CEO of States Title, the family of companies using technology to make the residential real estate closing experience instant and affordable.
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The real estate industry is a $162.8 billion industry that employs more than 2.1 million people — and it’s in danger of falling apart for a surprising reason. In 2019, 5.34 million existing homes were sold, and the National Association of Realtors estimates that for every two homes sold, one job is generated, and that contributes $60,000 to the GDP. Failure is not an option for this industry, which is a crucial pillar of our economy.
As the market rebounds from Covid-19 closures, a new crack in real estate is becoming apparent: Lenders are being flooded with a rising volume of mortgage applications, and notary availability is at an all-time low. You wouldn’t think something as nuanced as notary availability would be a reason for alarm, but we’re starting to see some concerning trends that suggest otherwise.
Where have the notaries gone?
Notaries, deemed essential workers during the pandemic, have always been crucial to real estate. Despite the recent response to Covid-19 and the industry’s move toward a more electronic home buying process — including a patchwork of temporary and permanent legislation that has allowed remote online notarization (RON) in most states — a home closing transaction cannot be closed without a notary, in most counties.
My company requested and received custom data from Signature Closers, a network of notary agents and attorneys, that showed in April 2020, notaries not accepting signings for 15 or more days increased 1,225% compared to April 2019. This problem became visible in March but continues as resales rebound and refinancings cause loan volumes to skyrocket.
The decrease in notary availability can be blamed mostly on the pandemic: Notaries, like everyone, are concerned about taking unnecessary health risks, including in-person contact with strangers. Still, the lack of technological adoption in the industry is exacerbating the problem. The status quo — in this case, stacks of paper, manual record-keeping and in-person identity management — has reigned king. When lenders do not offer RON, for example, homeowners are left to rely on an in-person notary signing. In many cases, this means having a notary come to your home. The notary process requires sharing your identification, signing a book and having your fingerprints taken — the antithesis of contact-free service for both the consumer and the notary.
The industry cannot treat technology as a temporary solution to a crisis but must move to industry-wide adoption. Covid-19 forced a change, but the lending industry must seize this moment to boldly modernize its processes. Start by examining your software and systems and assessing whether it is improving your business or creating roadblocks. Where are your weak links, and how can you improve efficiency? Determine how you can effectively deploy change in your organization — is there a culture of inertia or barriers to change?
A system that relies on in-person signing is destined to fail. We are seeing the damage now. Demand is at an all-time high, and notaries are forced to choose between their livelihood and safety. Many opt not to take the risk, shrinking the availability of qualified professionals and creating frustration for homeowners with delays that cause transactions to drag on for months. Others are demanding higher fees from title companies to do the notarization. The higher costs are passed on to consumers.
Failure to implement technology hurts lenders, too. Expediency is critical in loan transactions. The longer it takes to close a loan, the higher the risk of losing the deal. The time to close has increased across the board. According to mortgage software company Ellie Mae, the average closing time is 46 days for a purchase transaction and 49 days for a refinance.
There is no end in sight in terms of loan volumes or health risks. We have no cure or vaccine for Covid-19, but we can fix our inadequate infrastructure. The answer is not simply more notaries but industry-wide technology adoption. Technology allows us to close loans faster, stem losses, hold down prices and, most importantly, improve the customer experience. With so much uncertainty and the possibility of rolling shutdowns, we can stand and watch the building fall or move to a modern structure that will support us now and in the future.
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