Monday, September 10, 2012

Closing table disappearing? What’s next?

The closing table as we all know it has been evolving throughout the years. I had a wake up call a couple of weeks ago when a client, in the middle of a conversation regarding real estate investments in Miami, asked me what a closing table was. You might say there are a lot of people that out there who do not know what a closing table is, especially nowadays that most people in the US are renting instead of buying because it is really hard a find a mortgage. But coming from a very active real estate investor from Latin America, the question definitely caught my attention. Then, after I explained what a closing table was, his next question was how come I have never been to a closing table and I have bought three investment properties this year?

Now you can see the importance of the question. The real estate business is definitely evolving and technology is playing a major part.  Years ago, buyers and sellers would meet at the property to inspect it before closing. Then the buyer would get a cashiers check and bring it to the closing table, where he would meet the seller and the representative from the title company (usually the attorney), and they would all sign the closing statement most commonly known as HUD1 and seller documents.

Nowadays, title companies highly recommend wire transfers over cashier checks. Actually, some of them do not accept cashier checks at all to prevent fraud. In addition, in international markets such as Miami, it is very common for buyers and sellers not to be physically located in the same city. Therefore, it is common to conduct mail away closings, in which seller documents are sent to the seller, who gets them notarized wherever he is located. The same process takes place with the buyer. They are basically signing the closing documents in counterparts. To give you an idea of how frequent this happens, 95% of our closings this year have been mail away closings.

As you might have noticed, nowhere in this process do buyers and sellers meet in the same place to sign closing documents. Now you can see why a very active real estate investor does not know what a closing table is, since he is just wiring funds and signing documents abroad when buying property in the US.

As a result, with the closing table disappearing or losing importance, some of us are asking ourselves, what’s next? Is it the real estate agent? Is it the title company? Personally, I don’t think any of these two entities are disappearing in the short term. However, there is one change that is slowly taking place in the real estate business. Buyers and sellers are relying more and more on the Internet to conduct their own research, sometimes before even contacting a real estate agent. Most of them actually contact a real estate agent after they have conducted their own research online.

Therefore, the agents who empower real estate consumers with the tools they are looking for to conduct their own research online, will be the ones better positioned to retain consumers. This is very similar to what happened with the travel industry and the car industry. When was the last time you bought an airline ticket at a travel agency? When was the last time you bought a car without doing research online first? Granted, real estate is way more complex than an airline ticket and than a car, but I have many examples of real estate consumers who started doing their own research online and they contacted an agent after they made up their mind.

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