Editor’s note: We’ve come a long way in the race to slash paper from real estate deals, industry insiders say, but there’s still a long way to go. More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing the old-fashioned way. In this three-part series, Inman News examines where we are in the paperless real estate initiative.
Editor’s note: We’ve come a long way in the race to slash paper from real estate deals, industry insiders say, but there’s still a long way to go. More big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software to automate the real estate transaction, but most consumers are still closing the old-fashioned way. In this three-part series, Inman News examines where we are in the paperless real estate initiative. (See Part 1 and Part 2.)
We’ve come a long way, but still have miles to go. That was the conclusion of industry leaders speaking about the state of paperless real estate transactions and where the industry is heading next.
“We’re moving remarkably fast, and we’ve made remarkable progress,” Mark Lesswing, vice president of the National Association of Realtors Center for Realtor Technology, said during an Inman News audio conference Monday.
Go to www.paperlessnow.org to learn more about the Paperless NOW initiative.
“But it’s a complex transaction; it’s not like ordering toys online,” he said of the plight to make all parts of the real estate transaction electronic.
The electronic or “paperless” real estate transaction is catching on with industry participants. Big companies, trade groups and entrepreneurs are investing in technology platforms, back-end systems and software and digging deeper to revolutionize the costly and paper-weighted closing process.
Despite progress, a paperless real estate closing is still a newsworthy event as the industry has yet to make it a common method of transacting. The majority of buyers still spend hours poring through documents at the closing table.
Panelists agreed that real estate transactions have unique obstacles that stand in the way of immediate widespread adoption of electronic processes.
Lesswing said that in comparing real estate to other transactions, “if you look at where truly electronic transactions are used today it’s between two parties who are ready to accept this.” In real estate, though, there are many participants, including closing agents, real estate agents, title insurers, lenders, buyers, sellers and attorneys, to name a few.
In real estate deals, this creates a “sociological barrier,” he said.
The industry has pushed ahead, though, and the National Association of Realtors has made a major investment in a transaction management system called RELAY. Transaction management systems — Web-based systems that enable all parties to a transaction to upload information and access progress on the transaction 24-7 — are central to taking real estate deals paperless, according to industry leaders.
In another sign of progress, Stewart Title announced its first electronic closings in Indiana this month.
Travis Wright, president of Stewart Transaction Solutions, said that the biggest obstacles are continued education and motivation of all the stakeholders in a transaction, including lenders, title insurers, real estate salespeople and their clients. While there may be paperless pieces to a real estate transaction within one of the major stakeholders, we will never have a fully paperless transaction until all of the parties join hands on this, he said.
In the Indiana paperless closings, Stewart teamed up with First Republic Mortgage Corp. and Trustcorp Mortgage Co. and used Stewart’s SureClose online transaction management system and eClosingRoom to cut paper from the signings.
Integration with existing technology and processes is also key in moving the paperless transaction forward, said Kelly Pantis, senior vice president, First American Residential Group. Vendors need to “make it as seamless as possible for agents so they don’t even have to be trained to use the system,” she said.
Electronic forms are a good initial way to reach agents to start to adopt a more electronic system, panelists said. “Realtors themselves are in this paper world and things start with forms, so any solution that comes out must fit with the workflow of the agent or brokerage,” said the CRT’s Lesswing.
Asked why technology vendors have not promoted the advantages of electronic systems directly to consumers, Pantis said that First American doesn’t want to give the impression that they are trying to disintermediate brokers and agents. First American focuses more on multiple listing services and Realtor associations as clients. However, she said, the company creates marketing materials about the efficiencies of transaction systems for brokers and agents to pass onto the consumer.
“We really don’t go out and sell anything to consumers directly,” she said.
Walt Clark, senior vice president of Transaction Management Solutions with Fidelity National Real Estate Solutions, said his company reminds its broker and agent clients of the value a transaction management system provides to consumers. “In today’s world, you need to do more than say ‘I can communicate with you via e-mail,'” he said.
“The ability to show (consumers) what will be produced through a transaction management system is huge,” Clark said. “We’re seeing more (agents) using that in listing presentations.”
Many transaction management and other systems meant to cut paper from real estate deals promise cost savings and improved brokerage efficiencies. Clark said there are three points that hit home with brokers: cost savings from not having to store a bunch of paper at an offsite facility; risk mitigation savings because everything is recorded and logged with electronic transactions; and what Clark calls the “client for life” opportunity because electronic systems enable brokers and agents to brand themselves on the Web site and disks associated with those transactions.
While Pantis noted that some older case studies of First American’s transaction systems showed that about 20 percent of users were consumers, agents say that some consumers still have reservations about electronic transactions.
Some features within transaction systems aim to ensure consumers their documents are secure and safe from being altered by anyone after they’ve signed them, Pantis said.
Panelists also discussed the notion of the paperless transaction being built upon open source technology systems where platforms are open to collaboration. “I believe it’s a good direction to go into, but some of the vendors would disagree,” said Lesswing, who also said that there’s already been progress in implementing XML standards with many products.
Pantis said that First American has used the new RETS 2.0 standard in developing its new package. RETS, which stands for Real Estate Transaction Standard, is a collaboration of industry vendors who’ve set standards for real estate technology systems to facilitate easy integration between those systems.
Agents and brokers looking to find more information on paperless processes or transaction management systems can search the Internet for vendors, or ask their current vendors or Realtor associations, panelists said. Additional resources from the panelist’s companies can be found at TransactionPoint.com, Rebt.com, FirstAm.com/residential and SureClose.com.
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