July 30, 2020
Max Simkoff: Welcome to Ask the Expert, where we ask industry leaders about their unique perspective on how to navigate the most difficult challenges faced by the broader real estate and financial services ecosystem during the current global health crisis. We’re also giving you a chance to ask the experts some of the most pressing questions on your mind. My name is Max Simkoff, CEO of States Title, and today I’m excited to welcome Compass’ San Francisco founding partner, Monica Pauli, and residential real estate sales leader, Kate Tomassi, to talk about the topic, “How to drive real estate transactions in today’s market.” It’s a particularly interesting topic given the unique set of challenges that need to be navigated in California, in the Bay Area, and also across the country, to help get real estate deals done.
Just by way of quick background, Monica – who I’ve known now for quite some time – is one of the top producing agents in the United States. She did over $150 million in sales just in the San Francisco Bay Area last year. I can personally attest that she is highly sought-after by clients and greatly respected by her fellow agent community. Kate was named Rookie of the Year by her brokerage in her first year in the business. Over her first five years, she closed over $100 million in transactions. So, they are really just a powerhouse team and we’re super excited to have them. Welcome, Monica and Kate. Thank you for making the time for this today.
I wanted to just start by mentioning, Monica, you and I met back in 2010 or 2011, and our experience was when you helped me find my first home, which was in fact the experience that led me to start the company States Title. When I went through that closing process and saw that there was clearly an opportunity to make closings more efficient and use technology, you could say that you helped inspire the start of the business. Certainly, you and Kate have helped a lot of homebuyers, home sellers, and first-time homebuyers in figuring out the process and easing some of the different pains across the process, and now at Compass. I’d like to start there, because you’re at Compass. They brand themselves as the technology brokerage, and certainly, in the current time we’re in, technology is playing more and more of an important role in helping get deals done. I’d love to maybe start by hearing about some of the technology that you both have seen that has helped find and helped customers close during the crazy time that we’re in.
Monica Pauli: Well, thank you, Max. One of the reasons we started Compass four years ago in 2016 was their technology platform. When we left our brokerages – I left Coldwell Banker after being there 16 years and there were 15 of us that started Compass in 2016 – we knew what Robert Refkin’s plan was, but we had no idea it was going to be this. I will say – and Kate can also add – that during this pandemic, if we were not with Compass, I just don’t know what we would have done, because of everything Compass has built for us, for all of the agents and the staff. Every worker at Compass can work from our laptops anywhere in the world.
The tools that Compass has been able to provide us during these last six months have just been so beneficial for us as agents. We have actually made more money during this pandemic. We are working smarter. We are not wasting the time that we used to waste.
That is, producing a comparative market analysis live for our clients, doing live video tours with our client in the property. The tools that Compass has been able to provide us during these last six months have just been so beneficial for us as agents. We have actually made more money during this pandemic. We are working smarter. We are not wasting the time that we used to waste. Now, all of our staff employees and team members are able to do this – which we never knew of – Zoom. The new world is now, I think, going to be moving us to the future oh how we’re going to work better and smarter.
Max Simkoff: That’s awesome. Kate, anything to add on what you’ve seen?
Kate Tomassi: Yeah, both Monica and I have, during the pandemic, been able to get contracts done sight unseen because of the incredible virtual tours that we’re using now, even at the lower price points. I didn’t use to do virtual tours for properties that were low $1-million condos, but we have to have it out there now. When we do showings, it’s not open houses. It’s people who really already know the properties. It’s very targeted. We may have fewer showings, but each showing is so much more likely to result in an offer. In a weird way, that’s really benefited us.
Max Simkoff: Yeah. And I’m curious. Have you closed on deals without people actually having seen the property in person? Like, are you seeing people tour these locations virtually, and then make offers and actually close without ever having been inside of the property?
Kate Tomassi: Yes!
Max Sikoff: That blows my mind. I was on Redfin or Zillow the other day looking at a property, and I was surprised at how easily there’s a piece of technology and used called Matterport. I was surprised at how easily that had been integrated into the viewing process. It was the first time I’d seen that, and this is actually for a property outside of San Francisco. It was an up in Napa. I was used to a world where you’d click on pictures, and now there is like a really easy thing to click on. You get a 3D walk through the entirety of the property, from any vantage point, and just seeing stuff like that, it feels like that would probably be more useful and more valuable in the current time.
Monica Pauli: Now we’re using my Matterport for every listing. Before clients even come to see the property, they view the Matterport for the virtual tour, the floor plans, before we have them come see the property, if they do see it in person. We also see every buyer who’s pre-approved ahead of time. We know this is a real showing, and because of COVID and how strict everyone is, this will be the new norm.
