Should Real Estate Attorneys Produce Their Own Closing Documents?
Everyone in the real estate industry is examining their practices in light of the big changes coming August 1, 2015. The new closing forms from the Consumer Financial Protection Bureau are the most significant change to real estate closing in years, and we may see different agencies than before handle each part of the closing process.
Real estate attorneys are considering their role in the process as well. Closing software is widely available making it easy to produce the necessary documents, but would it be better to have the title company handle this process? This paper explains why you should keep closing documents in house.
Just because you can doesn't mean you should
Computers make our lives easier by allowing us to do so many things from our desks or, with the rise of the cloud, from anywhere with internet access. Attorneys don't have to hire assistants since they can easily write their own letters, organize their own calendars, make their own travel arrangements and so on. Unfortunately, the problem is that attorneys seem to have less time to handle cases than they used to because they write their own letters, organize their own calendars, make their own travel arrangements and so on.
That's the trap of software. It gives us capabilities we don't need and can saddle us with jobs that we shouldn't be doing. We waste time with tasks that should be delegated to other staff members.
That brings us back to closing. Long ago it made sense to have title companies produce closing paperwork. Modern closing software allows attorneys to produce the software themselves, but is that a wise move? In this case, yes it is. Closing software is a good idea for real estate practices for several reasons including cost, control, liability and integration.
Qualified professionals are expensive. They earn that money by providing specialized services and are often more cost effective than providing the same service internally. While that might be true for many tasks, real estate closing documents aren't one of them, especially for large firms.
When you contract with a title company, you pay a fee for each closing. The more closings you do in a year, the more you spend. However, when you use real estate closing software, you pay the same amount no matter how many closings you handle. You pay a known cost for the software whether you use it once or a thousand times. There is a breakeven point where it is cheaper to use software than to pay title companies, and that point is usually quite low. So using real estate software to produce your own closing documents lowers costs and increases profit compared to using a title company.
Timeliness has always been important for closing document and it is going to be even more so with the new CFPB changes. Forms must be in the consumer's hands much earlier than before, and failing to meet these strict deadlines jeopardizes the transaction. Do you really want to have to tell your client the sale fell through due to someone else's mistake?
The more services you keep in house, the more control you have over the process. You can implement procedures that ensure every document associated with every transaction is created correctly, submitted promptly, and recorded completely. Your practice doesn't depend on someone else doing the job right. You keep control so you ensure every aspect of the closing process meets the same standard of excellence as the rest of your practice.
Missing closing form deadlines does more than just threaten the sale of a property. It exposes your practice to serious non-compliance penalties. Even if the title company is the one who misses the deadline, your law practice could be held responsible for the error. That may not seem fair, but as an attorney you know the law is not always fair.
If your practice is going to suffer the penalties, then you might as well do the job yourself. Take responsibility so that you know what is getting done, and more importantly what is not getting done. You have the motivation to be sure the closing forms are completed and submitted according to the law.
The closing paperwork is only one part of the real estate process. If you farm that out to a third party, then you break the link between closing and the rest of the transaction. You can't guarantee that the exact same information you have on the rest of the paperwork is what will appear on the closing documents. You have no place you can see the entire matter. You have to look in multiple places to get the big picture.
A full-featured closing solution is about more than just sending out some forms. It ties the closing documentation to your calendar system so you can be sure to submit the documents in a timely fashion, to your tax system so you can submit your 1099 forms, to your financial system so you can track disbursements and generate a closing ledger, and to your other documentation so that any other correspondence or contracts generated are kept with the closing documents.
Real estate closing software is the best choice
We aren't trying to denigrate title companies. They provide critical services to the real estate process, but that doesn't mean they are always necessary. If you can provide the same or better quality closing documents then you might as well keep the process in house for the reasons listed above. Thirty years ago, producing closing documents was difficult, but today's software simplifies and streamlines the process so that anyone can do it.
If you are still unsure, then try handling the closing documents yourself on just one or two transactions. Closing software developers like Easysoft typically offer free demo versions so you can test out the process yourself. Once you see how simple and affordable it is, purchase the full software and start producing your own closing documents.