Usually, it's the big ideas that get all the press. Last week alone, Microsoft launched a new search engine (Bing), Google announced a new way to communicate (Google Wave), and Facebook began rolling out an alt-payment service to its 200 million users. 

Those have intriguing long-term ramifications, but can they save you money today? 

Here's something a little more pragmatic: A tool that promises to make it easy to challenge your tax assessment, potentially saving hundreds or thousands of dollars annually. Enter LowerMyAssessment.com (LMA).

I saw a few screenshots of the service during the company's application to debut at FinovateStartup 2009 last month (demo video here). But I couldn't use the service until a few weeks ago.

How it works
Consumers visiting LMA can use the website's free tool to check their home's value against current market estimates. LMA taps public databases to determine tax-assessed values and calculates market value from various third-party sources such as Zillow.

The company then makes the simple math calculation and informs users if the value of their home is under the tax-assessed value. If it is, LMA provides forms and instructions to challenge tax assessments with the local assessor's office.

In our test case, using an address in Seattle, one of 10 states currently served by LMA, we were told that its assessed value was $300,000 more than the market value (note 2). LMA encouraged me to register and let them help me challenge that assessment.

Registered users complete an online form with info needed to challenge their assessment (see screenshot 3 below). After completing that form, users must pay $125 to complete the challenge process and receive their FairValue Report (shown above).  

Analysis
While the cost-saving potential is significant, the challenge for LMA is getting consumers to shell out $125 for something they can conceivably do themselves (note 3). It took us just a few minutes using Google to uncover the challenge forms and procedures at the King County website. And market value estimates can be pulled from Zillow and its competitors.   

To reduce sticker shock, the company recently removed the big $125 price tag from its homepage (see screenshot 1) and is now emphasizing the free lookup feature (screenshot 2). I can understand downplaying a three-figure fee, especially online. But now they've gone too far the other way. I cannot find the price of the service anywhere on the website. It wasn't disclosed until I completed my registration and filled out the challenge form (see screenshot 4 below).

There's also the small matter of getting the word out. The major market opportunity will largely be gone once home prices get back to their pre-recession levels, even though there will always be cases where consumers feel their assessment is unfair. But LMA needs to team with major financial or real estate firms as soon as possible to reach large groups of potential customers. 

Bank and credit union opportunities
As discussed in previous posts, direct fee income is scarce in online banking, at least in the United States. Aside from credit bureau monitoring, there are few up-front fees that consumers are willing to pay. Certainly, banks earn billions from the underlying checking, debit, and credit card accounts, but nothing from the value added online.

It's possible the service could be replicated by a bank or mortgage provider using available APIs from Zillow or others. But for most banks, it would be far simpler to outsource the service to LMA or other specialists.

If the service were sold for $100+, with revenue shared 50/50, a bank or credit union could earn a respectable profit while providing a unique and free service to customers; however, the folks at City Hall may not be so appreciative. If city government is a big customer, you might tread carefully here.

1. New LowerMyAssessment homepage emphasizes free (2 June 2009)

2. Previous homepage disclosed the substantial fee up-front (12 May 2009)

3. Online appeal form for King County Washington (2 June 2009)

4. $125 (+tax) fee is not disclosed until checkout (2 June 2009)

Notes:
1. States currently covered: Arizona, Florida, Hawaii, Illinois, Indiana, New Jersey, Ohio, Oregon, Washington
2. That was on May 11. Now, three weeks later, LMA shows the house having declined another 20%. Home prices are certainly fluctuating, but not that much. It appears that LMA has switched to using Zillow's low estimate instead of the mid-range one. That may help sell more services, but it's a bit misleading. It would be much better to show the range of potential market values pulling data from all three third-party valuation sites, in much the way RedFin does. 
3. They also have some work to do in clarifying the buying process. It's not really clear exactly what you are buying at checkout. Are you submitting a property-tax challenge at that point? What about the FairValue Report? When do you see that? But we'll cut them slack on that since they just launched a few weeks ago.

