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? 

22Reply
311 views

Most Popular Reply

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..

Gimer Law516 Reviews
See this reply in the discussion

104 Replies

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

    We have come a long long long way.

    when I started in the industry it was like East coast.. titles were researched at the courthouse. And everything was recorded by hand in the big books.. (  not sure if this is still how they do it on the east coast at the courthouses.

    then in then 70s courthouses and title companies started to get digitized IE micro fisch.

    We were still using carbon paper when I started... fax machines were not invented yet.. so we had to make copies then we had NCR paper and that was huge..

    then we started faxing but the darn paper the image would fade away over time so that was not really good for legal docs etc.

    The counties got into the computer age and created their GIS systems  which really helped this started in the 90s with computers entering the homes and work desks.

    Scan became a thing  then docu sign.. and then counties electronically filing deeds as well.

    Nothing has changed with Notaries in all my years in the business its still in my mind very weak link to protect real estate transactions.. for a number of reasons that I wont discuss as I don't want to give bad guys any more ammo .

  • Investor · Ann Arbor, MI · Member since 2014 · 45 posts · 29 votes
    8y

    i have a feeling that the technological lag is not driven primarily by regulatory burden, rather, it's a matter of a very old industry desperately clinging to the last bits of what was once a very lucrative model.   logically, the folks in this business that have historically made tons of money doing it are not interested in change.   

    for example - the agent compensation model hasn't changed much in 30 years (and neither have the real estate commissions, for the most part.  it was 6% around here 30 years ago, and it's still 6% today.)  what HAS changed is the ease with which most agents can now do their jobs.  30 years ago, agents needed to research specific homes for their clients, know the school systems inside and out, help clients understand their financing options, and be neighborhood experts.  today, buyers and sellers use the internet do those things.  

    and the title companies.  think about what they do.  here in michigan, title companies primarily coordinate closings, and provide title insurance, both of which could be automated FAR, FAR more than they are, reducing time frames and cost.  but again, buyers and sellers are used to these charges.  and title companies are happy to receive them.  no one really questions it.  

    case in point:  last year we bought a brrrr deal - single-family residence.  we paid the title company for a title insurance policy at closing.  so far so good: for $600 i get the peace of mind that i'm the only one who owns the place (the title hadn't changed hands in 50 years - it seemed like a good idea to me.)  we did the rehab on the house, put a tenant in it, then went to refinance.  and guess what?  the title company wanted $600 to issue a title policy again.  say what?!   clear title was established 90 days before, when we bought the place, and i had been the only owner since.  how much effort would this "title work" require on the part of the title co?  ZERO.  wow, how stupid are we willing to let ourselves become?  

    We pay appraisal fees and recording fees in the same blind fashion.  we accept the whole 30-45 day closing time frame idea.  why?  to make our deals go through, and to get on to the next one.  pay the fees, accept the long time frames, close the deals, and find the next.

    which brings me to your question, @James E.   what should we be doing to help?  we should be thinking about our deals, of course.  but we should also be more interested in the logic of the system we're working in.  what fees are we paying, and why?  we should value what efficiency would do for our TIME and our BANK ACCOUNTS.  if enough of us balk at ridiculous fees and even more ridiculous time frames, how long can the status quo stand?  

    [btw, i didn't balk at that second $600 title policy fee.  i paid it so we could just get closed and i could go find the next deal.  i'm currently seeking counseling for my hypocritical tendencies! ;)  ]

  • Bjorn AhlbladPro Member
    Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
    8y
    Originally posted by @James E.:

    @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...

     The printer is an HP Envy 4520-good machine. Today, young people can hook these things up themselves. For us old guys it can take forever!

  • Joe SplitrockPro Member
    Moderator
    Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
    8y

    @Tom Gimer that is the irony of technology like Uber "changing an industry". It usually just circumvents regulations that were put in place to protect the consumer or the worker. 

  • Rental Property Investor · Rockford, IL · Member since 2014 · 4k+ posts · 2k+ votes
    8y

    I wouldn't say it's so much clinging to the once lucrative as simple resistance to change. People naturally fear what they don't understand and RE is a security and confidence business.

