Today, homebuyers can tour homes, see the neighborhood, and research the history of a property all from the comfort of their couch. Technology has streamlined the front end of the purchase process, but the actual closing remains largely stuck in the past. Research from the National Association of Realtors shows that nearly 40% of home buyers rank understanding the closing process and the related paperwork as the top challenge. Tech savvy consumers who have looked at homes and even virtually furnished them with a smartphone are confronted with a mass of old-school paperwork and disconnected procedures when it is time to buy.
15 Degrees of Separation
In a typical real estate transaction, there are approximately 15 different players, including an appraiser, a title examiner, a home inspector, a buyer, a seller, buyer’s and seller’s agents, a lender (which includes the loan officer, processor, and underwriter), a seller’s attorney, and a closing attorney (including paralegals). With such a large line-up, it can be hard for buyers and sellers to keep the roles straight let alone understand all of the intricacies of the close. Further, the communication between these various parties typically took place at best via email and sometimes still through fax! To an ever-connected society, this can feel like a painful experiment in time travel.
In an industry that is designed to help consumers participate in the American dream, the closing process is a nightmare.
Painful, Intense, Taxing and Inefficient
As a long-time closing attorney in Massachusetts, we suffered the same pains as many in the industry. Consumers were confused and we were buried in tedious inefficient closing functions performed on multiple platforms. For example, we ordered a title abstract by email and then received the abstract from the examiner by PDF attachment or written report in the mail which had to be scanned into our server.
We had to draft a separate form to order a tax certificate from the municipality. We used real estate software to draft the title commitment, then used the title company’s system to obtain a required Closing Protection Letter (“CPL”).
An intern or junior admin copied the property’s existing legal description by typing up a new Word document. To obtain seller documents and schedule the closing, we emailed the seller’s attorney or paralegal and attachments were sent to us by email. Any personal and private information (e.g., borrower authorizations for mortgage payoffs) would have to be faxed. We separately emailed buyers to confirm spelling of their names, schedule closings, and deliver documents. Additionally, we emailed realtors to obtain their commissions, receive transactional forms (e.g., condominium documents and financials) and schedule closings.
The Software Setback
Software programs did little to solve the root problem. As the escrow agent, we used separate software to manage all funds. Each vendor and fee had to be entered into our real estate software or in the lender’s software platform to generate a Settlement Statement. Separately, each payee was entered into the ledger utilizing a different funding software. To denote the recording information, we transcribed the Book and Page by hand into our file, and manually entered it in our real estate software. Electronic recordings were done by separate software. When funding, we would track letters and packages through the FedEx website. If it all sounds slow and painful, it was.
That’s how we used to do it and from my conversations with others, that’s still how many in our industry continue to operate. Given those inefficiencies we sought out technology that would both streamline our process as well as provide us comfort that our processes would continue to be compliant with the litany of security and privacy rules we are required to follow.
Today, we coordinate our closings on a single platform. We conducted our due diligence on a variety of technology solutions, most of them solved a single task. Ultimately, we decided to use Qualia to provide us with a unified, collaborative, and compliant system. With Qualia, the closing is a much more coordinated process. The title examiner drops the title abstract into our platform. The tax certificate, CPL and title commitment letters are all generated internally from the platform. The existing legal description is scanned and copied in our platform. We are able to automatically send out requests to buyers for contact information and to realtors for commission statements from the platform. We have a shared calendar to schedule and memorialize closings with all parties right in Qualia. These are huge time-savers.
In order to comply with numerous state and federal laws, our office is required to safeguard our client’s nonpublic personal information. We are now able to utilize a “Connect” feature that allows all parties to upload documents and email on a secure platform. This is especially helpful when cybercrimes and unauthorized access to computer systems are on the rise.
Additionally, my entire staff can view a memorialized record of all transaction correspondence. I can enter a note on a file that all members of my team can view. We can share condominium documents, deeds, and settlement statements with the intended parties. Seller’s attorneys can securely upload their clients’ payoff information and wiring instructions. Further, we have our funding software built into the platform, which also is a major benefit. All deed and mortgage recordings are synced into our system, and all letters and closing packages sent by registered mail service are automatically entered in the platform.
It’s Time to Unify the Closing Process
My firm’s operational change highlighted that our industry, which relies on precedent, was reluctant to change. We believe these roadblocks can be overcome to improve our daily practices as well as our clients’ experiences with us. Collaborative software allows all parties in a real estate transaction to work toward the same goal expediently and efficiently.