By Robert Steeg
I recently returned from a national conference of title insurance agents. The agenda included traditional, technical topics like underwriting standards and title insurance claims—very helpful, even if not the most exciting, topics. But, there were several presentations that were entirely different. The real stars of the show were about the future of real estate law, title insurance, and real estate transactions in general.
As everyone tries to keep up with—or perhaps even get ahead of—the curve of rapidly advancing developments, here are my main takeaways:
Residential Real Estate Sales Practices are Changing
The traditional structure of home purchases and sales being handled by real estate agents, who in turn bring the transactions to title companies or closing attorneys, is under attack from a number of fronts. For example, the looming anti-trust lawsuit of Moerhl v. National Association of Realtorsthreatens to disrupt the current commission structure for residential real estate agents. The plaintiffs, with several high-powered plaintiff antitrust law firms behind them, are claiming that real estate agents engage in anti-trust practices to keep residential real estate commissions high (typically 3% to each side).
If successful, this lawsuit could open the away for serious price competition among real estate agents.
Online Sites are Disrupting Residential Real Estate
Further residential disruption is resulting from online sites that skip the realtor and deal directly with the consumer. Consumers can buy and sell their houses online for smaller commissions, using algorithms and sophisticated data to arrive at the listing price and the ultimate sales price. Closings can be conducted through (or at least significantly facilitated by) these online portals as well. Other websites go even further and directly acquire a customer’s property and place it in inventory for a later sale, thus letting a potential seller avoid the time, difficulties and hassle of listing, showing and selling the property.
These developments have the potential to reshape the entire industry.
The Traditional Closing is Looking Very Different
The traditional “closing” is looking very different as well. The changes are most evident in the residential field, but these changes are affecting commercial transactions, too. If the traditional “table” closing is not already a thing of the past, it soon will be. Parties want to sign documents in the comfort of their own homes and offices. At present, documents are quite often signed and then exchanged electronically pursuant to laws that allow electronic signatures to have the same force as originals.
Most documents that require notarization are still signed in person in the presence of the Notary Public. In the future, notaries will operate via electronic screens (comparable to Skype or Facetime) that allow the notary to verify the identity of the signer and to notarize a signature that is observed remotely, rather than in person. State laws are rapidly changing to accommodate these practices.
However, the possibility of fraud looms large.
The Future Isn’t Bright for Ink and Paper Documents
Ink is becoming a thing of the past as well. As noted above, “wet ink” signatures are currently scanned and transmitted electronically in the place of original documents. The future will go even further. Ink will not even be used, just a stylus on a pad. Paper documents themselves may become a thing of the past, as the electronic signature pad will be connected to an electronic document storage and retrieval system. Government registrars will have to adjust, as will law firms and title companies. These developments may be several years away, but they are coming.
Go short on ink and paper.
The Future is Now
State legislatures are passing laws to adapt to these developments. New companies are offering services to facilitate these trends. Law firms and title agencies are positioning themselves to be able to offer their clients and customers the ease and convenience that they will be demanding.
The future is now.