COVID Innovations Are Emerging Even In Homebuying
Digital tools and online services have become increasingly valuable in recent years, and the demand for them have continued to rise amid the spread of the novel coronavirus. The pandemic has certainly accelerated the move to digital platforms, forcing industries to either adapt or fall behind. In the home buying industry, one example is a rise in remote online notarization, which allows anyone to connect with a commissioned notary public 24x7 to sign and notarize documents from any device — entirely online.
Amrock, one of the nation's largest providers of title insurance, property valuations and settlement services and responsible for delivering 90% of all digital closings with eNotes through the first three quarters of 2020, has doubled the number of closings completed in all of 2019 in just the first nine months of 2020. Any loan closing where at least one document is signed electronically are considered eClosings. They not only speed up the process but also allow borrowers to understand the closing process better, while remaining at a distance. By using this and other innovative technology solutions, the home buying industry can improve on services provided to for customers in the era of COVID-19 and beyond.
Currently 28 states have some form of a remote online notarization law. It is likely the rapid shift to handling these processes to online will outlast COVID-19. In fact, a survey conducted by Zillow found that 36 percent of Americans are more likely to buy a home completely online during the pandemic, and the same study found that 30 percent say they would do so even following the pandemic.
New digital tools such as eClosings are often developed through smart collaboration and industry innovation, but regrettably, some companies may be hesitant to engage in partnerships to develop such platforms. The risk of exposure to legal liability, as made evident by the uptick in intellectual property litigation, specifically related to contract and trade secret disputes is prominent among causes for this timidity. Previously I wrote about one notable example, Title Source v. HouseCanary, which gained notoriety in part due to its massive punitive damages, a staggering $706 million verdict awarded to HouseCanary.
HouseCanary was originally hired by the previously mentioned Amrock (formerly known as Title Source), for $5 million per year to provide a mobile application that would create property appraisal reports as well as property data and analytics, comprising estimates of home values developed by a real estate automated valuation model (AVM). For more than a year, HouseCanary repeatedly failed to deliver the product, resulting in Amrock suing for breach of contract. HouseCanary countersued, alleging Amrock misappropriated its trade secrets in the development of their own AVM.
During the trial, HouseCanary’s own expert witness testified that none of their technology was used in Amrock’s AVM. Further evidence demonstrated that HouseCanary never gave Amrock any proprietary information, that they were contractually obligated to build a working app, and that they failed to do so. Nonetheless, the jury sided with HouseCanary.
As I previously argued, “there is no rational explanation” why Amrock was ordered to pay $706 million, eventually swelling to $740 million after including attorney fees and interest, despite their original contract only being for $5 million.
Additional evidence came to light after the first trial had concluded, which included testimony from a former HouseCanary executive that the jury’s finding was based on inaccurate information. Subsequently, another three former HouseCanary executives came forward and testified that there was never a working version of the application and that HouseCanary had intentionally misled Amrock regarding the development of the product. After an appeal from Amrock, the Texas Fourth Court of Appeals in June this year reversed the initial jury’s decision, holding that a new trial is necessary due to flawed jury instructions in the original trial, which left the appeals court unable to ascertain if the verdict was based on valid or invalid legal theories.
Innovative companies which are following this case may take significant pause and reconsider their own potential liability before engaging with other companies. A lack of collaboration amongst companies would slow growth and negatively impact consumer’s access to these innovative tools, like RON mortgage eClosing services that can improve the overall consumer experience and their safety during difficult times.
Despite promising vaccine trial results there is currently no set “end date” to COVID-19. However, individual’s lives will not stop and the home buying industry will need to adapt to accommodate our new normal. The home buying process has and should continue to be adapted to suit our current and future needs, and the risks that may emerge in the future. Innovators will continue to adjust to new conditions and strive to make markets more efficient. But excessive and abusive litigation can threaten their success and harm consumers, as can be seen in HouseCanary’s legal assault on Amrock.
Wayne Brough is the President of the Innovation Defense Foundation.