Since a VM is requesting this reduction, I would politely refuse.

Reason being: They are typically the Fidelity Property Svs / Safeguard Properties VMs that will still continue to charge HUD and the bank full price for the title work being done anyways. They have virtually iron-clad contracts with these banks. The service they are offering is simply lien priority on foreclosures. Some one , somewhere decided through the data that most likely every house in foreclosure was most likely behind on taxes as well, so they saw this as an opportunity to trim more off their bottom line, without even knowing the ins and outs of searching.

Prashat is most likely making a killing off these 10 second searches and unfortunately people will need to make the decision whether to feed their family or stick to their principles. It's simple economics to them, lower your cost, or we will find someone cheaper. I myself found a new profession rather than whore my experience and service out to a VM.

 

We all saw this coming; for further proof, here are some members of SOT and myself after an interview in 2007.

Once a job that stood proudly at the core of the entire land title industry, abstracting has taken a financial backseat to the billions earned by the insurance product it supports. In the process, those billions have been poured into creating databases and technology that may someday make abstracting all but obsolete.

George Booth knows this firsthand. A third-generation abstractor, Booth has seen the highs and lows of the industry. Growing up in Florida, Booth carried his father’s briefcase into the courthouse. He learned to abstract with a legal pad of paper. “I grew up with the family curse,” he said.

“Title examining is a passion, it takes a particular mindset,” said Booth, who also is a licensed real estate agent and mortgage broker. “You have to be analytical. You have to delve into more than what is on the paper. It’s like little clues on each document of paper and you have to hunt them down.”

Current trends in the industry have jaded Booth’s passion. Once the owner of an abstracting company in Medina, Ohio, that covered seven counties, Booth now is mulling a new career path as orders have stopped coming in.

“To give blood sweat and tears and watch the industry and the incompetence literally unfold it in a decade, it hurts,” said Booth, whose brother, R.F. Booth Jr., continues to operate Community Land Title in Port St. Lucie, Fla.

Booth, who has worked in the industry since leaving the Navy in 1994, isn’t the only abstractor feeling the noose tighten. Issues such as non-paying or slow-paying clients, turn-around times, instant title searches and records going online, offshoring of records and lowering of prices have all played a role in dividing the abstracting community and shrinking its ranks.

According to a national survey conducted by Bankrate.com in 2006, national costs for title insurance for a $200,000 loan ranged from a high of $1,164 to a low of $418. The average was $663. Meanwhile, the cost associated with an abstract continued to be compressed.

Jay Duncan, president of Missouri-based Bi-State Title Search, said several people flooded the abstracting market during the refinance boom willing to complete searches at minimal prices.

“You had these so-called ‘tow truck Joes’ that would pull in front of a courthouse, drag their nose across their sleeve and say ‘I’m an abstractor,’“ Duncan said. “They would cut-throat everyone’s prices. There are people doing $15, $20, $25 current-ownership searches. Then the refi boom ended. Now, you have all these title problems and prices have been cut so low that others had to cut their prices to keep business.”

Because price depends on proximity to a courthouse, rural areas will pull out a higher price due to travel time. Many searches in Florida go for $25 because they are online. Searches west of Kansas and the Northwest can fetch $150 for current homeownership searches, as opposed to the East Coast where there are more abstractors and courthouses that drive down cost.

Duncan, who started his company in 2000, said some title companies use abstractors against each other. A company will contact an abstractor and say they have a person who will do the work for $40. “They will ask another abstractor to do it for $35,” he said. “Then they go back to the other and ask to have the work done for $30.”

Booth said he used to charge $125 for a full search, now you can get the same search for $35.

“Abstractors aren’t in a position to turn down work,” Booth said. “When it comes down to doing what’s good for the industry or paying the car payment, people will make their car payment. On one face they will say ‘damn the torpedoes this isn’t right,’ but on their other face, they will ask the VMCs if they have sent over their orders.”

Many accept lower terms just to survive and ensure future business.

“Sometimes, you’ve got to fire the client even though they are making the house payment,” Booth said. “Go find a new client. It’s hard to get an abstractor to value their work and put a price on it.”

As pressure mounts from lenders and title companies to maximize profit, some abstractors wonder if title policies will even be ordered since abstractors carry errors and omissions insurance.

