How Title and Escrow Companies Can Boost Efficiency

While the U.S. housing market has been stalled because of high interest rates, the slowdown provides companies in the real estate finance industry a chance to get ahead of a market rebound and improve their operations and workflows. Title and escrow companies that take automation to the next level now will be able to compete better when housing revives by becoming faster, more accurate, and able to deliver better service to their customers.

"We’re finding that title and escrow companies are interested in using their extra bandwidth now, while things are slow, to build efficiencies and capacity for when things heat back up," says Eric Heuser, Senior Vice President and Director of Corporate Treasury Management at Fifth Third Bank. Here are ways an escrow or title company can increase efficiency.

Streamlining the Closing Process

The advent of title and escrow software platforms has gone a long way toward creating a single source of truth about real estate closing transactions—a comprehensive system of record for title and escrow companies. But closing still requires the use of multiple systems and manual steps, which reduce efficiency and increase the risk of error or fraud.

However, tech-forward banks are now making available options that integrate financial transactions directly into existing title and escrow platforms, such as SoftPro and RamQuest, streamlining the closing process and saving valuable time by decreasing the number of steps required and eliminating errors made by rekeying and manual entries.

"By embedding within the title production system, this integration removes the need to bounce back and forth between the title company’s accounting platform, the title production system, and a bank portal," says Heuser. "In addition to the increased efficiency, title companies are gaining greater confidence in the quality of the data."

The closing process requires many steps, beginning with the homebuyer sending a payment for the amount of the deposit to the title company, which then pays the seller and other parties at the closing, which can be either in person or, increasingly, online. All of the transactions in the process are part of the closing file.

Avoiding Delays and Losses

Gaps and errors in processing can be costly, both financially and in terms of customer satisfaction and reputation for title and escrow companies. For example, delayed payments for taxes or insurance can hang up the closing and seriously undermine the title company’s brand.

Title and escrow companies could also suffer financial losses because of fraud. According to the American Land Title Association (ALTA), the industry paid more than $900 million for fraud and forgery claims from 2013 to 2022, with the average claim costing title insurers $143,000.

Even when the closing is conducted within a title platform, each payment for things like fees for real estate brokers and attorneys, the appraiser, surveyor, and title insurance must be sent separately. Although the closing may be online, the agent for the title or escrow company still needs to bounce back and forth between their own accounting system, the title production platform, and a bank portal to complete a payment. Wire transfers must be handled separately.

How Firms Achieve Closing Efficiency

While there are many opportunities to increase efficiency and transparency in preparing each closing file, one of the simplest and most effective is through the use of embedded payments. Fifth Third Bank was one of the first banks to offer direct payments from closing platforms.

“We are among a very small group of banks that offer this integration,” says Heuser. “We continue to evolve as the landscape changes, ensuring that we remain at the forefront of the industry."

Title and escrow companies that have used embedded payments say that the integration of payments on the closing platform has solved several problems, including:

• Eliminating many manual steps. By initiating bank payments from within the closing platform system, agents no longer need to bounce back and forth between their systems, the platform, and the bank portal to complete a transaction.
• Simplifying the process to receive confirmations that payments are pending or complete. Payments are digital and immediately visible.
• Eliminating questions about whether a payment has been made, giving all parties greater confidence in the records and data visible on the platform.

The integration of payments also includes these benefits:

• The bank also provides confirmation of non-bank payments. Wire transfers, which may be mandated by states, still require a separate process, but those transactions are tracked by the bank and visible on the platform.
• During closing, the title agent can see payments moving in and out of the bank in real time.
• Users of embedded payments report faster completion of closing files.
• A feature called check positive pay decisioning allows businesses to review payments that don't match their issued payment register and decide whether to pay or return them, a form of automated fraud prevention.

Next Steps in Title Payments

Advanced technology title companies, title companies, banks, and other participants in the industry are beginning to use artificial intelligence and other advanced tools to make closings faster, according to ALTA. "We’re not doing a victory lap after building these integrations," says Heuser. "We will continue to evolve as the landscape changes."

Real-time digital payments in closings are currently limited by law to certain parts of the transaction. For example, Ohio has adopted rules requiring wire transfers for payments greater than $10,000 or out of title company trust accounts (except from the realtor’s escrow account).

But these types of restrictions are expected to change as the technology gains acceptance. For example, more than 900 banks and credit unions have signed up for the FedNow direct payment system. Integrated bank payments on title platforms will allow title and escrow companies to quickly take advantage of expanding digital payments options as they become more widely adopted.

"As instant payments become more prevalent, and as regulatory agencies allow for instant payments related to real estate closings, banks with leading technology like Fifth Third are building the capability to generate instant payments via FedNow and the Clearing House Interbank Payments System," Heuser says.

For more information about Fifth Third’s solutions for title and escrow firms, contact your relationship manager or find a banker.