Max Simkoff: Wow. Well, kind of in a similar vein, I know that the two of you are team members. You’ve worked together closely on opportunities in the past. A couple years ago, that might have meant you find ways to meet in person. You can tag-team opportunities by meeting with buyers and sellers, showing homes. How have you found new ways to be successful in this remote-first world now, where a lot of the things you can’t do? I’m interested in what tools or strategies have you found that have helped you as a team working in an industry that has historically been so heavily based on in-person interaction?
Monica Pauli: Well, today, I have two other Zoom calls with a seller who I’ve never met who was just referred to me, and a new buyer who was just referred to me. This has really been an amazing opportunity. I feel that buyers and sellers are completely transparent. They’re telling you everything. A lot of the time, you really don’t know the full truth on things, but people are really honest and we are developing a relationship 10 times faster. The trust, advice and direction that we give our clients … For example, today I’m talking to someone that’s going to need Compass Concierge, the staging program, and they will need $30,000 to paint, stage, and maybe redo a bathroom, but we’ll be able to do that all together on the conference call today. I also have my stager on a Zoom call. Then we will go to the property and see it. It’s vacant. The client won’t have to do anything except trust and see what our plan is. Everything is done by video conferencing calls right now. Then our team will go and do the presale inspections. We’ll do all of that work for the client. Again, Compass has all these amazing tools. Kate, you can also chime in on the other things that our team has been doing during this.
Kate Tomassi: I recently closed on a listing where my clients were sellers who recently relocated to Maryland. We signed a listing agreement in January, pre-COVID. It had some delays because there was a lot of work to do through the Concierge program to get it fixed up, but lost the month of April. But overall, it was amazing. You know, they couldn’t get back, so they never saw the house before it sold. I would walk them through as work was done. They were thrilled with the results. You know, I haven’t seen them since last year in person, and now they are closed.
Max Simkoff: Wow. That is kind of a great transition to another interesting theme that I’d love to hear both of your perspectives on. You mentioned this client who moved to Maryland and sold a home in California. Certainly, that’s a long-distance move. I think we’ve clearly seen that the current market has got a lot of people questioning their home location choices, particularly in the microcosm that is San Francisco, or even the Bay Area. For people with kids in the city of San Francisco, clearly space is at a premium. A lot of people are considering moving to the suburbs, and even this concept of escape homes is more acceptable if you are working remotely. I’m just curious, how have you seen this play out? Are you seeing more of this, or of housing market trends that you think are indicative of current conditions, where people are able to work more flexibly from a variety of locations and they’re starting to reassess the value of space, and, how they’re working from home? What are some of the trends that you’ve all seen there?
Monica Pauli: I’m finding first-time buyers are out and about. One of my clients put in an offer. There were 28 disclosure packages out on a little house in Twin Peaks. My client was a renter, where he was paying $5,000 a month in rent. I’m finding that myself and my team are all working with first-time buyers right now who are moving from renting to buying a little single-family house. If that’s in the Sunset, you know that the market under $2 million is very robust. Everyone wants a garden. They don’t want to hear their neighbors. They want to have a flex room. They want to be by the beach.
People are making life changes right now that they were probably deciding in the next two years, but now they’re deciding, ‘Let’s do it now,’ given the environment we’re in.
I think people are saying, OK, I’m going to take my 20-percent, 25-percent down, and I’m going to put it in the market. I’m going to be here the next five to 10 years. And you know what, if I’m not going to work from home, if I’m not going to have to go into the office, maybe I’m going to move to Marin, maybe I’m gonna go to Stinson Beach. People are making life changes right now that they were probably deciding in the next two years, but now they’re deciding, ‘Let’s do it now,’ given the environment we’re in.
Kate Tomassi: A lot of my clients tell me they feel that the safest place for their money right now is real estate. They’ve already liquidated any stocks after the crashes in the spring. Now the money is sitting there. I’m also finding that my first-time homebuyers who had initially started thinking they would buy a condo are stretching their budget and saying, ‘You know what, we’re gonna go higher,’ or, ‘We’re going to make this happen, we’re gonna go for this single-family home.’
