June 14, 2020

JF2112: Verifying Applicants Through Software With Stephen Arifin


TRANStephen is the founder of The Closing Docs, a software company based in Seattle that provides automated income verification for property managers and lenders. He explains how he evolved his software over time to cater towards property managers, he explains how they started inserting certain pieces of data to help provide more clarity and reliability for the lenders and managers.


Stephen Arifin Real Estate Background:

  • Founder of The Closing Docs, a software company based in Seattle that provides automated income verification for property managers and lenders
  • They handle income verification for over 600,000 properties and growing
  • Based in Seattle, WA
  • Say hi to him at https://www.theclosingdocs.com/ 

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Best Ever Tweet:

“We’ve tried a lot of things to find what works and now we see a compliance rate of 97%” – Stephen Arifin


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Stephen Arifin. How are you doing, Stephen?

Stephen Arifin: Hey, Joe. I’m doing great.

Joe Fairless: I’m glad to hear that, and looking forward to our conversation. Stephen is the founder of The Closing Docs, which is a software company based in Seattle that provides automated income verification for property managers and lenders. They handle income verification for over 600,000 properties, and growing. First, Stephen, do you wanna give the Best Ever listeners a little bit more about your background and your focus, and then we’ll go from there?

Stephen Arifin: Sure. My name is Stephen Arifin, and my focus right now is taking technology to help automate tasks in the real estate industry. I was born  in Texas and lived there for 21 years, and now I live in Seattle. I’ve spent several years at Microsoft as a software engineer, and learned how to build and scale software. Now I’m taking my learnings into the property management industry. Now I’m building The Closing Docs, where we’re focused on automated income verification for property managers during the tenant screening process.

Joe Fairless: What brought you into real estate and property management in particular?

Stephen Arifin: To be honest, I had no background in property management. I was really looking for a business idea and how I can use technology to streamline an outdated industry. I usually look for industries that have a lot of paper and pencil processes, and I know that there is a lot of innovation in those industries. So I knew that it was this upcoming tech where financial data providers and banks are opening up their information to the consumer, with their consumers’ permission, so I figured that there might be an opportunity here in the lending space to help verify income using this new technology.

And while I started in the lending space, there was a lot of regulations that I could really dip my feet into, so I went into property management. I found a partner who is also based in Seattle and owns a property management company. We partnered together and I wrote the software for his property management company to verify income, and he became our first customer. Once we nailed the product down, we started selling it to property managers all across the nation.

Joe Fairless: Ah, good for  you two. That sounds like a very logical progression. When you first created the software, what did it do or not do, compared to its current state today?

Stephen Arifin: Let’s see… That was ways back.

Joe Fairless: How long ago was it?

Stephen Arifin: It was about 2,5 years ago.

Joe Fairless: Oh, come on. That’s nothing. [laughs]

Stephen Arifin: That’s true.

Joe Fairless: Many iterations ago though, right?

Stephen Arifin: Right, right. It took a long time to get the data that property managers wanted to see in a report. So I was new to this industry back then, and I was learning as I went… And I learned what type of data property managers wanted to see when they were verifying an applicant for income. For example, we would just print out the annual net income for an applicant. The annual net income and the monthly net income. But we didn’t really have the data to back it up, or we didn’t show that data in the report. So as we got more feedback, property managers were like “Hey, I see this number, but I don’t really see where is the proof of this number.” So we started adding in all of the transaction  data and the direct deposit data to back up that claim. That was one of the ways that we helped improve the product.

Another way was that the applicants themselves – we were a little bit hesitant, because in order for you to use our service, it’s consumer permission data, so the applicant has to give permission to pull the data from their bank. And we were like “Will any applicant do this? Is it easier for them to get pay stubs, or W-2’s, or the traditional ways of verifying income?” and we found that with the correct messaging and many iterations the applicants actually love it, because it’s super-easy for them. They don’t have to dig around for pay stubs, or W-2’s or bank statements, and it takes them about 30 seconds. So we think we really streamlined the income verification process.

Joe Fairless: I imagine that messaging was pretty tricky, because you’re basically asking “Can we get access to your personal bank account?” Right? That’s basically what you’re asking.

Stephen Arifin: Correct. Just read-only access. We just take a snapshot. But yes, it was tricky.

Joe Fairless: How does that work? Do they have to give you their password?

Stephen Arifin: Yeah, so essentially we’ve partnered with a lot of data providers that handle this, so we actually never see sensitive credentials… But the way they authorize their bank for us to pull data is that they just log in to their bank account. Sort of like Mint. I’m not sure if yo’re familiar with Mint.

Joe Fairless: Yeah, I am. I signed up for Mint more than ten years ago. I don’t use it anymore… But remind me how that works again, with Mint.

Stephen Arifin: So Mint is a financial aggregator and an investment aggregator. You can see all of your investments and your accounts in one place. They’ve fixed the issue for manual data entry by just automatically linking to your bank account. So you can sign into your bank and then they will consistently pull transactions, and Mint will show you an overall snapshot of your finances.

I think that sort of helped our service with the acceptance, because more and more people are starting to realize that this is actually a thing, and they’re more willing to authorize their bank for us to do this.

Joe Fairless: What messaging at the beginning did not work?