“It makes me wonder if that’s going to be the next criminal activity where a title company charges $500 for the title policy and just pockets the money. If there is a title problem they will go after the abstractor,” Booth said.

Automation clock ticking

Armed with 11 full-time abstractors, four title examiners and a network of abstractors, Bi-State Title operates in nine other states including Illinois, Kansas, Indiana, Texas, Michigan, Kentucky, Ohio, Pennsylvania and Florida. That’s not the norm for most title examination shops. Most are one to three-person stores.

But it’s those grass-root shops some say will guarantee the future of abstracting. While technology has its benefits in saving time and helping with research, it can come with a loaded gun if not used properly.

Mary Mitchel, president of the National Association of Land Title Examiners and Abstractors, said public access systems are only as good as the user.

“If you don’t know and understand how the records were indexed or the quirky little ways to pull up certain names and documents, you are doomed before you begin,” she said. “We all know each county has its own rules for properly locating certain documents. You would have no way of knowing those types of issues unless you spend time in your county. That is why we are so very important to this industry, regardless of the direction it may take in the future.”

A need for quality control and quality assurance will require human analysis on an ongoing basis on all transactions. The level of involvement and touch time on residential transactions will be reduced with the majority of time spent on complicated residential and commercial transactions. Elsewhere in the commonwealth — such as the western and central portions — most courthouses remain field-oriented where the abstractor has to go and pull books. Few courthouses in the southeastern part of the state are not online either.

“We see a couple of changes on the horizon in Virginia abstracting that will affect how, and how many, abstractors are utilized,” said Jim Cooke, Virginia production manager for LandAmerica Financial Group. “First, and most visible, is the increase in online records. Fewer searchers will be required to remain in the field. This does not diminish, however, the need, just the location that they do their work. Second, automation. With data services like Datatrace, DataCheck, etc., coupled with online records, automated products will surely become a normal part of the process in the years ahead in Virginia, as they are in other parts of the country, particularly residential transactions. However, the expertise required on the commercial transaction will require the continued use of abstractors, be they in the office ‘online’ or in the field.”

The role an abstractor plays in a transaction can directly be tied to geographic location. Pat Neu, who is the Florida production manager for LandAmerica, said the quality and quantity of electronic data also impacts an abstractor’s relevance.

“The availability of electronic data varies from county to county and from state to state,” said Neu, who works in an automated, data-rich area of Florida. “Large metropolitan areas with sufficient depth of electronic data should be able to generate the necessary title products by using an automated search product in the near future. Abstracting and the intuitive examination process will continue to be a part of commercial transactions for the foreseeable future.”

 

There will always be a need for this skill in the commercial and complicated residential transaction. These matters require a great deal of intuitive thought, which makes it difficult to program the type of logic necessary to automate the process. However, as the availability of electronic data grows, so will the automation of the abstracting function. Completely electronic title reports are already available in some markets — reports that did not require any human intervention other than keying an order in a system. These reports are used for both residential refinances and residential buy/sell transactions.

Jay Sibley, president and CEO of Title Data Inc. in Houston, said no matter how automated abstracting becomes, the title industry will always want a human set of eyes to review what a computer produces.

“When a title company’s checkbook is on the line to any extent, it will want to ensure that the computer didn’t hiccup along the way,” Sibley said. “This set of eyes may belong to an abstractor in Altoona, Pa., or to a resident of Mumbai, India.”

Some abstractors remain bitterly critical of the new technologies. Booth, for instance, adamantly opposes the use of instant title searches, calling the product the most “selfish greedy thing this industry has every done.”

“It’s dangerous and reckless,” he said. “It poses more risk, but it doesn’t matter. If you are making $7 billion and I ask for $2 billion back would you do it? Sure you would because $5 billion is $5 billion.”

Future roll of abstractors

Over the years, the industry has shifted from photostatic copies to dry silver microfilm prints to digital images to paperless transactions. The industry will continue to adapt to new technologies. In the future, abstractors may not be called “abstractors,” rather they may be called upon to provide quality control of automated products and analyze title to complex commercial properties.

 

Booth suggests abstractors start looking at the retail sector because competing with 10-minute commitments for $35 is too difficult. He said abstractors could get into online privacy products and provide information to homebuyers such as “Do you want to know your property’s history or do you want to know if there are claims against your property.”

“Who better to do that stuff than the people who delve into records everyday,” Booth said.