Max Simkoff: Which is certainly unfortunate timing for a lot of us. I think in this sense, probably San Francisco is akin to Manhattan in many ways, and that you saw this boom of high-rise condo construction over the last couple of years to try and alleviate some of the housing challenges we had. Then all of a sudden, you’ve got a lot of these high-rise condos coming online right at the time that’s likely the less attractive option for them given the current markets. I guess I’m curious, have you seen that, too? Like when you think about the difference between even the types of condos that are for sale in San Francisco, have you found that living right downtown in a high-rise building has become meaningfully less attractive than at least having a little bit of space to spread out and not feeling like you’re kind of trapped in a building with an elevator?
Monica Pauli: Right now, those sellers – the owners that are downtown – are going to have to wait it out until they decide to sell. Right now, the prices are way low, significantly low. We’re seeing less than maybe 2015. Wait for two years. It’s going to bounce back. It’ll probably be 18 months to two years, but nobody wants to be in a high-rise right now. The listings that I’m selling, those buyers are coming from downtown. The big buildings with the doorman, they’re moving to single-family homes. The families that are in a nice condo in Pacific Heights, they’re moving to single-family. I just think the condo market owners should hold if they can. But you know, it’s definitely cyclical. We saw this in 2008. San Francisco will bounce back, and it’s going to come back very strong. We’ll have a lot of new buyers. It’s a waiting game right now.
Max Simkoff: I want to shift a little bit now. You’ve both talked about the parts of the technology landscape and the process landscape that has somewhat amazingly gotten more efficient in the current environment. I want to talk a little bit about some of the quirks that remain. The first one is particular to the market that the Bay Area is in, which clearly is more of a high-net worth market. Earlier, Monica, you said the market for properties under $2 million remains competitive. I think for people who don’t live in the Bay Area, they may just about fall out of their chair when they hear that that’s the threshold for a competitive market. It helps to remind folks that the price per square foot in San Francisco and in the Bay Area is in many cases like four or five times what it is in the rest of the country. Finding a single-family home for less than $1.5 million, for example, is very, very difficult to do in the city of San Francisco. Clearly, they become more affordable as you get out into some of the suburban areas. But given that this is more of a high-net worth market, I’m curious, what have you seen in the current environment? What will be some of the remaining challenges associated with selling to and for these folks? Given that a lot of our audience here is focused on the mortgage process, they are particularly interested in what qualities you’re looking for in lenders that your clients are working with. What are some of the challenges there, and what does that mean in terms of how you guide your clients and work with particular kinds of lenders to help them get through this process easily?
Monica Pauli: Well, I can say I’m closing something tomorrow. Yesterday, we were scrambling because my client, the seller, all-cash, doesn’t have a loan and he has to get a notary to come to his home in Orinda to sign, and all the notaries are booked. This is a man that is just extremely successful and owns properties all over the United States. He’s like, ‘Why can’t I just do this online? Why do I have to sign my closing papers?’ I was like, ‘That’s a really great question.’ We were very frustrated.
Yesterday, we were scrambling because my client, the seller, all-cash, doesn’t have a loan and he has to get a notary to come to his home in Orinda to sign, and all the notaries are booked. This is a man that is just extremely successful and owns properties all over the United States. He’s like, ‘Why can’t I just do this online? Why do I have to sign my closing papers?’ I was like, ‘That’s a really great question.’ We were very frustrated.
I think the lending part has been great with all the lenders. Everyone works really hard together and is very transparent. We really love the lenders we all work with. But the bottom line is the biggest negative to our whole transaction is the most important piece of closing, and that is getting the documents signed. We cannot do that online. That is having to have a notary person come to your home during COVID, just in general. I don’t want somebody in my house and neither does my client. So they’re outside on the picnic bench, in their masks, signing. But I don’t understand why we can’t have in California remote signing online. What’s the deal?
I don’t want somebody in my house and neither does my client. So they’re outside on the picnic bench, in their masks, signing. But I don’t understand why we can’t have in California remote signing online. What’s the deal?
Max Simkoff: Yes. Actually, there’s a question that came in about that, and I’ll ask that in a second. But maybe before that, Kate, anything to add on challenges that you’ve seen in serving this kind of unique client base, and particular feedback for lenders in the mortgage process, things that you’ve seen there?
Kate Tomassi: We’re really trusting the lenders who we know, and who we hand-pick for the right client. You know, it depends on different clients or might work better for different lenders. But the candor that we need from our lenders right now in terms of reality with underwriting delays, difficulty getting appraisers out, having drive-by appraisals in San Francisco, which was happening in the spring, is very difficult for us because a lot of the houses here have unwarranted space that’s actually worth quite a bit of money. But if the appraiser doesn’t see it and is only seeing me outside of the house and only looking at tax records, that can be very, very challenging. So understanding which company they’re using for the appraisal, being able to know for sure that my client’s using a lender who’s going to send an appraiser out who will actually get into the property. I found that’s been really key.
