Comment by poulsbohemian | Hacker News Reader

Comment by poulsbohemian | Hacker News Reader

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>Title insurance when buying a house also seemed like a total “legally required” joke.

Real estate agent checking in here... I agree with you, but there's always a but... the problem is that there really are situations where there's a cloud on title or where title is questionable. This doesn't mean there's anything nefarious going on, and it also often isn't a question of history (IE: title recorded on parchment or something). It also seems to me that some states are just better at maintaining good title records over others - and again, I'm not convinced this is directly related to the timespan of recorded history.

So the problem then is an 80/20 or a 99/1 thing... 90+ % of properties the title insurance is going to be a waste of money. But in those few cases, it really could make a difference. Since the amount of money involved is usually quite small, especially relative to the size of the transaction, it becomes really hard to change the system.

Not to sound snarky, but this was my reaction as well. It's also the very nature of insurance: you get insurance to cover the rare but costly problems that arise. If they're not rare, you don't need insurance because you address the problems another way.

Yeah, that's exactly it. I know I've certainly spent spare brain cycles considering it, and there seem to be a number of startups trying to create cheaper title insurance, but it's not clear to me how to really solve the issue. Basically it's a human behavior and record keeping problem. You have to have perfect records, and you hope some estranged cousin doesn't magically popup with a deed someday claiming to own your house. So, you fork over $1000 just in case.

I'm actually in a transaction right now where the title history is weird and questionable. Will the insurance be a factor? Probably not, ironically, but it's exactly the kind of scenario for which this kind of thing exists.

When we bought our house, after our down payment and on our way to closing I asked a question to the escrow/title insurance person:

* the disclosures show two slightly different figures for the dimensions of the lot, which one is it? (County mapped shows Width W and another owner provided map showed W-1ft or something like that)

Instead of doing anything to try to figure it out, this title insurance company (also doing escrow) lowered the tier of title insurance they were willing to provide LOL

Because this was a material change, once they saw we wouldn’t go through with the transaction without the best coverage they changed their minds about and said that they’d title insure at the highest level… but only once we pushed them on it…

Nobody did any more work to settle the question than us, who went to the house and measured to determine which dimension was right…

Yes, there's plenty that could be discussed about how to improve the title / escrow process, in addition to the information collection process... for much of it, it comes down to being a better process than the alternatives, having been refined over decades (or longer).

The state of that industry is absolutely incredible to me. Throughout the whole home purchase process all I can see is people trying to cover their ass and do the absolute minimum amount of work possible. I understand that they want to avoid getting sued, but the whole process (sell side agency, brokerage, buy side agency, title, home insurance, financing, escrow, whatever) is just agonizing every step of the way. I see a great opportunity for a vertically integrated agency that could own as much of the process as possible and lower the fees, but only admit "easy" clients who don't have any custom needs.

It's actually a much "safer" process for buyers and sellers today...there actually used to be greater integration in the past, but a lot of that went away in order to protect consumers. Regarding fees - when you actually break down the cost of a home sale, the fees really aren't much. On the sell side in particular, that commission should be irrelevant if the listing agent was doing their job, IE: marketing your property in a way to get you a top dollar return. Likewise, from the perspective of the buyer - the NAR / DOJ lawsuit could result in a scenario where the buyer pays an agent commission directly, rather than via the closing settlement, but I guarantee we do not want to be living in that world - it's a case where the current system might seem bad, but it's better than the alternatives. Would love to chat sometime if you have thoughts on the industry.

As much as I love my clients... there are very few who are "easy" in the same way that there are very few "normal" transactions - this is where Zillow et. al. just don't understand the realities of real estate.

> a lot of that went away in order to protect consumers

As I and the parent poster were discussing, the consumers are not being protected. Every single player is just compartmentalizing the areas in which they cover their ass. As a customer I am not being protected - I'm on the hook if anything goes wrong, and nobody actually goes out of their way to check if anything is wrong, as long as the documents look generally like what they are used to.

I will respectfully disagree with you about the fees. I understand the value prop of everyone in the value chain; in HCOL markets their prices are not justifiable and are ripe for disruption (and to be fair in LCOL markets there's no problem with the pricing). This is where vertical integration has a lot of potential.

I expected Zillow to come up. Zillow made a pretty fundamental mistake of introducing a house flipping business on top of their services business; even if they had perfect models that made their flipping business a success, I don't think the two could coexist for long because holding property is so fundamentally different from services. As far as their original business, I think they and Redfin and others "understand the realities of real estate" perfectly well; they are just up against a cartel that would be illegal in most other industries.

Happy to chat - my email can be reached from my profile

> On the sell side in particular, that commission should be irrelevant if the listing agent was doing their job, IE: marketing your property in a way to get you a top dollar return.

A vendor agent’s financial incentive is to sell as quickly as possible, and spend as little time as possible on the sale. Successful vendor agents are very good at convincing vendors that they should sell, quickly. They have a variety of strategies, and vendors are easily convinced they got good value, since successful agents are good at marketing a narrative (and the vendor wants to believe they got a good deal).

Let’s say a successful agent sells 50 houses as quickly as possible. Another more honest agent works to get the best price, which takes them twice the time, so the honest agent only sell 25 houses. The commissions from selling 25 houses nets the honest agent approximately half the profit compared to the successful agent selling 50 houses at lower prices.

Financial incentives really do influence most agents, even if they are not so aware of how they have been influenced by other agents to sell quickly.

Most other countries solved the issue a century ago with Torrens title.

Both Torrens and Abstract are in play in the US, sometimes even within the same state.

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