Today, I attended The Future is Now: Legal Services 2.018, an event of 2Civility. The event is hosted by the Illinois Supreme Court Commission on Professionalism. Jayne Reardon, the Executive Director, was the host and in charge of putting the event together. Reardon deserves congratulations on a terrific event. She closed the event with a few final remarks about three components of modern legal practice: 1. data, 2. diversity, and 3. delivery. On the subject of delivery, she mentioned a famous comment by Amazon CEO, Jeff Bezos. Bezos is frequently asked what will change in the next 10 years. He has replied to that question with what he believes is a better question: “what will stay the same?” Bezos believes that is the better question because stability, not the unknown, is something a business can safely build upon.
With all the proposed changes in title insurance, I take Bezos’ suggestion, and wonder what will stay the same. Here’s my list (so far):
- People will need a place to live. That’s an easy one, but what does that mean now? We frequently hear that millennials are renting more than buying. I’ve seen more condominiums pull themselves out of the Condominium Act, and become apartment buildings in the past two years than I’ve ever seen before. We also hear that the same group is in fact starting to purchase homes, but their standards are different. Some want tiny homes, and others want to buy traditional homes or condominiums, but have lingering student debt preventing them from entering the market. Keys to their business will be making it easier for them to find welcoming land zoned to allow tiny homes, or mobile homes, or event new 3D printed homes. Others will want traditional homes or condominiums despite outstanding student debt that conventional lenders may reject or it will cause them to seek higher interest rates. These prospective home purchasers may be seeking alternative financing products, which often raise additional questions for title companies.
- Home buyers want to close faster with fewer surprise impediments. I mentioned in the comments of my earlier post that an old international client of mine educated me about closing practices around the world, and proclaimed the USA “the worst.” That was in the mid-1980s, and little has changed to improve things. With initial price negotiation, inspection, attorney approval, loan approval, title examination, survey, and finally closing, the process can take months, and that just covers the easy closings with no need to probate or obtain lien releases or case dismissals. Perhaps a proactive recorder’s offices or title company can use new technology to help solve this old and continuing problem by maintaining automated running exams of properties, so all current liens and other impediments to a quick closing can be looked up on demand. The portal owner can maintain security using a private key owned by the fee title owner and primary lender. The private key could be shared with a contract purchaser after inspection and attorney approval.
- Home buyers want to pay as little as possible for intangibles like title insurance. If you watch as much HGTV as I do, you know that people are happy to pay for nice finishes, and amenities, but are less excited about paying for necessary safety and structural improvements. They pay for the latter because they know they have to, and the downside of not paying for safety can become very tangible very quickly. People get the problem of a house that burned down from faulty electrical work, or a house that flooded because the pipes burst. It’s harder to explain the value of title insurance. It covers latent title defects, and almost no one knows what that means or how it could affect them any time soon. Title defects can affect a property owner as bad as a physical problem with the building, of course, but few other than folks like me who have spent time in a major underwriter’s claims department, or the outside counsel who often litigate policy coverage or title defense, really know what that means. Title insurers should do a better job valuing their products, and communicating their value to attorneys and consumers.
- All generations, and not just millennials, want easy to use digitized applications. Technology is not just a requirement of millennials. I’m 58 years old, and do not want to spend time filling out written forms, or sitting on the phone explaining myself. I like to do business at odd hours, after work and on weekends. I don’t want to wait weeks to close after my lender is committed to loan, and I didn’t appreciate that it took 3 years to get my title policy from a major underwriter after I purchased my current condominium (especially since underwriters are requiring policies before they will issue hold harmless letters or handle claims). The technology is available, and should be used to deliver the product better, faster and cheaper for customers of all ages. As for older generations, often ignored in the creation of new business technologies, we must keep in mind that many seniors are very computer proficient, and more will be over time. We should also consider that some seniors need technology to help them with problems of aging such as difficulties with travel or with signing documents. Technology can also be used to flag or even prevent financial crimes against seniors. One example of that would be AI now used in the credit card industry to detect patterns of financial activity for people. That technology allows your credit card company to notify you by email, text or phone if unusual activity is detected. A lower tech version of this is now used by the Cook County Recorder to notify people of quit claim deeds on their property.
- There will be situations with and interests in real estate not readily conducive to blockchain technology, or full-automation of the real estate sale/purchase/refinance. Blockchain is at its best when it’s verifying a transaction based on the outcome of an earlier hashed transaction, and making sure a transaction isn’t duplicated. Please educate me if I’m wrong, but I’ve read nothing that convinces me it works well with off-record title changes that are still legal as we do not have a Torrens system in Illinois. I imagine a computer can find a forgery if given historic signature data, but are we really going to take everyone’s signature and keep it in a database? If we are going to do that, how, who and where? What if the signature changes? Can video notarization be 100% protective given what we know about human perception, video angles, editing, photo-shopping? Also, what computer can tell if a person is under undue influence to sign a deed or mortgage? Other situations, while capable of being automated, will require a lot of system’s analysis and new data inputs including some of the events I mentioned in my earlier post such as: corporate or LLC name changes, mergers and dissolutions, board voting requirements, changes in officer authority, changes in trusts based on complex trust documents, descent and distribution where no probate has been filed (Is the answer to the last one really to eliminate the so-called “bond in lieu of probate” procedure — a procedure which has worked for decades, and has been credited with speeding up closings as the Cook County Recorder has apparently directed with the office’s refusal to record deeds signed by heirs?)
- Some will be ahead of others. I can see this still being true in 10 years. This has already happened in efiling of court documents where the downstate and collar counties are ahead of Cook, but Cook appears to have taken an early lead in Blockchain with it’s pilot program last year. Title companies are generally really good at handling county differences, but national lenders aren’t. This has been true of local differences in real estate law and custom forever. Also, some consumers will be open to eNotarization (if and when it becomes law in Illinois), and eClosings, and others will not. Now, eClosings can mean many different things depending on the parties capabilities. Now, most advertised eClosings are actually hybrid closings where wet signed documents are delivered despite the other electronic conditions which vary by lender and title company. Title companies will have to figure out how to help all of the parties deal with the differences?
- Some title issues are ancient, and not conducive to new technology, but remain relevant to current title. One of the speakers at The Future is Now, Professor Susan Nevelow Mart of the University of Colorado Law School in Boulder, talked about the continuing need for libraries. Professor Mart suggested that libraries best function now is to preserve the older and more unusual documents that cannot or have not, due to age and rarity or difficulty of use, been digitized. Some documents aren’t needed frequently, but are needed sometimes. In title insurance, those documents include old plats of subdivision, old easements, old street or alley vacations, origin documents, old deeds containing additional rights such as life estates or covenants or restrictions, all not yet expired from age or otherwise outlawed as the statute of limitations on general real estate interests is rather long at 75 years. It also comes to mind that even some of the newer, digitized plats are virtually unusable due to bad photography, lack of scale, or simply come in an unusable size.
There are probably more components of the title insured real estate transaction that won’t change in the next 10 years, but this is my current list. Feel free to add more in the comments.