difficult to go after the whole industry at once. Gain traction by pinpointing a niche that will help you scale. Identify one or two types of loan programs that require more hand-holding for the borrower, hence creating a bigger pain point and greater need for your services. It might not be the niche you initially expect. Explore the veterans market, particularly in the D.C. region. Try to get as much traction possible for the type of loan you focus on, and then you can grow out of that. “Millennials will eventually be a huge market of home buyers, but they aren’t there yet. They are still mostly renters, so they won’t be the ones to help you scale now. Instead, focus on the 35-to-45 age group, who are buying homes and are still Internet-savvy enough to find you.
“Another word of caution: Real estate is definitely one of the industries with the highest customer acquisition costs. You need to figure out those costs. Contact the mortgage associations. You have to be sure that you have that priced properly in your business model.”
The reaction, from Zohar: “Acquisition costs and entrenched relationships are definitely some of the biggest challenges we have. It’s a great idea to make our arrival in a new market more manageable by focusing more narrowly on a few groups that would get the biggest benefit from our service, rather than trying to be everything to everyone. As we see traction with those groups, we can broaden our focus and our coverage.
“Lowering our acquisition costs through partnerships is an angle that we’ve seen some early success in California, and given how locally focused real estate is, we will identify the most active ones in our nation’s capital.”