It's 2018... someone tell my why these are still thing

It's 2018... someone tell my why these are still thing

Investor · Boston, MA · Member since 2014 · 232 posts · 165 votes

Can someone please explain to me how, in 2018, we haven't come up with a better process for:

1. The real estate title system

Between title searches and title insurance - the real estate title system is a $15 BILLION complete scam. How can we still not say who actually owns a property? When I buy or sell a car, there's a title transfer document and a bill of sale. End of story - no lawyers or title companies involved. I'm not saying buying real estate should be as simple as buying toothpaste, and I get the idea of title clouds, but there HAS to be a better system than the one we have in place. Is anyone getting close to improving this? For all of the hype around blockchain helping to fix this system, I haven't actually seen a functional project launched yet. Are places like Ubitquity making an impact?

2. Notaries

How are we still saying that "yea this document is super legit because this person who paid a $60 fee has a fancy stamp?" Shockingly, this is not the most secure system, and there are still cases of rampant fraud (like this one from a few years ago,  or this one). The notary system is so antiqued it's preposterous. I'll double down and say that the concept of a physical signature is just as ridiculous. 

3. The rest of my rant can be bucketed into just general technology enhancements, especially in the commercial lending industry. In my previous life, I was a consultant with a big accounting firm, and our projects were mostly around bringing these lenders from the stone age to at least 2010 with their tech. And that's not even the consumer facing stuff, it was the back end, loan accounting and reporting systems that were so mickey mouse it was terrifying. Bigger banks have the pockets to justify new system implementations, but many smaller banks and credit unions are running on decades old technology. My latest commercial loan was through a bank that can't even link an auto pay to my loan! Boston Sewer and Water doesn't accept auto pay either - when I asked, they said they are "working on implementing later this spring." I physically write checks every month. In 2018. 

So, that was a lot of whining without offering much in terms of solutions... sorry about that. 

Consumers are expecting more and more in terms of technology offerings from their lenders, brokers, property managers, the courts and other partners, and the real estate industry is letting us all down. These inefficiencies are costing us time, money, and creating massive barriers to entry for new investors and home owners. I fully realize there are some progressive companies out there, and CRE tech is starting to gain steam, but we are still 100 years behind other industries and it's up to us to drive institutional change and improvement.

Do you have anything to add to this list or anything I'm missing in my assessment? 

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Tom GimerBusiness Member
DMV · Member since 2017 · 3k+ posts · 3k+ votes
8y

@James E. This movement needs a #hashtag.  Something whiny but cute.

Once we have that let's put the federal government in charge of the whole system so it is efficient and fund it with Bitcoin so it is stable..

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  • Rental Property Investor · boston, MA · Member since 2017 · 202 posts · 222 votes
    8y

    @Charlie MacPherson or @Jay Hinrichs would either of you guys mind explaining what happens when you do buy title insurance but someone you've never heard of has a claim on your home that was not found when you first buy the house? Do they then buy them off? If there is still a risk how do they claim to absolutely guarantee you won't run into this problem later?

  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Tom Gimer  I tagged Tom on this.. he is the expert on east coast title issues..

    Maybe he will chime in.

    Generically if I understand what your saying is you bought title insurance and something may have been missed and some third party is making a claim.

    first thing make sure it was not an exception on your title commitment and title insurance..

    then that is exactly what title insurance is for you file a claim and its up to the insurer to step in and take care of it.

    I have a land lock one going right now with Chicago title and its quite complicated but they have hired the lawyers and we are a year of battling it out and still not to court yet..

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Jay Hinrichs @Son D. Jay is spot on... if a lawsuit or demand surfaces and you purchased owner's coverage you just make the claim with the title insurer and they take over from there including legal defense... which is one of the most important aspects of title insurance.

    That said, if this someone you "never heard of" turns out to be someone you knew full well when you purchased title insurance was going to make some claim... well then that becomes a much more interesting scenario.

    As to what the title insurer does... they deny/disclaim coverage based on some exclusion in the policy or they settle or litigate the matter. Once the claim is raised and finally resolved, it should be barred from being raised again by law. 

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  • Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    8y

    There are 2 or even 3 sides to this. I have made some good money on difficult titles. Properties that would have been sold 10 years ago if it had been simple, because other investors would have been able to figure it out - but they didn't - so the properties sat. I taught myself to do my own searches in the courthouse and go through the grantee and grantor books - searching titles back to the late 1800's.

    There's also a big difference in the ages of the properties that you're dealing with. Here in Atlanta, if you're buying in the suburbs, then most title documents are probably found on the computer - for the last 30 years or so - and things are much simpler. 