Duncan believes there will be more abstractors closing shop this year as business shifts from refinances and purchases to foreclosures — work that involves more risk and liability. While it doesn’t pay any more than refi and purchase work, it could pay the bills.

“In a foreclosure search, those people’s credit is already shot,” Duncan said. “There will probably be judgments, tax liens and property taxes not paid. You should always concentrate on your judgments, but when doing foreclosures that’s when you pay particular attention to judgments.”

Duncan said his company is exploring possibilities to broaden its offerings, such as imaging and scanning information for title companies. Duncan said he helped develop a system that scans in images. Once they have performed quality control and make sure the image is in the system, the paper documents are shredded.

Another possible avenue is doing title searches for bail bond agents. “When someone is bonded out, people sign over their homes,” Duncan said. “Why not market to them? We haven’t done that yet.”

Abstractors trivialized

Many abstractors are concerned outsourcing work overseas poses problems because someone in a different country won’t know the idiosyncrasies of each geographical location. Someone overseas won’t be able to check the assessment book sitting on a clerk’s desk. “It’s not online, it’s in a three-ring binder,” Booth said. “That’s where you find a $2,000 street assessment. What happens when the new owner gets hit with that bill?”

Prashant Kothari, president of String Real Estate Information Services, defended the impact offshoring has on abstractors. He said technology has played the larger role in minimizing the need for abstractors. Kothari compared the title industry to changes that occurred to travel agents. He said the Internet and the amount of information available online is having the same effect on abstractors.

“It would make sense to centralize the process even if you didn’t have offshoring,” he said. “Offshoring has a minimal impact on abstractors.”

Booth said he testified last year for legislation in Ohio that would put a limit when title policies are issued. Currently, there is no limit in the Buckeye State, whereas Florida’s limit is 90 days and Texas is 60 days after closing. Senate Bill 185 was passed without the legislation Booth campaigned for.

“Some aren’t paying the premiums to their underwriters,” Booth claims. “It opens an incredibly huge door for fraud for ripping off the underwriter.”

Some legislation that recently passed in North Dakota will impact abstractors’ bottom lines. The state’s governor recently signed into law Senate Bill 2217, which limits the amount an abstractor may charge for making and certifying an abstract.

“Everything that a real estate loan is based on is the abstractors’ work, without that work nothing else can happen,” Duncan said. “The real estate market will come to a halt without the abstract — and that’s where you find the title problems, such as releases that haven’t been filed and judgments. A lot of companies on refi transactions are going to a deed report and a credit report. A credit report won’t show a local homeownership lien or it will be delayed on the federal income tax lien because it’s only checked every couple of months. The importance of a title searcher is No. 1. Abstractor work has been trivialized and packaged in a nice little box and they have said ‘that’s all its worth.’“

Expertise still vital

While many are wary of their roles as more data is found online, Brian Twibell, chief executive officer for Red Vision, believes abstractors will continue to play a viable role in the real estate transaction because of the expertise they bring.

His company’s product, TitleVision, is aimed at minimizing the manual effort required to abstract and examine title, such as the less-expert work that generally takes up to 80 percent of an abstractor’s time, Twibell said.

While the platform was designed to minimize the manual effort required to abstract and examine title, it still requires an abstractor or title examiner to validate the online information culled from courthouses, property assessors and tax collector data. The technology looks under the covers for different state statutes and data anomalies, such as the Homestead Exemption in Texas, he said.

“With saving a trip to courthouse, you still have the dichotomy in the type of work that’s performed,” Twibell said. “We’ve been able to get four or five times the work out of one abstractor. We optimize the time an abstractor spends doing the work. In our world, it strikes a nice balance between pricing and quality.”

The Web-based Red Vision hosts its own servers of histories of tax records and appraisals for all of Florida and Maryland, most of Texas and eight counties in Southern California.

Red Vision utilizes its Gainesville, Fla.-based staff to produce deed reports, current owner searches, institutional mortgage reports and full chain reports. Twibell said his company employs about 40 abstractors and has been hiring about three or four abstractors a month the past year.

“It’s acclimating to the new world. The emphasis isn’t how closely domiciled you are to the courthouse anymore,” Twibell said. “We recognize that expertise needs to be utilized for these orders. The nature of the work has changed but the reality is the expertise is still relevant.”

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