Why is title insurance necessary? Or how about a URL for every parcel?

Oct 9, 2007 Michael Wurzer

Bad data, that’s why. The many county governments across the country deploy a dizzying variety of legal and technical approaches to tracking title, and the title industry has evolved to wade through that complexity. Forbes ran a fascinating article in 2006 on the title industry, which is even more interesting in light of the MLS vendor acquisition spree the major title companies have gone on over the last several years, resulting in First American and Fidelity National becoming the two largest MLS software vendors. Here’s an interesting quote from the Forbes article, further quoting Parker Kennedy, CEO of First American:

“We get a little more automated every day,” Kennedy says. “In the old days, if you wanted to double your business you had to double your people. Now you can double your business and increase your staff maybe 10%.”

The tech push must continue, he says, because one day economic rationality and digital reality will catch up to the title industry. Real estate ownership records, always open to the public, are going online, alongside all sorts of other data. Today anyone can instantly learn a property’s square footage, its sales price history, even view satellite photos, at virtually no cost. If records are instantly accessible and accurate, the need for title insurance will fade away. “Eventually insurance won’t be an important component of the product,” he allows.

So Kennedy hopes to harness digital technology to create a new business. Rather than broker one piece of information for an exorbitant cost, he hopes to collect all manner of real estate skinny and sell it to banks, insurers, real estate agents and direct marketers.

The article concludes, “Yet another movement for change comes from efforts by the nation’s county recorders to agree on a uniform way to store property records online, which could severely curtail the need for title insurers.” Whoa, that perked me up. Some time ago, I wrote that the NAR should focus on working with county governments to establish a standard property identification system.

Though I probably should have known of this earlier, the standards effort referred to in the article appears to be by the Property Records Industry Association (PRIA), which is made up of county recorders and title insurance companies. Interesting.

I really don’t know much at all about title insurance and generally am skeptical about slash and burn articles like the Forbes piece. Frankly, not much of that is interesting to me. What is interesting, though, is that there are people working on defining standards for property records. Clearly, the RETS schema working group needs to consider this work, which, fortunately, is based in part on the MISMO standards that are already being considered in the RETS process.

Delving into the details of standards work is daunting. There are hundreds of different parcel number formats, legal description methods, and cadastral formats. Trying to capture all of these into a standard can be paralyzing. So here’s a simple idea that might just be useful to all parties: Every property should have its own URL. With a standard way of identifying a property, bringing disparate records systems together is easier. MLS systems can more easily be integrated to public records and vice versa. MLS regionalization becomes simplified. Title searches become trivial. Interesting.