By Dennis Kaiser

The commercial real estate title business is a labor-intensive process of gathering information from myriad sources, such as lenders, buyers or sellers, to consummate a transaction. Connect Media spoke with representatives at one of the country’s most respected and oldest title firms to find out what the CRE industry needs to know about how COVID-19 is impacting title and deal closings. Chicago Title’s Lance Capel and Shauna Smith shared insights into how the current situation is most affecting the closing process in our latest CRE Q&A.

Q: What are some solutions or advice you have for clients today as the coronavirus pandemic unfolds? What are people NOT thinking about that they should be?
A: This is a dynamic situation that everyone is facing today. That means we must be creative and proactive to anticipate situations that may arise. Since we conduct roughly 60% to 70% of our title business outside of California, we must be flexible and try to be proactive on the next steps. We tend to rely on our network of internal vendors across the Chicago Title platform. That helps us anticipate any potential problems that may arise in other parts of the country on transactions. The biggest issue we now are facing is county recorders that are closed due to restrictions from the COVID-19 pandemic.

That may impact deals where electronic filings are not possible. Fortunately, 75% to 80% of the filings in California are electronic, where we can scan and record electronically. If you can’t do that and we have to file manually that is a challenge because recorders offices aren’t open. That is a reason gap coverage is necessary for title transactions to cover the time between the last plant date and the date of actual recording. Lenders want protections to keep others from jumping in front of them priority-wise. This is a unique situation and there are some guidelines and provisions emerging to extend in certain counties where rural courthouses are closed and not expected to record filings for 30 or even 60 days. There are some guidelines in place that still allow deals to close and title policies to be provided.

Q: What were some interesting things you’ve seen as the past few weeks have progressed?
A: As recently as last week, California and many other states did not recognize online notary signatures. That is currently changing, as COVID-19 could potentially make mobile notaries and in- person signings unavailable. This situation has pushed online notary signatures to the forefront and we are currently monitoring how each jurisdiction is choosing to handle them, so we can adjust our closing guidelines and practices accordingly. We are aware and mindful of the amount of forgeries that can occur, when signings are not handled in person. It is wise to stick to best practices and be on guard because this situation could be a haven for predators and cyber fraud. Title and escrow teams must remain on high alert for cyber fraud and have strong practices in place to confirm closing items like proper authority documents and signatures, the same way they verbally verify wire instructions and wires over certain amounts, for example.

Q: What potential issues do you see on the near horizon?
A: One of the more pressing issues is April 10th, when property taxes are due. So far, California hasn’t given notice that property taxes will be deferred. That means they must be paid. This presents some interesting challenges since tax assessor’s offices may be closed and may not accept electronic payments. Property owners must be careful to make sure payments are received and shouldn’t rely on Fed-Ex or UPS to deliver to a closed office. Perhaps one of the best ways to send property tax payments is certified mail via the U.S. Postal Service, because it requires a signature.

This all requires proactive planning and plenty of early communications with clients to arrange necessary payments, since it will take more time now. It may require money to be held in escrow until there’s confirmation that taxes were paid. If not, that looks to be a sure recipe for claims galore. At best, it will require patience for all involved parties in a transaction.

Q; How has the work environment changed for those in the CRE title business?
A: People need to work remotely, so we need to tap into business continuity plans. Many companies bought laptops, so, if needed, people could work from home. We fortunately took our continuity plans seriously and were prepared. Some aren’t necessarily that efficient yet, and delays are greater. But we are trying to get out information to clients as often as possible. That is helping to defuse tensions.

This situation has forced all of us to adjust our expectations regarding closing timelines, as different counties are handling this situation in their own ways. There must be ample time to review things now, in case additional time is needed to clear items from municipalities and organizations that are partially closed or not operating. It could be something minute that causes the delay, but it turns into something larger because of the current environment. We must make sure everything is taken care of, and the more detailed you are today will help in the long run. But people must be prepared for those delays and the coronavirus situation has forced everyone to slow down and look at things closely and pay attention to details. Doing so may help eliminate 11th-hour issues by addressing things early. As a national platform, we can keep in constant contact with other offices to find out what is happening in local markets and how they are finding alternative solutions to issues. By remaining in constant contact with other offices and knowing the right people to talk to, we aren’t being hamstrung by the obstacles that COVID is causing.

This COVID-19 pandemic shows why having a relationship with a deep organization like Chicago Title is important. Even in an industry that is somewhat commoditized, at times like this it separates the varsity from junior varsity teams. Having a professional team, supported by those with hands on knowledge, beyond simply serving as a relationship manager, can work to the advantage of those trying to get deals done in a challenging situation, like we all find ourselves in today, as a result of the coronavirus pandemic.
Now is not the time in trauma to go to a general practitioner, it is vital to work with a title professional.

Q: Can you share some action from the front lines, since the COVID-19 situation has emerged?
A: From a volume perspective, there’s a strange dichotomy going on here. We experienced a record Q1, perhaps the best in history of our commercial group. Our orders are higher than ever, but we anticipate a slowdown, and we expect lenders to tighten up.

Every day is something new, with a bi-polar market that’s up 1,000+ points one day and down the next. Every day is different. That feeds anxiety. We are hedging a drop of from 10% to 30% in the coming months

We’ve seen deal flow pretty similar across product type and markets. People have pulled back, but not canceled deals. They are just letting the water settle and are maybe extending. They are underwriting cautiously what they bring in the door. We feel business will come back and clients will be eager to do deals once the threat has dissipated. They are simply being cautious now.

For comments, questions or concerns, please contact Dennis Kaiser