The Digital Transformation Finally Addressing These Traditional Chokepoints in Title Workflow
December 12, 2023
By Anton Tonev
One of a title agent’s top priorities is clearing the title and facilitating a proper closing. The settlement process is complex, made more complicated by a myriad of varying laws, rules, and customs from state to state, county to county. Things like unusual or excessive closing fees, undiscovered HOA liens, or even missing (or incorrect) information only contribute to what has long been a 30 to 50 days-to-close average.
Because of this lack of uniformity and the heavy burden of regulation and compliance, many points of the settlement process have long been performed manually. Over the past few years, however, that’s begun to change. Now, more than ever, title and settlement services businesses have begun to ditch previously manual processes—with all of the errors and redundancies that come with manually entering or retrieving data—for integrated technologies and qualified service providers.
Today, you will be hard-pressed to find a title agency that doesn’t use a title production system. The typical title agency will also have automated or partially automated the title search process, escrow reconciliation and release tracking, just to name a few. Yet, for quite some time, even with the advance of the digital transformation, some elements of the settlement process stubbornly remained manual and continued to be chokepoints on the march to closing. Finally, that’s starting to change.
HOA Curative—a Great Example of Inefficiency
Take, for example, the document procurement and lien curative process involving Home Owner Associations (HOA).
Long a manual, in-house process, the mere thought of dealing with HOAs prior to closing still keeps some escrow and closing professionals awake at night. That process could include determining whether or not there is an HOA; determining how to locate and reach that HOA; procuring the proper HOA documents; hand-holding the buyers and sellers while a possibly last-minute delay threatened to postpone the closing; and possibly even having to cure liens placed by that HOA were very real threats to any residential real estate transaction. All too many closing firms have experienced the surprise of an untracked HOA lien in the final days of the settlement process. They know the angst that came from the resulting phone tag, email chain or, worse, unresponsive property management companies. They’ve likely had the experience of chasing down the property management company only to learn that they’d been replaced by a different property manager. And, more than once, they watched an otherwise smooth settlement process turn into a rescheduled closing.
But HOA-related challenges aren’t going away any time soon. Far from it. In fact, there are over 370,000 homeowner associations in the United States. Collectively, this represents over 40 million households (over 53% of the owner-occupied households in America). An average of 22 new associations are formed daily. If anything, they are growing increasingly common—along with the growing potential for related surprises and roadblocks on the final leg of the closing journey. It’s not just liens that cause issues during the settlement process. Learning there’s an HOA involved. Determining which HOA that is and how they can be reached. Getting that HOA to communicate in a timely manner, if at all. Managing the coordination and communication among the parties involved with any HOA issue--paying the fee for the required HOA documents (even determining that there is a fee, and what the amount is); extracting the proper information from HOA documents (there is no universal HOA document…they vary substantially).
HOA challenges in the settlement process are a very real part of the escrow and closing process. Fortunately, there are evolving solutions that should mitigate those issues in the near future.
What are Title Agents Doing to Address Things Like HOA Curative?
As is happening with many other phases of the traditional title workflow, settlement services firms are slowly accepting the concept that if it can be automated, it should be automated. The industry has come to accept that digitalization does not take human jobs but, instead, empowers title and escrow professionals to turn their attention to more complex (and satisfying) tasks. Good technology takes unnecessarily manual (and often mind-numbing) responsibilities away from employees, giving them more time to spend with customers, partners or prospects.
Outsourcing to a qualified third-party service provider, as well, has come a long way in a short time. While many firms once hesitated to enlist the aid of contracted services to manage the most inefficient elements of their workflow, the quality and accountability of many service providers have improved exponentially. Where a title business’s options for becoming more efficient were once fairly limited to things like implementing a title production platform and outsourcing title searches to BPO firms, they now have available a much wider variety of providers and technologies designed for more specialized elements of their operations.
The Streamlining Options are Growing for Title Businesses
In the case of HOA-related challenges, for example, the industry is starting to see significant improvements, such as better technology as well as improved data availability and accuracy. Specifically, technology and service providers are today able to do more things, more quickly and more accurately. The data to which they have access is more comprehensive as well as updated. As a result, things like lien and release tracking can now be done more efficiently. No escrow professional enjoys surprises, least among them an untracked lien revealing itself at the eleventh hour or discovering that an HOA is involved at all. Such surprises can derail an otherwise smooth transaction. Naturally, the curative and settlement process becomes dramatically more efficient when the operation is able to locate any and all liens far earlier in the process.
Not long ago, too much of the curative process was executed by most settlement services providers with some combination of Google search, phone tag, and email chains. The same was true of locating and executing the proper documentation required to carry out the process. This exercise was additionally delayed by bad record keeping, obscure requirements, and outdated information. Just locating the unique form required by an HOA or the location of a municipal lien unrecorded in the county clerk’s office could add days or even weeks to the closing timeline.
Fortunately, even as core settlement technologies continue to evolve, new technology and more service providers are focusing on some of the more specialized functions required to bring a transaction to closing. Agents have more options than they did even a few years ago. Better technology is facilitating better record keeping, better accessibility to more data, and more efficient means of assembling and addressing the information and documentation needed to expedite a number of title processes.
Other Areas Can Be Made More Efficient
HOA challenges aren’t the only traditionally manual settlement processes to benefit from this rapid growth of better service and technology options. Technology and third-party service providers are not only easier to find but more effective and efficient in their own processes. The result has been better options for processes like municipal or tax lien tracking and curative. Communication, long the Achilles Heel for the title industry, is also benefiting from better technology, improved processes, and additional providers to streamline the process. Data collection, data extraction, and status updates are no longer measured by time spent typing on a keyboard, leaving voicemails, or chasing emails.
While the title industry has made massive improvements to its operational processes, there’s still, admittedly, work to do. Some firms, initially slow to adopt modern platforms or effectively employ third parties or even Software as a Service options, are just now wading into the process of updating the way they do things like curative or release tracking. Slowly but surely, however, it’s happening.
Time and time again, across industries around the world, we’ve seen just how much of a disruptor technology can be. However, with change comes uncertainty and even turbulence. More often than not, those who adapt and innovate emerge as leaders. Those who resist usually fall behind the pack. The way title and settlement services firms do business is in the midst of a massive transformation. The very reality that we’re finally turning our attention away from whether or not we need automation and toward what needs to be streamlined next is a great start.
Anton Tonev founded InspectHOA after his own frustrating experience with HOA documentation while making a real estate purchase. He can be reached at anton@inspecthoa.com.
Contact ALTA at 202-296-3671 or communications@alta.org.