Over the last 15 years, there has been a tremendous use of technology in the title & escrow industry. This digital transformation is pushing the entire real estate ecosystem toward new possibilities. “Title & escrow is the key link in the real estate transaction. If it becomes more digital, it enables the entire ecosystem to come online… what we’re seeing now is just the first inning,” Qualia CEO Nate Baker said during ALTA ONE’s virtual session “What’s Next in Real Estate Tech.”
Baker was joined by David Townsend, CEO of Agents National Title, who moderated the session, and co-panelist Gorkem Kuterdem, Senior Vice President, Strategy of Adeptive Software. The trio discussed digital closings, automation, cloud-based technology, and their predictions for the future.
Laying the foundation for digital transformation
Townsend noted that in the past, latency issues made trading data between systems and managing the volume of data involved in real estate transactions nearly impossible. “The infrastructure was not ready to handle that amount of data,” he said.
Over the past decade, the internet has advanced rapidly. “I would say everyone watching Netflix for ten years helped build the pipes,” Baker said. “The internet has changed a lot of things, so it’s a good opportunity to bring the internet to title.”
Townsend added that while technology is moving fast, government processes are slowing things down. “The gears of progress move slowly. In Missouri, it took 3 years to get a [RON] bill through.” While the technology is in place, there’s still much to be done to deliver uniform and workable laws for fast-moving technology.
What’s ahead for remote online notarization?
2020 has been a standout year for remote online notarization (RON). Kuterdem referenced an earlier prediction he made that by the end of 2021, 50% of all real estate transactions would be closed with RON. “I didn’t know I would be helped along in that prediction with a horrible pandemic,” he said.
While interest around RON is certainly growing, Baker noted that specific transaction types will lead the digital shift. Baker predicted that RON will be the default in just a couple of years for seller-side and cash transactions. “Seller-side participants and cash buyers are typically both experienced in the closing process. Those two will lead the way in adoption,” he said. Meanwhile, the purchase and buyer-side will continue to leverage hybrid e-closings (e-signatures on non-notarized documents) until the industry is more comfortable and confident using RON technology.
Baker also predicted that select venture-backed lenders (like Quicken) “that make it their mission to differentiate on consumer experience” will be “pounding the pavement” for RON. “This group will lead the way [in adopting RON]. Once they get to 80% of volume completed digitally, the rest of the industry will follow,” Baker added.
Lender adoption of RON is slow but promising
Kuterdem agreed that seller and cash-side transactions will be the sweet spot for RON moving forward. “The buyer side [use of RON] will be driven by lenders,” he said. While lender adoption of e-Notes has been slow-moving, there are promising signs that e-Note adoption will pick up.
Baker noted that the Intercontinental Exchange’s (ICE) purchase of Ellie Mae is a signal toward a more digital future for mortgage lenders. “[ICE] has MERS, Simplifile… it’s easy to see where they are going with this,” he said. “If you have the biggest player in the industry pounding the pavement [for digital transformation] it will speed things up.”
Robotic process automation and artificial intelligence
In addition to transforming the closing experience, technology is also rapidly changing the ways in which title, escrow, mortgage lenders, and other partners work together in a connected system. Automation and artificial intelligence (AI) are taking center stage as businesses evaluate operational efficiency in light of increasing volume.
Many tasks involved in title processing can be distilled to if/then statements and rules; however, there is almost always a situation in which a human needs to step in. “I think things [in the title space] right now are more about building rules with structured data than machine learning and artificial intelligence,” Baker said. He noted that common data points are needed for lenders and other partners to digest information in a structured way. “Then, AI can pull in what’s been gathered.”
Kuterdem noted that on the escrow side, tasks are document-intensive. “The capability to reason about documents at scale could transform the escrow side of things,” he said. He noted that the continual search for stronger margins will force businesses to look critically at how work is getting done. “Many in our industry were trying to work around pain points through offshoring or getting things done with multiple providers,” he said. “A lot of those practices will need to be reevaluated…Agents need tech solutions that take away labor.”
Continued focus on data security
The real estate industry is responsible for keeping highly-sensitive information safe. As the industry moves to more digital communication, data privacy and protection will become more and more important.
“A fundamental goal [at Qualia] is to protect that data,” Baker noted. “A lot of efforts around phishing attacks come back to a common story. One solution is to create a secure way for all transaction participants to communicate on a single platform… and that’s where [Qualia] is helping the industry by bringing everyone onto the same system.”
Baker added that companies should move their IT resources away from security and uptime of systems and toward other functions of expertise. “Our perspective is that you should leave server management to providers like Amazon Web Services,” he said. “They specialize in security, uptime, and operational rigor.”
The future is digital
Baker and Kuterdem closed out the session with their predictions. Kuterdem urged participants to consider both consumer experience and back-of-house operations. “We will need to look for ways to improve margins [with technology],” he said.
Baker agreed and added, “things are going to start changing faster than they have been. Technology coming out is a tool to sell better, win, and serve clients better. Those who succeed [in the year ahead] will use these tools.”