Bridging The Gap Between Mortgage And Real Estate With Adi Pavlović of Newzip
[David] Welcome listeners excited to have Adi Pavlovich, joining us. He is the Co-Founder and CEO of Newzip, a broker as a service platform that empowers lenders to offer their own real estate agent offering to number one, elevate their value proposition. Number two, increase their pull through and three. borrow money. We're going to learn more about that in just a minute. Adi was also director of innovation with Keller Williams. So he knows a little bit about the space and very excited to have him on the podcast. I want to give a shout out to David Kawata who first introduced me to Adi a while back and we met and had dinner and now we're on the podcast together, Audi, good to have you here, friend.
[Adi] Appreciate it. Yeah, David, thank you for having me on. I appreciate it as well.
[David] Yeah. the fact that you were with Keller Williams and you had an innovation ward, can't wait to hear about that and a little bit of your background, share a little bit of your journey with us, please.
[Adi]Yeah. Yeah. So first gen immigrant from Bosnia and Herzegovina moved to the States. My family knew nothing about real estate. I didn't even think about real estate until I was the age of 25. Mostly been focused on tech and I got a call from Keller Williams. They were looking to build out a tech arm. So I was one of the first kind of new technology hires and that turned into building out what was KW labs, the R&D arm of KW labs.
[David] Oh, interesting. I love that.
[Adi] And the thesis was, hey, 90 percent of people use a real estate agent. A lot of Kel Williams agents out there. So if we can modernize the tools that the agents are using, we can modernize the transaction. So my team was really focused on going from zero to one with a lot of different concepts of how we could do that and I spent almost a decade doing that there. So fell in love with real estate, fell in love with the problem. Yeah. Shadowed homebuyers agents, probably a hundred hours plus on focus groups. You say shadowed,
[David] I want to make sure everyone understands what that means. I know what that means, but when developing technology, that's an important thing because it's the key to really getting it right. Explain what you mean by shadowing.
[Adi] Yeah, I made this requirement for every employee I hire as well at Ke l Williams is to spend a full day just shadowing a real estate agent. So you're going to follow them. From whenever they start their day to complete their day. So full day in the industry, just to see what happens on a day to day basis and then from there shadowing people as they go on to showings, open houses, titles, closings all of that. There's no way to replace the fact of just getting a front seat and seeing how things happen in action over and over again in the real estate.
[David] That's really good. It's fascinating to have that ability briefly tell us a little bit about some of the things that you're doing or how that you came up with the concept Newzip and what is the problem that you're solving?
[Adi] Yeah, so Keller Williams, we launched Keller Mortgage and the idea is that every Keller Mortgage loan officer and every Keller Williams agent is gonna be best friends and partner together on leads. And really What was missing from that concept was some kind of collaboration software or platform to enable them to do that. So after I left Keller Williams, I was an entrepreneur in residence at modern ventures, which is a venture capital firm focused on real estate, and that's really where I started to build a thesis that is to use it, which is, Hey, mortgage lenders are really well positioned to offer a lot of different real estate services and bundle of savings. Obviously, RESPA is a big challenge to do that. But the Rockets of the world, the Loan Depots of the world, they figured it out. They've stood it up. And so when I started talking to other mortgage lenders, why they aren't doing the same playbook, it really came out in two things. One was like RESPA compliance. You have to have a big risk appetite in order to take that on. And then two was just the bandwidth and the capital and subject matter expertise to build it and The original idea came from, Hey, what Rocket's doing is really interesting. Why don't we productize that and offer it to the rest of the industry so they can all compete and we can move the industry forward.
[David] When you're looking at what Rocket's doing, describe that in contrast to how you've taken a little bit approach. You've studied what Rocket did and we all admire them as market leaders in many ways, at least they were beginning to question whether or not they were maintaining that leadership. What was you say? I like what they're doing here, but I want to build on this.