Max Simkoff: Well, so I’m going to shift now to some of the questions I’ve received because I want to make sure we leave a few minutes left for that. I have, as expected, gotten a couple around this topic of remote digital closing. I actually had one on one of our webinar participants remind me here that the state of California is working on digital notary becoming available similar to other states, but lenders have their hands tied on this a bit.
But this gets to one of the other questions that came through, and that is that California is generally known as a progressive state and is the largest real estate market, but is literally now the only state who hasn’t approved Remote Online Notarization (RON) or even what’s called Remote Ink Signed Notarization (RIN), which I believe, just as an aside, is where you have basically a Zoom session and the client still signs in person by having a promissory note and the closing documents FedExed to them, but they still don’t have to do so in the presence of a notary. But the question again says that, these have been approved on a temporary basis during the pandemic – and Monica, I know you touched on this a bit, but maybe both of you could touch on it a little bit more – How have you and your customers felt the impact of this? And more importantly, are your customers expecting or requesting a remote signing option? Did they do this even before the pandemic, under normal circumstances?
Monica Pauli: They always like to sign remotely. They’re all very busy. Everyone’s very busy. The fact that they have to go into the title company or they have to have a notary to sign them is a big inconvenience. I just had somebody that, again, was all cash, both sides, the house had no loan, nothing. The sellers were in New Zealand. This delayed our close by 10 days. That was last month. They had to go to the United States consulate in New Zealand. So this, for example, is the new norm. I really hope that California will change this and it becomes all automated, because it isn’t easy and it’s a very important purchase. I know that it can be regulated.
Everyone’s very busy. The fact that they have to go into the title company or they have to have a notary to sign them is a big inconvenience.
Just like everything else we do, everything’s gonna be automated. Once again, this is why we joined Compass. It’s going to be one click. Am I going to buy a house? Sure. We’re going to do everything virtually. Yes. I’m going to need a real estate agent to negotiate for me. But it’s going to be taking everything out.
Max Simkoff: Last question here before we wrap up. Are there any market trends that signal what the “new normal” for the real estate market may look like? And maybe if I could put my own tweak on this question, which is if both of you were to fast-forward, let’s say 12 months from today, hopefully, we can expect a vaccine, and we have things somewhat getting back to normal in terms of not having some of the restrictions. What do you think that new normal would ideally look like? And again, I’ll put another twist on the question, are there any things you’re afraid of people going back to that will take us back into a place that’s even less efficient than it has needed to be in the current environment?
Monica Pauli: Open houses. You know, I don’t want 100 people going through my client’s home, using the bathroom. It’s just a waste of everybody’s time. You think of all the handshaking and everything we were doing, and just the body contact, and you think,’I think we’re doing this better now.’
I don’t want 100 people going through my client’s home, using the bathroom. It’s just a waste of everybody’s time. You think of all the handshaking and everything we were doing, and just the body contact, and you think,’I think we’re doing this better now.’ We’re dealing with real buyers, pre-approved. They’re ready to go. The market will speak on how we list the house, the buyer’s reaction.
We’re dealing with real buyers, pre-approved. They’re ready to go. The market will speak on how we list the house, the buyer’s reaction. Our business has been, if you go back to when it started with the book and you know how everything was, everything has changed. We are the last industry to really change, to do this big change. You know, when you look at Compass and States Title, I hope it’s the new norm.
Kate Tomassi: I do, too. We were talking about, at least for us, the days of A-frames are over, right. You know who comes in because they saw your sign on a street corner? I’m really enjoying being able to focus on my profession and my clients. It’s a profession, it’s not somebody’s Saturday afternoon entertainment. You know, that’s a waste of our time and our client’s time. I’d like to see that stay the new normal.
I know a lot of agents are struggling with it because they pick up clients at open houses, but that’s not really servicing their clients. Monica and I do most of our business off referrals. I’m thinking my A-Frames are just gonna continue to collect dust in my garage, and I’m totally fine with that.
Max Simkoff: A new normal where A-Frames are collecting dust and we have less, or maybe no, open houses, more qualified buyers, easier, faster transactions using more technology, certainly sounds good to me. Certainly, when it also enables more people to, you know, become homeowners more efficiently.
Really wonderful talking with you both. Thank you so much for making time for this. I really appreciate it. I have certainly learned a lot of valuable takeaways here. I want to thank you again, Kate and Monica. Always a pleasure.
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