    @Jay Hinrichs mentioned notaries. I guess if you're not signing an actual physical document with pen and ink, I can understand why notaries may be difficult to fit into the technological model. Perhaps someone will develop a way to attach an appropriate digital signature to a DocuSign document, or something similar.

    There are counties where even in the electronic age, things are still a bit backward. Here where I am, on-line documents are not indexed by the property PIN, rather by subdivision, section, lot, etc. When you get a tax bill for a property through Zillow, you need to find the necessary info to go back to the County Recorder's website and look up the documents which pertain to the property - the PIN won't do it because they're not indexed / linked by PIN.

  • Somerville, MA · Member since 2017 · 21 posts · 14 votes
    8y

    @James E.   Great thread.   I just saw the below opinion piece last week on Curbed and the author certainly isn't a fan of the current state of Title Insurance.   

    https://www.curbed.com/2018/2/26/17017142/title-in...

  • Santa Rosa, CA · Member since 2017 · 325 posts · 701 votes
    8y

    @James E.

    I would propose there are a few reasons the technology changes slowly (more on that later)

    1.  The stakes, in this case the ownership of trillions in real estate, had to have a very stable system that everyone trusts.     In fact, the real estate industry did try and update to a national system with MERS.   It was a complete and total disaster.   The ownership properties was in doubt both before and after foreclosure.  Leading to things like..

    https://www.massachusettsrealestatelawyer-blog.com...

    and 

    http://thjf.org/2016/05/01/floridas-4th-dca-revers...

    This is not Apple Maps, where you can put out a beta version and get better over time.  The existing system may be old, but it works and it stable.   Compare to a place like Haiti where land ownership is in doubt and no development can take place because it is impossible to get assurance you own anything. 

    2.   Diversity and profit motive.   It is NOT a national system.   So anyone with a better system has to sell it to the 3007 counties in the US.   Who all have a system already and will lose money adopting the change.   How do you make any money developing and selling a "better system"

    3.   In fact the pace of change is not slow at all.   We have recognition of electronic signatures and electronic records which 20-30 years ago was a fantasy.    It is in fact just slower change than other areas.    Again, this is because of the reasons cited above.

    I so I would cut those small banks some slack.   Better to have an old system that works than

    https://en.wikipedia.org/wiki/2012_RBS_Group_compu...

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    @Jonathan Howard - thank you for this link.  Here were some key takeaways for me:

    “There is no point [to title insurance],” said Robert Hunter of Consumer Federation of America. “What keeps it going is the vested interests who are ripping off people in the process. You got a lot of powerful players who like the status quo.”

    Title insurers don’t market their services to homebuyers, but to real estate professionals—real estate agents, mortgage lenders and brokers, attorneys. Title insurers woo real estate middlemen with lavish parties.

    Title insurance pays out 3 or 4% of premiums for claims.  Home and auto - closer to 80%. Title 'insurance' rates are 20x higher than they should be.

    Home buyers and sellers have no choice but to pay thousands in bogus title and lender insurance if they want to transact. The big 4 title co's control the market and have powerful lobbyists to keep it so.

    Homebuyers can buy title insurance to protect themselves, but mostly, they’re buying title insurance to protect their mortgage lender. Most lenders don’t buy their own title insurance; they force borrowers to buy it for them.  @Russell Brazil

    Nothing wrong with being 'ok' paying these outrageous fees.  I will continue to self-close my buys and private loans when not complex.  So far I've saved $18,000 with my 6.

  • Andrew SyriosPro Member
    Moderator
    Residential Real Estate Investor · Kansas City, MO · Member since 2014 · 10k+ posts · 5k+ votes
    8y

    Title makes sense, it will take a while for blockchain to peculate throughout society. The rest probably boils down to inertia.

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

    @Steve Vaughan  while I like to think the title co would throw us LAVISH parties in 40 years never been invited to one.. and with one title company here in Portland I am their biggest client.