[Adi] Yeah, so when you're a customer and like the rocket lead funnel you have the rocket mortgage product and then you have the rocket home. So they say, Hey, we'll help you connect with the real estate agent and there's some cost savings for you. And then obviously they have Amrak title. So the play is what I think is the holy grail in real estate, which is like vertically integrating the real estate transaction. As we all know, it's super fragmented, super stressful. I think Zillow publishes a stat over 50 percent of people cried during it. So to me, it's a great problem to focus on because there's a lot of opportunity. And so the idea is, hey, 75 percent of the leads mortgage lenders interact with. I haven't engaged with the real estate agent yet. And this number has actually been growing as consumer behavior has changed with specific.
[David] That is interesting, that is encouraging. You said 70, say that he has 75 percent of consumers or showing an interest in buying a home, but have not yet engaged with a realtor.
[Adi] Yeah. If you look at the stats for the first time ever consumers are interacting with mortgage lenders before interacting with the realtor, and so it's putting the mortgage lender in a position that we think that they can take advantage of this consumer trend because what's happening, David is consumers going to Zillow. They're going to the search portals first for 90 days. And at some point, especially in this market, they're gonna say, what can I really afford, right? And so that's where they will leave that ecosystem, interact with mortgage lenders, and to basically find out, hey, what am I pre qualified or pre approved for? And what the mortgage lending industry has done for such a long time is, hey, let me get you pre approved. Here's a pre approval letter. Call me when you find your dream house. And a lot of those individuals will never call back because They find an agent that agent recommends their local lender or buddy or someone they've worked with in the past to de risk it. And so it's a huge leak in the funnel that as the lead flow into mortgages increased over the years of the prequal preapproval process being super easy, fast, digital, secure the bottom of the funnels as a heavy leak to it. And so really, the idea is like we can help plug that leak and arrest the compliant way where you can offer your own real estate agent representation powered by Newzip and save the customer 50 bips on the buy side or a hundred bips on the sell side. So that there's a hook or a carrot or a cost savings. You can leverage to increase your value proposition to the customer.
[David] Are you finding that customers are feeling trapped in that? And they go I want to maintain, I want to keep the fragmented process alive because we think that there's, less conflicts than that, or are people starting to embrace a more vertically integrated process.
[Adi] I think now is the time for the market to be embraced. We have a 90 net promoter score meaning customers love it. They we're removing friction. We're making it easier to navigate a very challenging inventory market. And so what happened before, right? As individuals could buy within 30 days, they get pre approved and they're going to buy and put an offer. Now we're seeing it take three to six months. And how do you keep that customer or that borrower engaged and nurtured? And we think the solution is, hey, instead of saying, here's a pre approval letter, good luck. It's, hey, here's a pre approval letter. And let me show you what that means for you. I'm going to connect you with a home advisor, which we offer. I'm going to show you your home trajectory, which is a tool we built that pulls an MLS data and predicts how long it's going to take you to buy in the market you're in. And so it's really about creating this hyper personalized localized content to this borrower who's going to be on a three, six, nine month journey in a really difficult real estate market and so our goal is we can make the lender be the superhero here. They're starting with them. Don't let them leave your store or your digital store with just a pre approval letter. Give them Guidance and mentorship about what this is going to mean for them, how long it's going to take them, which listings are best fit for them, their financial persona, and then their, family and qualitative persona and so we built all these tools to enable lenders to do that and we see a significant lift in conversion.
[David] Get a little bit deeper into how that experience is for the consumer. So consumer is out there Zillow, realtor. com and going in there looking at the house and they've got something and they go I think this is it. and then they engage, is it New Zip or is it they engage the lender using New Zip technology?
[Adi] They engage the lenders. So we white label or co-brand the product. Okay. So you're white labeling it out. Okay. That's a good important point. Yes. So we'll use a great example like New Res is a big client of ours. Very excited about that partnership. Yeah. And they have a large congratulations. That's a good way Portfolio. Thank you. Thank you. And we're super excited about it. And they're sitting on a large portfolio, of homeowners. And so we'll use that example of they have a pretty good model of propensity of who in their portfolio is gonna move and then how do you recapture those votes? You can have your loan officers call them. But another solution you can do is what they've done is they've created the Newrez home rewards program powered by Newzip. And so they target these individuals and say hey if you're thinking about moving Our new res home rewards program You can save 100 bips selling and 50 bips buying through our program if you use one of our agents, right? and so these are agents that are In the Newzip network. So the engagement and the opt in all happens on the lenders ecosystem and then we have a simple API pushes into our system. We're going to call that customer within five minutes. They'll get email SMS basically qualification things. But then we're also going to create a personalized hub. That we're gonna invite the customer to so you can see that data they collected from the financial side and how it merges with the MLS data and we have some cool AI tools just to help them say, Okay, cool. Here's the home rewards program. And now here's a digital experience where you can continue to understand the market at a high level, all branded to Newrez.