How many times have you seen the “three-legged stool” sketched on a whiteboard? The subject matter differs, but the point is always the same. No matter how sturdy you build the first two the thing doesn’t work without three legs. Applied to online lending, the three legs are:

1. product

2. online sign-up form (i.e. application)

3. proactive marketing

There are far too many two-legged stools on the Web today. The missing leg? Marketing. Without proactive marketing to drive a good cross-section of borrowers to your online loan center, you are destined to spend most of your precious resources processing loan applications for the credit-impaired, kooks, and con artists. (This isn’t unique to cyberspace. Lay a pile of loan applications on the sidewalk in front of your branch and you’ll get a similar response.)

Online loan marketing has picked up considerably since October when the term “refinance” went begging for a sponsor on four of the five major search engines. In our latest test, “refinance” was sponsored by mortgage companies at every search engine we checked (see below).

Source: Online Banking Report, 4/2398 to 4/30/98

*Served to our browser searching from a Seattle POP. Banner ads displayed can vary by geographic location and sometimes by what ads you’ve already seen. We tested for multiple sponsors by hitting reload 10 times per search term.

Banner ads on search engines are just one of the more obvious and expensive ways to drive new loan business. Below are ten techniques for increasing loan volume from existing customers. To increase volume from outside your current customer base, consult the table on the following page.

How to Increase Refi Cross Sales to Current Bank Customers*

1. Make sure your customers find you when searching online. Page descriptions and meta tags should include the words: mortgage, refi, refinance, banking and/or bank (even if you are not one), your state, your city, and interest rates. Also consider purchasing a refi ad banner whenever your company name is used as a search term.

2. Leverage the paper statement (front, back, inserts) with your Web address and a list of services offered online. Wells Fargo includes this clever tagline, “With Online Banking you would already know what’s inside,” on the top portion of its checking account envelopes.

3. Plaster that Web address everywhere (print, radio, branch, outdoor, events, biz cards, VRU).

4. Assist local media in writing stories about how easy it is to track rates and make refi decisions using online tools and email.

5. Offer unique online features to attract attention in the press and with prospects.

6. Offer simple and advanced versions of refi calculators preloaded with current rates.

7. Offer email rate update services (see p. 6 and
E-Loan.

8. Provide multiple paths from other parts of your Web site into the refi area.

9. Offer preapproved mortgage refinances to qualified customers.

10. Offer lifetime mortgages that can be refinanced or rolled into a new home with no new “paperwork” (users would just update a few fields at your Web site).

*without focusing on price

Attracting Refi Business from
Outside Your Existing Customer Base

1. Maximize your free exposure on search engines (see number 1 in previous table).

2. Offer an “email this deal to a friend” so users can easily alert others to the great deals at your Web.

3. Create a local physical presence through Realtors, mortgage brokers, attorneys, and escrow companies located in your target market(s).

4. Buy banner space at search engines and rate comparison sites such as BankRate.com.

5. Purchase leads from Web-based lead generators such as GetSmart.com and Quicken.com.

6. Create a presence at Web sites frequented by homeowners in your target market(s); look beyond the banner and consider exclusive sponsorships and joint ventures such as E-Loan’s new arrangement with Yahoo!.

7. Create an online sweepstakes geared towards homeowners (see Intuit p. 16).

8. Post value-added content of interest to consumers thinking about refinance such as BankAmerica’s HomeWorth Search www.bankamerica.com/p-finance/athome/hmworth_ov.html free refi credit analysis complete with copies of credit reports; Relocation Wizards such as FinanCenter www.financenter.com Realtor links; home listings, and so on.

9. Try different headlines to entice Web users into the mortgage area. For example, “Trade-In Your Current Mortgage” may sound less onerous and/or more interesting than simply “refinance now.”

Driving new eyeballs to your Web is the first step in building out the final leg of your three-legged mortgage stool. Once a prospect lands in your refi Web, you have four goals to accomplish in the first 120 seconds:

1. Download the refi page quickly (15-20 seconds).

2. Reassure users they’ve come to the right place. For example, “Your spot for the fastest mortgage refinances in the northwest.” (5-10 seconds)

3. Entice users to begin interacting with your Web site. For example, “Click here to see if you can start saving money on your mortgage payment NOW.” (30-45 seconds)

4. Offer something interesting for free that requires users to enter their names and email addresses. For example, “Sign-up for our free rate update service and automatically save $100 on your refinance.” (45-60 seconds)

After these four goals have been achieved, begin a more thorough selling effort such as outlined below.

