Getting a clear title is a crucial step in the real estate transaction process, and First American Financial is hoping to make it easier, faster, and more secure with blockchain. The title insurance company announced the launch of a new state-of-the-art blockchain system that can be shared with other title insurance companies, and Old Republic has already signed on.
First American is the nation’s second largest title insurance company, behind Fidelity. Old Republic is the third. First American said of its system that it’s designed to “increase efficiency, reduce risk, and improve the title insurance process.”
If you’re not familiar with the details of the title insurance industry, it may sound odd that First American launched a platform that it shares with Old Republic. But, title insurance companies have a long history of sharing information. First American said in its press release, “This blockchain system melds that established practice (of sharing information) with emerging technology to further increase efficiency and lower risk in the title production process.” (1)
Unique Identifying Code
The blockchain basics for title insurance begin with a unique identifying code that’s assigned to each property entered into the system. That will make it easier to search for them in the future. First American says it will improve the accuracy of search results while looking for any historical data on the properties.
Technology experts say the blockchain system is safer because it provides a time-stamped ledger that cannot be changed or hacked. It is also managed by a network of computers so the information isn’t stored on just one vulnerable server. When property data is put into the system, it’s also visible to everyone who accesses the system. Attempts to change anything are virtually impossible since the information isn’t just in one place, but those attempts would also be visible.
We’ve been hearing a lot about how blockchain is going to revolutionize many industries, including real estate. Improving the title insurance process is just one of several ways blockchain is expected to change the industry.
$15 Billion-a-Year Industry
The title insurance business has a long history dating as far back as 1853 when the first title insurance company was founded in Pennsylvania. That was called the Law Property Assurance and Trust Society. First American Financial was originally part of First American which got its start in 1889. It split in 2010 to form First American Financial, and real estate data analytics company CoreLogic.
The title insurance industry is worth about $15 billion in revenue per year. It is currently dominated by four companies including the three I mentioned, along with the Stewart Title Guaranty Company. While title searches may be relatively easy for many properties, they can also be laborious and time-consuming.
Currently, each city, county, or municipality has their own methods for storing information on property titles, along with any liens or encumbrances. Some local governments have tried to make the process easier by putting the information online, but even that can be glitchy. And, many places still do it the old fashion way — on paper. (2)
Easier, Faster, More Secure
With blockchain, property information would be put into a system that is accessible by any individual or municipality, without traveling to some remote recorder’s office or struggling with a clunky online database. That would make title searching much faster and more efficient, but in addition to saving time and money, the blockchain system could prove so accurate and secure that it may, eventually, eliminate the need for title insurance altogether.
As a Forbes article points out, “It could also be possible to add information about construction, damages and improvements to the title, almost like Carfax for homes. This will help make it so that people truly know what they are buying.” (3)
But at this point, all that information is still being kept in the archives of individual recorder offices. First American Financial has taken a first step, but many more are needed, potentially by other financial tech companies that could help get all that information into the system. Or maybe it will build over time as properties are bought and sold, and the corresponding data goes into the blockchain system.
By whatever method it develops, it will likely mature into something massively different than what we’re used to today. And maybe you’ll experience it with your next real estate deal!
(3) Forbes Article