[David] Is there a CRM component in this to a degree?
[Adi] Yeah. So we built a software called Dash. Essentially the loan officer can see all the customers in their pipeline who've opted into this program and they can see all of the agent activity. So, typically what happens is customer raise their hands, this program sounds great. I can save thousands of dollars and I'm going to get connected to a top agent in my area. So, we qualify, nurture the customer for however long it takes. Once they're ready to tour properties, we have a network of 15, 000 agents that cover 80 percent of zip codes, top quartile in production, they know how to leverage our platform, and they're basically going to get an alert. The alert says, hey, we have this individual who's ready to tour properties this Friday sign this agreement, and basically you are going to start collaborating with this loan officer, with this home advisor and so that pain point that I was telling you earlier, I felt that Kell Williams, there's a lack of connective tissue between all these parties. That's what we built. So, the loan officer, the realtor and the home advisor are all sharing data, interacting with each other on a centralized platform and then we mine that data to be predictive and we say, Hey, Mr. and Mrs. Loan officer, just a heads up. This borrower is going to go tour properties with agent Gary Keller this weekend, and we noticed two of them are new construction, so there's a likelihood you're going to have to compete with builder financing.
[David] That's a really important intelligence there.
[Adi] Yeah. So on Monday morning, you should call and say, hey, how are the properties? I noticed you looked at a couple of new construction. Let me tell you how we work with builders and so really it's a sales enablement tool by unlocking all this real estate activity data that is typically offline and loan officers don't know about and we're giving that data and feeding it right back into their system. So, they can be more proactive rather than react.
[David] This has got my gears spinning. I'm looking at several of my clients. I've got one particular client of mine who is really being successful connecting with consumers, and this looks like it would be a powerful tool. This is something they're doing on their own through different lead sources they're out there. So I was going to say what it, but I better not give it away because he's got it down pretty good there. So anyway, that's great tool. I am really interested in your perspective on the NARS settlement. Now that's the commission lawsuit that's been impacted real estate industry, get your perspective on it. Is this going to be a major game changer in your opinion? And does your technology help in, as a provide a solution?
[Adi] I'll tell you my thoughts. I have a lot of opinions on it, but I'll try to keep them brief.
[David] There seems to be a lot of opinions, but you seem to have a unique perspective, having worked with Keller Williams.
[Adi] I dipped my toes on the real estate side of the mortgage side. So I'm happy to share my opinion on this. Ultimately, I think the market's always the side of commission. It's always been negotiable. It will be even more negotiable than ever before now, because really the biggest thing that come out of the settlement, to me is the headlines, to shape consumer behavior and consumer trends. When you interview people, you say, Hey, why did you use a real estate agent? Oh, my parents use a real estate agent. My neighbors use a real estate agent. It is very much a part of, hey, you're going to make the largest financial transaction. You should use a realtor, right? And that's more or less how consumer behavior has operated for a very long time and those agents have figured out what to charge and negotiate it and I think what's going to happen now is it's going to introduce more friction into talking about commissions. Negotiating them, signing buyer rep agreements, which only happened 4 out of 10 of the time now 10 out of 10. And so what I think it ultimately means for the industry is good news. It's going to be a higher standard of professionalism to be able to talk about the value you bring and what you charge for it, and you'll have to defend that, but alternatively, it's also going to create a lot of commission sensitive buyers and sellers and so I think this season we can anticipate a little bit of downward pressure on commission. But what I don't know is whether it'll stick, whether this is just an element of the lawsuit and the settlement and how lenders and brokers are carrying themselves, or realtors and brokers are carrying themselves, or alternatively, whether this is just driven by the headlines, and we're going into the spring, summer buying season, and next summer, it might not be there. And so I'm not going to be, hey, here's what the crystal ball says from my perspective, but I can see it going both ways. Ultimately, what we believe is it puts the lenders even in a better position to push a value proposition like this, because you've already pre negotiated the commissions or the savings with the 100 bps on the sell side, which is a pre negotiated listing discount of 1%, or the 50 bps on the buy side, which is really the referral fee we collect from the agent, we pass that savings back to the customer, and so in a way we are unlocking the savings, by using the unit economics or referrals that have existed in signature forever. But really what we're doing is unlocking those savings from the commission that agents are willing to pay for the sales and marketing enablement that we do on our side and we are passing that cost savings back to the customer and so the lender is saying oh just use my realtor I can save you 150 bps buying and selling That's a much easier yes, than Oh, good luck finding a listing agent and a buyer agent and negotiating on your own. And so we've seen a huge lift in engagement ever since the headlines hit because lenders now promoting this program, makes a lot of sense to customers where it might not add. 10 years ago.