Ten Steps to Improving the Closing Percentage on Web Visitors

1. Make the intangible tangible with content and features that address refi prospects’ ten biggest fears (see p 7).

2. Tightly integrate a refi and payment calculator into the content. Pre-load current interest rates as the default.

3. Offer a 5-question, 2-minute prequalification form.

4. Divide the application into five steps and make it simple to navigate, simple to understand, and filled with links to more help:

• Step One Name, address, phone number, etc.
• Step Two Purchase price, purchase date,
• current value
• Step Three Current mortgage rate, balance
• Step Four Income, assets, self-assessed credit
• quality, etc.
• Step Five Loan desired, amount, term, etc.
• Step Six Loan preapproval subject to
• verification of information provided

5. Have human help available every step of the way by phone, online chat, and in-person.

6. Offer real-time loan approval subject to credit evaluation, income verification, and appraisal if necessary. A token, $50 or less, non-refundable application fee would greatly reduce nuisance applications from pranksters or those just testing the waters.

7. Provide a “Lock Your Rate Now” button with a couple hundred dollar fee to capitalize on the “gotta have this rate now” customers.

8. Leverage your Web to generate leads for human mortgage reps.

9. Provide daily email loan status reports until the loan closes.

10. Provide clear and concise service guarantees written in language users can actually understand.

Missing the refi opportunity

Had you listened to your mortgage banking group last year and built that online mortgage module they wanted, this spring you could have:

•  Captured thousands of new homeowner “eyeballs” (netspeak for Web site visitors/users) by capitalizing on the immense consumer interest in refinancing mortgages and consolidating debt. It’s not too late to catch the next wave.
•  Booked hundreds or thousands of incremental loans and other products from refi shoppers traversing the Web in search of the best deal. And by leveraging the communications power of the Internet, you could convert a significant number of the loan transactions into complete long-term banking “relationships”.

But if you believe everything you read, you might be thinking online lending isn’t ready for prime time. For example, the current issue of Faulkner & Gray’s “Collections & Credit Risk” contains the ominous cover story entitled, Fear of Online Lending ccr.faulknergray.com/art1.htm.

Don’t believe it! One relatively little-known site, GetSmart www.getsmart.com is already delivering thousands of mortgage leads per day to more than 82 lenders . But you don’t hear much about it. Lenders are keeping results close to their vest. Why tip off the competition in what promises to be the most important distribution medium for mortgages, home equity loans, and revolving credit?

Real estate content is one of the most effective Web site enhancements for financial institutions. In many parts of the country, consumers are actively using the Web to locate a new home or plan remodeling projects. Realtor.com alone currently has 1.1 million homes listed for sale (3/30/98) and is showing 88 million homes per month. With those kind of numbers, it’s no surprise that Yahoo!, Intuit, and Microsoft www.homeadvisor.com are moving into this space.

Last year, we covered online mortgage lending and ancillary real estate services in a two-part series. Next month we’ll bring you up to date on the burgeoning online mortgage market and take a look at real estate content such as:

•  Realtor networks (find-a-Realtor service).
•  Advice for homeowners such as www.hometime.com
•  Mortgage calculators from SmartCalc www.smartcalc.com and others.
•  Home value reports culled from public home sales records
•  Home improvement value calculator.
•  Contractor database (find-a-contractor service).
•  Guided links to homeowner information.

Experian

www.experian.com

Experian hawks home value reports on the Web.

Experian (formerly TRW) is selling individual home value reports from its Web site. Prices range from $4.95 for information on a single home; to $7.95 for information on the five most recent home sales in the same general vicinity; or $11.95 for both of the above plus 1990 census data about the neighborhood.

Contact: Rick Cortese is VP/GM 972.390.5000.