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Investor's Business Daily
- Like to Dump Some Paperwork From Property-Buying Process? -

Thursday March 9, 7:00 pm ET
Kathleen Doler

Real estate buyers and sellers face the daunting task of lifting heavy boxes of clothes and furniture.

Unfortunately, those aren't the only backaching things they have to haul to their next house.

Buyers and sellers also must move piles of escrow papers.

Many may wonder: Will these paper-intensive transactions ever be automated? That goal has been promised since the heady days of the dot-com boom -- and subsequent bust.

Now software makers and analysts see traction in this software market, as brokers work to reduce transaction costs and buyers demand a better way to follow and close deals.

Called transaction management systems (TMS), this work-flow software aims to help real estate agents document and track deals.

Pricing varies based on features, number of users and transaction volume. SettlementRoom Systems, one of the companies offering the software, charges $5 to $20 per transaction, depending on volume.

No one knows for sure how much such software might trim escrow costs. But any relief is welcome. Bankrate.com figures escrow and title fees averaged $2,748 in 2005.

The challenge will be to get people to change how they work. Also, widespread use of these systems will require that they integrate with forms software, share information easily with other transaction software, and enable electronic filing of paperwork to lenders and county recorders. Electronic signing and notary services are already available.

"Today, we're probably around 400,000 paid (TMS software subscriber) seats, but probably less than 100,000 realtors are actively using their (TMS) accounts," said Joe Kazzoun, a senior consultant with Scottsdale, Ariz.-based Clareity Consulting Inc. "But that is increasing rapidly, and we're hitting the steeper part of the adoption curve now."

Kazzoun says the more than 1.2 million realtors in this country are potential users of the software.

Spurring them along are their clients, who want more transparent transactions. If escrow is done online, buyers and sellers can access the transaction data more readily.

"You can track your package delivery online," Kazzoun noted. "Why can't you track the most important high-dollar transaction of your life?"

Inman News, a consulting and real estate news group based in Emeryville, Calif., has put together a consortium of software makers, brokers and others to try to speed the move to TMS software.

"Paper is like comfort food; people are more comfortable with a lot of paper around," said Brad Inman, the group's publisher. "We're trying to change that."

"We think consumers will help drive (the adoption of TMS products)," added Todd Costigan, senior manager of industry relations for the Center for Realtor Technology at the National Association of Realtors in Chicago. "The people who use technology in their daily lives have come to expect others to use it -- their realtors as well."

Who's in this software game? Clareity says a half-dozen companies participate in the market, with three firm leading the charge: Instanet Solutions in London, Ontario; First American Residential Group in Santa Ana, Calif.; and SettlementRoom Systems of Vienna, Va.

The fact that companies active in title insurance such as First American Residential's parent have built technology units to participate in this market is somewhat controversial. Some observers fear the software will be used to build the title business and control and mine real estate transaction data.

Kelly Pantis, senior vice president at First American Residential, says this criticism is old and is a marketing tool used against the software divisions of title companies by independent software makers.

"Back in 2001 or 2002 those question were asked, but now I rarely see that question raised," she said. "It's actually a great benefit to have a large stable company managing this technology. (Clients) want to have a national network that can install this kind of a product. And we are very careful to separate our title company from the rollout of our software."

Another marketing strategy: integrating TMS products with forms software that generates contracts, counteroffers and other standard documents. Instanet Solutions claims to have the edge in this area.

"We've been doing online forms since 1998, and we've built a transaction manager with integrated forms, which is unique to the marketplace," said Martin Scrocchi, In-stanet Solutions' chief executive. "Last year, realtors did 4.5 million contracts with our forms product."

Other software makers say their TMS products work with forms software made by third parties.

All the companies share one strategy: moving products to the market through state real estate associations and multiple listing services.

Celeste Starchild, vice president of SettlementRoom, touts deals with the Massachusetts Association of Realtors and Keller Williams Realty. Instanet has deals with realtor groups in Georgia and Florida.

First American has been courting multiple listing services across the country. It recently signed a deal with RE/MAX International Inc.

"Adoption rates are picking up and are pretty breathtaking," said Starchild.

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