[David] That's a really good point. Yeah. I think Newzip does plays a role in capitalizing on this situation. Adi, you have had an interesting background in innovation, Director of Innovation, just really locked down there at Keller Williams. You shadowed, you followed realtors around, You've got a unique perspective on where the opportunities are. I would like to get your perspective on the state of technology, both in the mortgage industry, as well as a real estate industry. Do we have a long ways to go yet? Are we getting closer to a breakthrough?
[Adi] It's been a long road and it'll continue to be a long road for the real estate vertical I'll say two things. One, yes, the level of technology available and the cost available today It is such a huge leap from when I got into this industry 10 years ago that the barrier to entry of creating proprietary software to use in a niche market as is real estate and mortgage and all the sub verticals within yes, there's better tools out there today than there were 10 years ago. The challenge is honestly the venture capital market, the way it's treated real estate as a vertical. So what happened when Zillow IPO, right? There was very little venture capital money going into real estate or what's now known as PropTech or FinTech and then after those certain big exits, it attracted a lot of eyeballs and we saw the WeWorks and the compasses and all of these large companies being built in the space that were pure venture back. It was about high capital intensity businesses, and basically that built kind of a bubble and that's what happened in 2020 to today is that bubble is more or less burst. And so access to that capital has become more difficult and startups have to be a lot more disciplined in a providing material value, right? Not just up, spending money on sales and marketing and buying leads is providing material value that moves the needle and being disciplined in how you scale and so we had a challenge where anyone with an idea could get funded. So we had a bunch of noise in the industry and it felt like there was a lot of innovation happening and then we saw those bubbles burst. We're not going to name any names, but the market was, okay, what's real, what's not, what moves the needle and what doesn't, because I'm being sold 10 things as a lender or real estate agent, they don't really know what works and so I think we're past that first battle, where now we can tell what's going to work. When it's I've heard this pitch where I've seen this tech and now it's, I think it's now is the best time to innovate in this space because we've filtered out all the noise. We have very disciplined capital coming into this space. And so now if you're a startup in this space and you're growing and surviving, it means you're doing it because you've earned it and I think that means that's a really positive sign for the industry that for the next five years, we're going to see a lot of adoption of technology that moves the needle, whether it's for the lender, the realtor, or ultimately the buyer and seller. Now is a really exciting time to be in the space, and we could have timed this more perfectly for us to launch this concept.
[David] And I think it's also important, you can't journey this alone. You have surrounded yourself with some really bright people. One of my good friends, Jodi Hall is an advisor to you on that and I want to give her a shout out because she knows the space. She has a spidey sense of what's going to work and what's not, and helps guide you through that. Speak to the importance of having good advisors. We do some advising on it, but Jodi's really good in that space. And there's different levels of advisors. The one thing is an advisor in communication, how to communicate. You're obviously very articulate. Then there's the strategy piece behind it and how to go talk to the capital partners. It's just a lot of moving pieces here. What has been some of the things that you've had, or the difficulties you are, have had to overcome in your journey?