    I work intown, in neighborhoods with 100 year old homes. A lot of intown neighborhoods were predominantly black. And due to Jim Crow laws they did not trust attorneys/authorities, because they were usually white. So, probate wasn't done and properties were given on to children, verbally. Now, try to buy one of those and you'll see the need to for deep title searches. 

    There's a lot next to one of my houses. Trying to find out who really owns it (person on title just started paying taxes many years ago. He died and his daughter has taken over paying taxes. But in Georgia paying taxes does not give you squatters right, as many people here think). So, I ran back the title to my house to the late 1800's and looked at the original platmap, when the lots were sold. Then I ran the title of that lot forward and found out that these are actuallfy 3 lots and 2 were originally bought by 1 man and the 3rd by a woman, who I later found out was his wife, under her maiden name. Both died in the 1920's or so.

    None of that would have been found on the computer somewhere.

  • Wholesaler · Clovis, CA · Member since 2011 · 31 posts · 39 votes
    8y

    Your arguments are valid, but the situation is minor compared to the real problem of mankind.

    Advanced energy producing systems have been developed and hidden from you.

    All our lives wud be extremely better if we had these devices. Why are they hidden? To keep the population dependent on gas, coal, oil and polluting our planet for mega profits.

    You want something much more serious to whine and complain about? investigate this.

  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Steve Vaughan:
    Originally posted by @Tom Gimer:

    @Steve Vaughan You are the exception. You actually understand the concept of title insurances and the issues they respond to, as well as when it may be worth it to forego that expense on the owners side. The average purchaser doesn't have a clue, understandably. By way of example, many who raise the issue say things to us like "you are doing a title/lien search... and you say things look good, so why would I need to buy title insurance?" That's when I pull of the form the buyer must sign if they decline owners coverage. 

    Lenders are just protecting their interests. Hard to complain that a lender would pass that expense along to the person they are loaning hundreds of thousands or even millions of dollars.

     Thanks, Tom.  Definitely not a DIY project for 99% of folks.  Most don't even get an abstract or O&E report.

    My issue with lender's protections is this - if lender's insurance protects the bank's interest, why does the consumer pay? If an appraisal protects the banks' interest, why does the consumer pay? If PMI is also only to protect the bank, why do we pay that as well? Skyscrapers of marble have been borne on the backs of avg Joe consumers. The banks should share these costs. The protections are for them, not us.

    My last beef is with who pays the owner's title insurance (here in the west at least).  This is insurance protecting the buyer going forward.  Why is it customary for the seller pay for it?  I know it's because the seller is receiving money at the sale, but still not equitable. It should be split, IMO and I usually negotiate for that as a seller.   End rant ;)

    If the lender paid, they would just raise interest rates to price in the higher risk. Lending is just basically about risk management. They do this already with PMI as lender paid PMI.

    I generally dont have a problem with fees or requirements lenders require. I just view it as well you are free to save up your own money and pay cash if you want to. If you want to borrow someone elses money, then that someone will set the terms of lending out their own money. A consumer is free to accept those terms, or not.

  • Rental Property Investor · boston, MA · Member since 2017 · 202 posts · 222 votes
    8y

    Thank you @Jay Hinrichs and @Tom Gimer for answering my question so quickly. Tom when you said "some one you've never heard of turn out to be someone you know full well when you purchased", I'm guessing you meant something like a former spouse? Yea that would turn everything you own into an interesting scenario. As for the title insurer, it wouldn't be surprising for them to find a way to deny a claim before being forced to litigate.

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Son D. I'm referring to any loss that was known at the time it was insured. The precise language regarding exclusions for matters such as this is:

    ...

    Defects, liens, encumbrances, adverse claims, or other matters

    (a) created, suffered, assumed, or agreed to by the Insured Claimant;

    (b) not Known to the Company, not recorded in the Public Records at Date of Policy, but Known to the Insured Claimant and not disclosed in writing to the Company by the Insured Claimant prior to the date the Insured Claimant became an Insured under this policy;

    So essentially, if you caused the title issue or knew about it and didn't disclose it before closing... you're out

    If spouse or ex-spouse has a claim it could be civil separate and apart from title-related.

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  • Investor · Atlanta, GA · Member since 2013 · 3k+ posts · 3k+ votes
    8y
    Here's what I had happen: got a vacant lot under contract by the executor of the owner's estate. She was a daughter (3 children total). title search was done and all 3 children signed documents. I bought. There had been a delay of about a week between the title search finished and the final closing. 

