Real estate has always been a process that is document-intensive. But in a world where paper documents and in-person meetings are suddenly dangerous, the world of real estate closings is changing rapidly.
The Federal Housing Finance Agency (FHFA) has been moving to respond to the issues around appraisal requirements, for example reducing the need to have an appraiser inspect the inside of a home. The FHFA also announced that it will allow Fannie Mae and Freddie Mac to do desktop appraisals on new-construction loans and on demonstrating construction has been completed as well as allowing remote notarization.
One big component of residential real estate closings is the title process.
Millionacres recently checked in with Patrick Stone, executive chairman and founder of Williston Financial Group, the parent company of WFG National Title Insurance Company, a title insurance provider with offices in multiple states including Arizona, California, Oregon, and Texas. Stone has been in real estate for over 45 years and reported that he's never seen a rapid transition like the one the real estate industry is currently undergoing. In the midst of this turmoil, his company had one of its largest months ever with over 45,000 files processed. Much of that activity was due to refinancing.
Clean closing rooms are now the norm
"Our company and most of our competitors have enacted policies where you have clean closing rooms," said Stone. The closing rooms are only used for a single transaction and then completely sanitized. Pens are only used once. The rooms are only used for transactions and aren't part of the general office. All WFG offices are currently closed for everything except closings.
Remote notarization is growing, but there are roadblocks
As we've mentioned previously, several states have changed their rules regarding remote online notarization (RON) due to social distancing rules inspired by COVID-19, and a national law could be approved. Stone sees a few problems with this, the first being that many recording offices can't or won't accept e-signed documents. One concern Stone brought up about that is that remote notarization providers may not be able to handle the overflow. Until recently less than half of states allowed RON, and many notaries haven't been trained on how to use it. Another consideration is that states that haven't utilized remote notarization before are suddenly needing to get up to speed very quickly. This is also putting additional stress on lenders.
Stone mentioned that at this point, RON is still more of a wish than a reality. However, should the need for social distancing remain in place for 90 to 180 days, it seems more likely that it will become a shift. Stone defined it as an "active opportunity."
Agent adoption in hyperspeed
A personal aside here: I taught residential real estate brokers how to use technology for over four years and can attest to the challenges involved. One issue is that if an agent has a system that works for them, they are loath to change it.
Stone reports that because of the COVID-19 outbreak, agents are learning technology faster than ever. His team is teaching classes to agents who are interested in learning the ins and outs of virtual tours, online document tracking, and other ways that technology can help them avoid in-person contact.
Increased cybersecurity concerns
Bruce Phillips, senior vice president and chief information security officer with Williston Financial Group, runs WESTprotect, the cybersecurity offered by WEST, a tech subsidiary of WFG. The company has run assessments for agents before this situation began and is continuing to do so now.
Phillips reports that he has seen a spike in attempted ransomware attacks and Trojan horse-type websites related to COVID-19. The loan officers receive emails that say something similar to "track where COVID-19 is spreading" in the subject line, and when you click the link it downloads malware without you knowing.
WFG created a pandemic response team back in 2011 to work on corporate responses to potential issues. As many as 90% of their employees are able to work from home using appropriate security measures.
Transactions are still getting done despite the complexity
For at least the foreseeable future, transactions will take more time to complete. Stone says the current limitations are adding a couple of days onto real estate transactions. A portion of transactions in progress may drop out due to lost jobs -- Stone says current data shows it could be around 15% -- but home sales are still going through.
If there's a positive in all of this, it is the level of cooperation that this crisis has engendered. Stone said that in his 45 years of work, he has never seen this level of collaboration and cooperation happening across all the different sectors involved in each transaction.