[Adi] I love this question, David. So, I spent a decade innovating the real estate side. I knew majority of the startups, the investors would speak at the conferences. So when I decided to build Newzip and met my co founder, Todd, who was also on the real estate side, we were both very new to the mortgage world. And so I started showing up at mortgage conferences and just fading to see some familiar faces. Obviously mortgage and real estate work together so cohesively and I didn't know anyone. I didn't recognize the soul. So it was very much of a, okay, cool. This is a really a fun challenge for me to hit the reset button and all the credibility and the intention I gained on the real estate side. I'm gonna have to rebuild that on the mortgage side, and that's where building relationships is so important from David Kawata, right? Who introduced us to, we met Chris Bixby at Rice Bar Capital. We talked about Chris and Jody Hall, Jeremy Potter. There's been so many individuals who have seen us shipping away, climbing the mountain as a startup and have introduced themselves in some capacity or offered to help or make an intro and we really wouldn't be here without those individuals. And that to me is like in a space like this where it's such a big mountain to climb. You need help. You need people to help you along the way. And the people who really offer that and recognize it, to me are like the angels of the industry that I'm super fortunate to have met the people we've met across this journey. And we're obviously, we're always looking to meet some more folks because it's such a big market.
[David] Hopefully this interview will open the doors for more of that. We have thousands and thousands of listeners out there and so I am really encouraged by this, especially when I see what you're doing and how this lines up and syncs up with the timing or the NAR commission lawsuit and the potential impact that this could have. So you're really creating an opportunity for smaller players to go in and do what some of the bigger players have done. So kudos to you. I really appreciate it.
[Adi] Yeah, thank you. That's the whole ethos behind this is we want to go power the rest of the market to compete. Let the best lender win and then ultimately if we can save the borrower some money along the way by centralizing the real estate experience in a RESPA compliant way, which is very possible. It's a win for everybody. So that's our favorite part of the model we have
[David] Yeah, I'll be having a lunch tomorrow meeting up with someone who's just flew into Austin and I'm going to be talking to them. And then we're talking Chris Bixby. I just met him through Jodi and we just did an interview with him, we're in the process of doing one. We haven't recorded it yet. But I'm really impressed. The last question, as you're talking to these you're saying that they're being more calculated and more, you need to show them more of the value prop and how this works. It's not just believing in something, but any other tips you would give to someone who's got an idea that they're wanting to bring to market and working with a capital provider like a Rice Park.
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[Adi] Yeah, for me, if you're a startup in this space, you're trying to innovate or build something like make sure, one, you move the needle. So whatever it is that you're trying to achieve, it is not that difficult to find someone to pilot test or try something. We're in a very competitive real estate industry. Everyone's, trying to get an edge. To find someone who wants an edge validate the product, understand the problem at a deep level and then go and scale and then ask for help and then ask for investment. And so people that tell me like, Oh, I need to raise capital to prove this model works. It's you don't. And if you think you do, that's kind of part of the problem and so what's great about, I think the investors that focus on this space know it really well. But the standard has improved, like you need to show value, you need to show growth and velocity, and you need to show you can be profitable without injecting a ton of capital in the business and so the bar is set much higher, which I think we're going to see lower volume of innovators in this space, but much higher ROI and much higher conversion, which I think is a win for everybody.
[David] Yeah, that's really good. Adi, thank you so much for your time today. What a joy. What a joy to met you the first time back then you were in a concept stage. I've got an idea. I'm playing with it and said get back to me. I look forward to it. and then we, then we reached out and we connected and so glad. So wish you the very best and if there's anything we could do to help you in your journey, let us know, we'd love to have you back. Keep us posted on how you're doing.
[Adi] Yeah, thanks for having me on happy to share what we learned on the front lines of like realtor and lender collaboration. Yeah, thanks again for having me on and love to keep in touch.
[David] You're on for it. We'll talk to you soon. Thanks.
[Adi] All right. Thanks, David.
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Adi Pavlovic is the co-founder and CEO of Newzip, a brokerage-as-a-service platform that empowers lenders to offer their own real estate agent offering in order to elevate their value proposition, increase pull through, and save borrowers money. Prior to launching Newzip, Adi served as an EIR at Moderne Ventures and Director of Innovation at Keller Williams. His passion and experience stems from building innovative software solutions that enables real estate agents and loan officers to deliver a modern end-to-end customer experience.