Stephen Arifin: I think it would be easier for us to say which messaging did work, because we’ve tried a lot of things…

Joe Fairless: [laughs] A lot of it didn’t work, and then you landed on the right messaging, and now it’s pretty smooth?

Stephen Arifin: Yeah, we’re actually seeing a compliance rate of 97%.

Joe Fairless: Wow…

Stephen Arifin: It’s blowing my mind as well.

Joe Fairless: What did it use to be, in the worst of the days?

Stephen Arifin: We didn’t explain to the applicant really what was going on. We were sort of like “Hey, sign into your bank. Okay?”

Joe Fairless: “Trust us.”

Stephen Arifin: And everyone was like “What the hell?” But now what we do is we help educate the applicant of what’s going on…

Joe Fairless: How do you do that? I understand the wording you said… You train the staff, or do you have a pamphlet, or is it an email, or what?

Stephen Arifin: So during the income screening request, how it works is that the property manager sends a screening request, and what that does is it sends an email or a text to the applicant, and they get directed to our site. And before the actual screening request occurs, we break down this process; it’s a three-step process. The first thing you do is you connect your bank, and you do that by authorizing your bank account by logging in… And then once you connect your bank, we’ll actually show you the income report and the income data to the applicant. They’re not able to change it, but we show it to them, for one, to comply with FCRA, and also number two, it gives them more of a reason to authorize their bank.

So it’s like, “I’m gonna authorize my bank… I’m gonna see my data first, before the property manager sees it, and I’m gonna make sure it’s all correct.” And once the applicant confirms that their data is correct, they produce the report, which gets sent to the property manager, and a copy gets sent to the applicant. And really, just breaking down those three steps in the very beginning has really helped a lot.

Joe Fairless: So let’s talk about income verification and what specific things that you provide. You mentioned that you provide the proof needed to show the annual monthly net income… What if someone does not have a typical salary/direct deposit job? Is there any way that you can verify income through a non-traditional employment?

Stephen Arifin: That’s a great question, Joe, and we get that question a lot. So we have algorithms running, and it can classify which deposit streams are regular deposits… And those are usually the easy  ones. The pay stub every two weeks, like clockwork. But a lot of renters don’t have that steady income, and they could be receiving income by check, they could be cash-based earners, tip-based earners, like waiters and waitresses… And we actually have a classification in our income report called Irregular Deposits. So what that does is it classifies all of the deposit history that don’t come in at a regular time. This can include tax returns, alimony deposits, and check deposits. So we try to classify which deposits are recurring, but we don’t filter any other deposits out… Because I think it helps paint a better picture. Not everyone makes a paycheck every two weeks.

Joe Fairless: What’s a couple other updates that you’ve made recently, if any?

Stephen Arifin: We’ve added the ability for the applicant to add a comment or an explanation to the income report, and that really helps, where they can say “Hey, I’ve been on vacation for the past three months” or “I’ve been paternity leave for the past three months, and that’s why you see a gap in our income between these dates”, which just helps the property manager spend less time… Because the property manager would ask “Hey, I see a gap. What’s with this?” and then they would have to have a whole email correspondence. Instead, the applicant can just put in some comments, and it would appear on their income report. We’re all about trying to have the property manager save time.

And a change that is in the works is that we want to support multiple banks. Many people split up their direct deposits between different financial institutions, and we want to be able to collect the whole holistic picture of their financial snapshot. So that’s coming in the works.

Joe Fairless: When someone works with your company, how much does it cost?

Stephen Arifin: Our retail price is $10/report.

Joe Fairless: And when you say “retail” – I guess there is a bulk order, or how do you structure that?

Stephen Arifin: Yes, we partner with a lot of software companies, and they look at us and say “Hey, everyone’s got credit screening, everyone’s got background screening, but we wanna include your income verification into our products and be able to provide that to our landlords and property managers. So that’s how we grow really fast, and doing wholesale sort of partnerships where they can order our income verification from their software. It’s a really tight integration.

Joe Fairless: Anything that we haven’t talked about that you think we should as it relates to the income verification process that you all provide?

Stephen Arifin: I would say the biggest thing that really made us take off and our customers start to love us is when we started building integrations with other property management software companies, like AppFolio, Buildium, Yardi, RentScreener – all the popular ones. We made it so that property managers can request income screening requests directly from, let’s say, AppFolio. So they no longer have to open a new window, just have some sort of disaggregate workflow. It can be directly from AppFolio’s site, and that makes it really easy to train their staff about this new tool… Because every time you use a new tool, you have to change your process a little bit. And I think what has helped the uptake with our income verification tool is that it’s so simple. It’s really simple, so we wanna keep it that way.

Joe Fairless: Stephen, how can the best ever listeners learn more about what you’re doing?

Stephen Arifin: They can email me at Stephen [at] theclosingdocs.com, or they could just go on our site, and we have a contact form there, at theclosingdocs.com.

Joe Fairless: I enjoyed learning about this. I always love talking to entrepreneurs. I have a lot of respect for entrepreneurs, and the process in which you came to this point is such a natural evolution, and it makes sense for why you’re offering what you’re offering, and clearly there’s a lot of need for that… As you said, you looked for paper and pencil processes and ways to automate that so it’s not the case, and it saves us all time and money, and actually could make money too on that.

Thanks for being on the show, Stephen. I hope you have a best ever day, and we’ll talk to you again soon.

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