    But what we do get.. is fantastic customer service..  which is not avalible in many areas because the title plants or records are not computerized and at the closing attornies finger trips like they are at a west coast title and escrow company.

    they hand deliver documents to me.. they send couriers to me for docs I never pay for.. and in the development services part of it .. its off the charts they run all our plats do all sorts of back end research on properties all for no cost to us.. just one one development I would say if I had to hire this work out it would easily be 20 to 30k that they save me.. but why do they do it.. to get 50 to 70 orders a year from us.. and this then leads to referrals for them and it mushrooms.

    On one title claim I have going right now were Chicago missed that the property was landlocked.. I bet they are at 50k and climbing on attorneys fee's  and if they cant get me access at all they will have to pay me.. and this is big money my policy is for over 500k..

    But on the flip side where we were doing foreclosure rescue and folks wait to last second.. we could call title company they give me a date down on the phone.. don't have time for a written report and we make the call to do our own deed and record it ourselves.. now we had a few issues.. but that's the risk of doing that business.

    Most folks are just buying or selling a few or less than 10 props in a lifetime.. so for them insurance is probably a good thing..

    Very few people out there have your knowledge or skills sets of the back end of real estate.

    And lastly my dads attorney way back in the late 60s told me .. if you want to make money in real estate learn the court house.. IE exactly what your doing how to do your own search's etc.

    But I am going to send a memo and ask them why I am not getting invited to lavish parties.. LOL.  Pullin your leg you know.. but we do get perks.

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    @Jay Hinrichs -since you haven't been invited to any of the lavish parties, you should file a formal complaint as one of their largest clients :)

    My wife and I were invited to a First American' Christmas party a while back.  We were the only non-lender, non-realtor, non-attorney there.  Wasn't that lavish but was disgusting to us as actual principals.  Took a long shower and haven't been back.

    Most of the kick-backs are refereed to as marketing service agreements (MSAs).  A way to hide kickbacks. The largest beneficiary is the lenders and attorneys most likely.

    If everyone's happy with the status quo, that's fine.  If I can help make 1 person aware of the racket going on, that's great.  In the meantime I will continue to transact my way and vote with my feet. 

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

    @Steve Vaughan  Ok one mans lavish party is another ones status quo.

    I go to bank Christmas parties.. lender parties.. ( now those are lavish)

    our real estate party is just for us who work there no clients.. and its nice we rarely go though even though my wife is the top producer in the entire company.. she does not care for them.

    But I get your point.. everyone should dig into how real estate is done..

    just like those that can build their own home and not have to hire a contractor.. same theory.

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

    @Steve Vaughan @Jay Hinrichs It's no secret that title companies earn a portion of the title insurance premiums. That enables discounts on all the other services provided in getting a deal to the closing table. If you aren't in the title business you wouldn't understand what I'm talking about but suffice to say that reviewing and interpreting contracts and coordinating a purchase and sale transaction between buyers, sellers, lender, agents, HOA, condo, lienholders, etc. is not a simple process.

    Eliminate title insurance and the discounts go bye bye plus I would go back to charging hourly rates on every file I'm involved with. Throw in some contract disputes and title issues to resolve here and there and net result may be that the average settlement cost to the parties would be roughly the same.

    Of course that's just a guess ... we'll see what happens.

    Gimer Law516 Reviews
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Tom Gimer@Steve Vaughan  biggest disconnect we have between attorney states like were you practice and title and escrow company states.. is those doing business with you like you said get the benefit of a bonafide attorney looking at each transaction.. whereas out our way.. its your senior escrow officer and title officer which neither are attorneys.. they are sharp and know how to do these transactions.. but they don't practice law.

    and like you said if you go to an attorney out our way your going to spend 1 to 3k at 300 to 500 a hour .

    were you guys do this work for set fee's and your time is not on the clock..

    I always wondered when I first got on BP all these east coast investors would say talk to an attorney.. we never ever do that unless its a massive transaction with multi millions..

    or litigation and even at that in our contracts we have mandatory mediation clauses.

    I would NO WAY NO how transact on the east coast without attorney and title insurance.. the land is simply too old. Too many title changes over hundreds of years.. out our way.. if its new subdivision lot and block not nearly as risky.. as title was cleaned up when the lots were created.. and many times there is only one or two title changes in the life of the property.