    2 weeks later I was selling to a builder and it turns out that the son had signed a quitclaim deed to Sam D. (well-known local Nationalist attorney, who is known for buying properties in black areas with shady practices) in between me getting the contract and before closing. Supposedly he had told the son that this was a form that stated that he, the son, was agreeing that Sam D. would be able to talk to the sisters for offering on the lot. 

    Well, Sam waited for my sales closing to come forward, to claim his share of the property (was worth more then than if he'd done it when I closed). Title company paid him and then went after the son. 

    Nobody would have expected this......and i'm glad I had title insurance. 







    Originally posted by @Son D.:

    Thank you @Jay Hinrichs and @Tom Gimer for answering my question so quickly. Tom when you said "some one you've never heard of turn out to be someone you know full well when you purchased", I'm guessing you meant something like a former spouse? Yea that would turn everything you own into an interesting scenario. As for the title insurer, it wouldn't be surprising for them to find a way to deny a claim before being forced to litigate.

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Originally posted by @Giora Sela:

    Hopefully in the near future blockchain technology will disrupt the title industry by not needing a 3rd party to search/verify titles. Records can’t be manipulated and all past transactions would be transparent.

    Let me make sure I understand this. There is no third party in this scenario? 

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  • Rental Property Investor · boston, MA · Member since 2017 · 202 posts · 222 votes
    8y

    @Tom Gimer I had no idea. I can't imagine why someone would not disclose what they know so it could be cleared before they own the title, unless they planned to scam the insurer.

  • Wilmington, NC · Member since 2017 · 31 posts · 23 votes
    8y
    Originally posted by @Tom Gimer:
    Originally posted by @Giora Sela:

    Hopefully in the near future blockchain technology will disrupt the title industry by not needing a 3rd party to search/verify titles. Records can’t be manipulated and all past transactions would be transparent.

    Let me make sure I understand this. There is no third party in this scenario? 

    Yes that’s the concept of blockchain technology, you don’t need a 3rd party to “vouch” for the other party. Its 100% accurate 100% of the times. It’s too complicated for me to imagine the fine details for this to become reality, but smarter people will hopefully figure this use case in the future. No 3rd party can provide such guarantees because they can make errors or get compromised. 

    No one is capable of hacking the actual ledger on the blockchain as long as it has enough scale. 

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y
    Originally posted by @Giora Sela:
    Originally posted by @Tom Gimer:
    Originally posted by @Giora Sela:

    Hopefully in the near future blockchain technology will disrupt the title industry by not needing a 3rd party to search/verify titles. Records can’t be manipulated and all past transactions would be transparent.

    Let me make sure I understand this. There is no third party in this scenario? 

    Yes that’s the concept of blockchain technology, you don’t need a 3rd party to “vouch” for the other party. Its 100% accurate 100% of the times. It’s too complicated for me to imagine the fine details for this to become reality, but smarter people will hopefully figure this use case in the future. No 3rd party can provide such guarantees because they can make errors or get compromised. 

    No one is capable of hacking the actual ledger on the blockchain as long as it has enough scale. 

    Those of you following along might have picked up that the "non-existent" 3rd party is the blockchain technology itself. Comforting. 

    Do people hack the land records now?

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    8y
    Originally posted by @Tom Gimer:
    Originally posted by @Giora Sela:
    Originally posted by @Tom Gimer:
    Originally posted by @Giora Sela:

    Hopefully in the near future blockchain technology will disrupt the title industry by not needing a 3rd party to search/verify titles. Records can’t be manipulated and all past transactions would be transparent.

    Let me make sure I understand this. There is no third party in this scenario? 

    Yes that’s the concept of blockchain technology, you don’t need a 3rd party to “vouch” for the other party. Its 100% accurate 100% of the times. It’s too complicated for me to imagine the fine details for this to become reality, but smarter people will hopefully figure this use case in the future. No 3rd party can provide such guarantees because they can make errors or get compromised. 

    No one is capable of hacking the actual ledger on the blockchain as long as it has enough scale. 

    Those of you following along might have picked up that the "non-existent" 3rd party is the blockchain technology itself. Comforting. 

    Do people hack the land records now?

     You just have to download the entirety of all land records ever with every sale. It will only take 6 months for every transaction to consumate. And of course this technology is flawless sonwe wont have to worry about insuring against data errors or hackers.

  • Tom GimerBusiness Member
    DMV · Member since 2017 · 3k+ posts · 3k+ votes
    8y

    @Russell Brazil @Giora Sela says "Smarter people will hopefully figure this use case in the future."

