This post is not about India or it's economy. It's about the validity of the title searches used to prepare the title policies purchased by your buyers. It's one thing when relatively benign services are outsourced overseas; it's something entirely different when technical decisions are relinquished to unskilled labor using inappropriate technology. There's been a rumor passed around the title industry for some time alleging that title searches were being performed online in India for certain title insurers I've tried in the past, unsuccessfully, to confirm the rumor to post on Title-opoly.
Though many jurisdictions have automated their land records, the information is considered completely unreliable for preparing something as important as a title policy. Automated ownership records are invaluable resources to title professionals who need to confirm a date or a fact found in a title search. Substantive research must be conducted at courthouses where it's customary for trained abstractors to compare title indexes to other sources of information. The secondary sources of information are often handwritten ledgers maintained by clerks at various desks, and other unsophisticated records, scattered around administrative buildings. Admittedly, the process is draconian, but it's all that exists in most states and very accurate once the idiosyncrasies are learned. I worked as a title abstractor and examiner in Maryland for over 20 years without a single claim. Maryland was the second state to automate it's land records, in 2006, and make certain information available online, without charge.
The following disclaimer must be acknowledged before entering the site:
The Clerk of the Circuit Court assumes no responsibility for this site. This website should not be used as a sole source for searching title. Researchers must check all indices including those at the courthouse.
Now, the news that all but destroyed my faith in the title industry. On July 27, 2007, The Economic Times, published in India, featured an article titled "Winning the title bout in style." The article outlines one of the most horrific and frightful stories that I could have ever imagined. A certain entrepreneur named M Sanjay Kanth owns a Bangalore-based company that provides title searches to the American title industry. The company is partnered with Stewart Title and provides title searches, the work is done in India, to two unnamed title insurers. There are only five title insurers in the U.S. and Stewart Title is one of them. Mr. Kanth anticipates creating upwards to 650 jobs, in India, over the next couple of years.
There's one more alarming fact, the article suggests that the company's title expertise can be found in the person of Mr. Kanth's brother who received 40 days of training while visiting this country.
A couple of thoughts:
- Many local title companies, yours may be included, now rely on title searches provided by their underwriters.
- Mr. Kanth's company is apparently providing title searches, from India, for three of five major title underwriters.
- I'm assuming that the two unnamed title insurers in the article are First American Title and Fidelity National Title since the India-connection ties in neatly with instant title products introduced by them earlier this year.
- An abstractor performing title research in your local courthouse had to apprentice for three years before becoming eligible for E&O coverage.
- How can a person qualify as a title expert in 40 days?
I'm saddened, more than angered, by the new development. As a long standing member of the title industry, I can tell you that a properly researched title is of paramount importance when preparing a title policy. Most people incorrectly believe that title insurers quickly write checks when title claims are filed by homeowners. It's rarely the case. A title insurance policy isn't an insurance policy at all. Technically, it's an indemnity contract which means that your buyer must first suffer a financial loss before being reimbursed. There's no promise that a homeowner will keep their home, the insurer is simply obligated to reimburse for actual losses up to the face amount stated in the title policy, typically the purchase price. Title claims cause a great deal of stress for innocent consumers. Sometimes the stress is emotional, which is costly enough, at other times it's both emotionally and financially devastating.
Improperly prepared title searches result in title claims. I know that much for a fact.
I'm forced to concede that title insurers have adopted the perverse philosophy of automobile manufacturers. Apparently, a family's suffering can be factored into an actuarial model with compensatory charges appearing on settlement sheets. After all, human lives are assigned a dollar value and factored into the price of new cars. The consumer foots the bill, and feels the pain, either way. Technology hasn't advanced to the point that a title for a property in Boston, Miami, Nashville, or Portland can be properly searched in Bangalore, India, not to mention the lack of credentials of the Indian abstractors.
A question for those of you who recommend title companies to buyers: Do you know who's doing the title abstracts?
May I suggest that you deal only with title companies that depend on title searches conducted by local abstractors with an E&O policy. It is after all, a good thing for your buyer and for the local economy.
In time, perhaps, automation may catch up with the lofty ambitions of Indian entrepreneurs and the greedy ambitions of American title insurers, but that day has yet to arrive.
A special thank you to Robert Franco, Source of Title Blog, for bringing this disturbing matter to my attention.
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