    My first experience in Charleston SC was hilarious.. virtually every property had something.. probate enchroachments etc.. we never survey lot and block here to sell a home.. out there we have to survey every single thing we buy.. in Texas they survey..

    its just so regional..

  • Rental Property Investor · Gulf Breeze, FL · Member since 2014 · 1k+ posts · 733 votes
    8y

    I would add CDs @James E. I received a boastful email last week from a bank I use bragging about their 1.25% CDs!!! I responded with a kind, "you mean you want me to give you my money so it can depreciate?", response. 

    Why do CDs still exist?

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

    @Jay Hinrichs -since you haven't been invited to any of the lavish parties, you should file a formal complaint as one of their largest clients :)

    My wife and I were invited to a First American' Christmas party a while back.  We were the only non-lender, non-realtor, non-attorney there.  Wasn't that lavish but was disgusting to us as actual principals.  Took a long shower and haven't been back.

    Most of the kick-backs are refereed to as marketing service agreements (MSAs).  A way to hide kickbacks. The largest beneficiary is the lenders and attorneys most likely.

    If everyone's happy with the status quo, that's fine.  If I can help make 1 person aware of the racket going on, that's great.  In the meantime I will continue to transact my way and vote with my feet. 

    MSAs and AfBA "kickbacks" most certainly do not benefit attorneys. Those are arrangement which in my opinion violate the spirit of RESPA and should never have been permitted. Like lenders and REALTORs (the actual beneficiaries) don't make enough on their own ... they need a piece of the title side as well? Ptooey. 

    Gimer Law516 Reviews
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    8y

    @Tom Gimer  in all my years and in all the states I have never been offered a kick back.

    maybe I did not know how to play the game.. there Is already builder rate.. short term rate etc. etc.. those are published.. and also folks probably don't understand that title insurance is INSURANCE and therefor regulated by the INsurance commissioner at least in most states.. they just cant make up pricing now they can do special deals on Escrow.. but not the insurance policies.. I negotiate escrow sometimes

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

     Thanks for clarifying, Tom. And thank you more for sharing your opinion! I wasn't sure who receives the majority of the kickbacks, which is the point of the MSAs in the first place. Backroom opaque side deals with no transperacy.

    I realize there is legitimate work done by title and escrow folks, but title and lenders insurance premiums are a $20B a yr cash cow paid by avg Jack and Jill consumer that have no alternative or recourse when they buy and sell. What's another $3k per transaction?

  • Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
    8y

    Duplicate Post

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

    @Tom Gimer  in all my years and in all the states I have never been offered a kick back.

    maybe I did not know how to play the game.. there Is already builder rate.. short term rate etc. etc.. those are published.. and also folks probably don't understand that title insurance is INSURANCE and therefor regulated by the INsurance commissioner at least in most states.. they just cant make up pricing now they can do special deals on Escrow.. but not the insurance policies.. I negotiate escrow sometimes

    lol ... Jay, you would be the one demanding the kickback, expenses paid, hey let's jv on a new title company, etc. 

    Gimer Law516 Reviews
  • Rental Property Investor · Camarillo, CA · Member since 2017 · 2 posts · 0 votes
    8y

    Word!

  • Investor · Trafalgar, IN · Member since 2016 · 95 posts · 58 votes
    8y
    Amen!
  • Long Beach, CA · Member since 2017 · 2 posts · 1 vote
    8y

    All those things you mention will vary from state to state,  they are regulated by the state, county and city level.  So its not as easy as buying a car.  ( it should be) and with real being considered more of an asset than most cars there are always complications.

  • Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
    8y

    The thing that bugs me about title insurance is that you usually have to get a new policy if you refinance. It seems to me that the same title insurance policy should cover you as long as you own the home, regardless of whether or not you refinance down the road.

  • Real Estate Agent · Chicago, IL · Member since 2017 · 75 posts · 37 votes
    8y
    We’re actively developing a CRM app that serves the back end user just as well as the consumer. Would love to hear about other technology projects up and coming.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.