    Hope isn't working yet. Here's the latest: https://www.nbcnews.com/news/world/bitcoin-heist-6...

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  • Wilmington, NC · Member since 2017 · 31 posts · 23 votes
    8y
    Originally posted by @Tom Gimer:

    @Russell Brazil @Giora Sela says "Smarter people will hopefully figure this use case in the future."

    Hope isn't working yet. Here's the latest: https://www.nbcnews.com/news/world/bitcoin-heist-6...

     Bitcoin was never hacked. Companies/Users got hacked and their coins stolen, the records  ladger containing the data was never hacked. 

    Technology is too young to know exactly what will be done with it 5-10 years from now. 

    Who knows, maybe you could even syndicate and raise funds using bitcoin & blockchain someday

  • Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    8y

    Notaries are the best side hustle one could invest in. It's only like a $200 weekend course and you can easily make that back with 4 signings! Become a Notary

  • Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    8y
    Originally posted by @Giora Sela:
    Originally posted by @Tom Gimer:
    Originally posted by @Giora Sela:

    Hopefully in the near future blockchain technology will disrupt the title industry by not needing a 3rd party to search/verify titles. Records can’t be manipulated and all past transactions would be transparent.

    Let me make sure I understand this. There is no third party in this scenario? 

    Yes that’s the concept of blockchain technology, you don’t need a 3rd party to “vouch” for the other party. Its 100% accurate 100% of the times. It’s too complicated for me to imagine the fine details for this to become reality, but smarter people will hopefully figure this use case in the future. No 3rd party can provide such guarantees because they can make errors or get compromised. 

    No one is capable of hacking the actual ledger on the blockchain as long as it has enough scale. 

    A 3rd party will still be needed to interpret the data. This isn't just a who-owns-it issue like bitcoin, its also who may have an interest in the property via liens, and what their exact interest is at that moment.

  • Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    8y
    Originally posted by @Federico Gutierrez:

    Notaries are the best side hustle one could invest in. It's only like a $200 weekend course and you can easily make that back with 4 signings! Become a Notary

    In Illinois its a $10 fee + $30 $5k Bond. MANY people, and it sounds like the OP included, have no idea the actual function of a notary. Its not to verify the content of a document, but rather to confirm that the person who is signing the document is actually the person they claim to be via their ID. And considering an Illinois Notary isn't trained on recognizing fraudulent IDs, the true value is essentially zilch.

  • Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
    8y

    Don't want to spin this topic into another direction but many of these steps will be replaced if blockchain takes off or with advancements in softwares. Give it 5years I doubt a notary will exist. 

  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    8y

    I spent two hours on the phone with Amazon support; and two more hours more with HP, to hook up a 65 dollar printer! A 65 dollar printer! 

    Buying real estate is painless, and a pleasure compared to that!

  • Investor · Boston, MA · Member since 2014 · 232 posts · 165 votes
    8y

    @Matthew Olszak I am fully aware of that and appreciate you clarifying -- my point was that I don't think you should be required to have actual humans to do that anymore. And without trying to offend any notaries in the forums, I don't humans are especially effective at verifying identification (and as you noted in your post, notaries rarely receive any extra training on this from what I've heard). 

  • Investor · Boston, MA · Member since 2014 · 232 posts · 165 votes
    8y

    @Bjorn Ahlblad hope it prints the **** out of your documents though! What model was it so we can avoid? Maybe someday you won't need a printer...

  • Investor · Boston, MA · Member since 2014 · 232 posts · 165 votes
    8y

    @Federico Gutierrez that's what I keep hearing - do you know of anything ACTUALLY happening right now though? Are there any real projects that are actually using a blockchain ledger for real estate in some shape or form?

  • Investor · Boston, MA · Member since 2014 · 232 posts · 165 votes
    8y

    @Charlie MacPherson @Jay Hinrichs @Tom Gimer @Michaela G. @Son D. 

    Thank you guys for all of the great insight and examples! I love the discussion. 

    To clarify my initial post, I'm frustrated at how severely the real estate industry lags in terms of technology adoption. 

    My hypothesis is that this lag is driven primarily by regulatory burden, and will continue to lag so long as those in charge of making the rules have no incentive to change them (and may even benefit from them). Title and notaries were just two examples that came to mind to highlight this growing gap - and I recognize that the gap can be wider or narrower depending on location - but it's pervasive enough to speak to at an institutional level. 

    My questions to the group are:

    1. What are some other examples of pain points that could theoretically be alleviated through technology?

    2. As investors, what should we be doing to help?

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