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ClosingOpinion

Opinion: Has the title industry reached the automation tipping point?

Not many would count the title industry among the economy’s technology leaders. Candidly, there’s good reason for that. For decades, settlement services firms staked their reputations on personalized customer service and regional or local expertise, rather than cutting-edge technologies.

More than a few observers have referred to us as a mom-and-pop industry because it’s comprised of a significant number of small agencies. In fact, many title agents will proudly tell you that ours is a “traditional” industry. It’s also one that has endured despite inherently thin profit margins. Its most successful firms dependent upon hard work and transaction volume to meet their goals.

Behind the tech adoption curve?

Of course, many will tell you that those factors are a big part of why the title industry has, at times, seemed a little behind the technology adoption curve. Those embracing automation tended to do so by investing in one of the major, national title production platforms or building out proprietary solutions. But it hasn’t really been that long since one could walk into just about any title agency and expect to see things like paper files, fax machines and a courier arriving to deliver documents (and, perhaps, a paper check or two.)

It didn’t happen overnight, and there’s still some distance to cover, but the past few years have witnessed a title industry that finally seems to be embracing digitalization. Agents and business owners are tackling their most manual, redundant and time-consuming workflow processes.

Any number of small and start-up technology providers have thrived during that period, and title business owners are no longer debating whether or not to automate. Now, they’re deciding how many of their processes can be automated.

What changed?

What spurred this newfound quest to fully automate title operations after decades of resistance? One impetus, traditionally high production costs, although seemingly a staple in the business model of the traditional title agency, may have finally pushed agents to a tipping point in combination with a few other factors.

Thin margins have long been synonymous with title operations, making them — along with the majority of the real estate industry — vulnerable to dips in transaction volume or rapidly-changing market conditions. Although those costs are spurred by a number of influences, heavy regulation is one of the more significant causes.

Title business owners, by the very nature of the work they do, must be well-versed in every requirement and mandate in the locations they do business. This despite diverse, overlapping and multi-layered laws and regulations at the national, state, county and municipal levels. All of that carries a cost.

Additionally, the title industry has always been labor dependent and beholden to a complex workflow supported by dozens of manual tasks. That could be because the very legal records and documents on which the industry is built were, themselves, primarily offline, housed in dusty courthouse vaults and clerk’s offices until finally going digital over the past 15 to 20 years.

While the high costs of labor should have only accelerated the digital transformation, many firms clung to personnel-heavy business models, claiming personalized service as their market differentiator. The byproduct of all of these influences? An industry known for inherently thin profit margins.

A tipping point?

The conditions created by the recent pandemic and the economic aftermath may have finally persuaded title agents that something had to be done to battle margin compression, especially as production costs began to rise again. Those conditions, in combination with a significant decline in origination volume, may have finally encouraged tech-resistant owners to rethink their operational models.

Title firms, like all businesses, may soon see the effects of the “graying” of the workforce as Baby Boomers, long a disproportionate percentage of the labor pool, exit to retirement. Now combine that with “The Great Resignation.”

The result, while not yet widely reported about the title industry, will likely soon mean a shortage of capable employees, making the turn to technology all the more appealing. The jolt to the system that came from the sudden need for work from home capabilities, not to mention the surge in demand for Remote Online Notarization (RON) and digital closing technology, has certainly played its part, as well.

Client demand may also play a major role in getting tech-hesitant title business owners off the fence. Increasingly, consumers, long accustomed to online and digital processes in nearly every other aspect of their lives, have questioned the title and closing process, and noticeable lack of automation. Realtors and lenders are increasingly demanding faster, smoother service and improved communication from their title providers.

Emergence of specialized tech

But there’s another reason more and more title businesses have become willing to automate. The emergence of specialized technologies, solutions performing or automating just a few specific operational tasks, has likely played a major role in pushing the industry across the tech adoption threshold.

At one time, a title agency’s option for new technology was limited, with the majority of the providers offering global or multi-function systems such as title production systems. However, with the rise of Artificial Intelligence (AI) and Robotic Process Automation (RPA), an increasing number of specialized technologies have become available to assist title businesses with things like automated payments, form processing and even client service and client communications tasks.

Suddenly, the objective of an “end-to-end solution” has been replaced by the need to maximize one’s tech stack.

Once relegated to the final session of industry conferences or the corners of exhibit halls, the conversation about automating the title industry is finally taking place on a widespread basis across the industry.

Title agencies and settlement services firms are beginning to realize the benefits of operation-enhancing technology. Considering the emerging transition of market conditions, that transformation is coming not a moment too soon.

Hoyt Mann is a co-founder and president of McKinney, Texas-based alanna.ai.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author of this story:
Hoyt Mann at [email protected]

To contact the editor responsible for this story:
Sarah Wheeler at [email protected]

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