A Pennsylvania title abstractor named Scott Perry has launched an Active Rain blog named Bossman's Blog.  The addition of an abstractor to our eclectic  collection  of professionals is an exciting development.  I happen to be an abstractor by training even though circumstances kept me behind a desk more than I liked.  Sadly, the public knows very little about the important work done by these intelligent, hardworking colleagues of ours who quietly spend the bulk of their time in local courthouses. 

It needs to be said: an abstractors work-product is the solid foundation of a positive closing experience for buyers!  Hopefully, we'll be able to convince Scott to share with us what he does and why it's so important.  Personally, I'm of the opinion that a title insurance policy is only as good as the abstract that was used in its preparation.

In a recent post, Scott wrote about the plight of title insurers whose financial statements are suffering due to the cumulative effects of elevated claim's ratios and decreased business levels.  Scott and I share a serious concern that land record integrity could potentially fail because underwriters are purposefully lowering abstracting standards to increase their bottom lines.  The major players in the title insurance game have invested heavily in offshore abstracting plants located in India, the Philippines, Panama, Israel, etc.  Aggregated ownership records are being acquired from local jurisdictions and resold overseas. 

It's a complicated matter that raises any number of critical questions.  Foreign abstractors lack the training and experiential judgment to properly search titles.  It could be argued that foreign title plants aren't as complete as local land records and therefor shouldn't be used to produce title policies.  Title searches prepared overseas aren't the technical equivalent of the searches prepared domestically and are therefor problematic. 

Fran Gaspari, our resident title guru, would agree.

Unquestionably, underwriters are experiencing a significant increase in claims due to a short-sighted approach to title searching.  Regrettably, a title claim, even one that's resolved quickly, is a nightmarish experience for consumers who often retain council to  protect their perceived interests vs their legal interests as defined by their owner's title policy.  Consider the emotional wear and tear of dealing with any litigation involving your home.  A title claim could reflect poorly on you as a real estate professional, if you actively refer buyers to preferred title companies. 

What do you really know about the internal practices employed by your title company?

Additionally, important security risks come into play.  Some years back, the Feds required that social security numbers be included beneath borrower's signatures on certain mortgages (substitute deed of trust for mortgage as applicable).  At the time, before we even heard of the internet, all records pertaining to homeownership were maintained by local clerks at local courthouses.  An unscrupulous character could access this sensitive information which became public record when the mortgages were filed, but it required a certain amount of effort which is not the case any longer.  If you signed a mortgage during the late 1980's or early 1990's, it's entirely possible that your legal name and associated SSN has been digitally transmitted to unsecured, questionable destinations around the globe. 

It's not a good situation!

The debate over the appropriateness of bigness in real estate model design is far from resolved.  Bill Roberts, my friend and AR nemeses, would argue that consumers benefit from the reduction of costs associated with economies of scale.  I can't disagree in theory.  At the same time, I strongly feel that certain aspects of the homeownership process are best left localized.  You need to know that Bill and I have privately agreed that his home state of California lends itself to business models that wouldn't work in other parts of the country.

At best, the upside of an offshored title search is the savings of roughly $150. 

The downside is an increased risk of involvement in litigation for homeowners. 

If I were to become a real estate agent, my buyers would use only title companies that relied solely upon local abstractors.

Seriously, how could anyone argue otherwise?