We are in the midst of the most profound change since the beginning of the industrial revolution. Creating change, managing it, mastering it, and surviving it is the agenda for anyone in business. —Tom Peters
A number of events are occurring both at the national level and within individual states that collectively are fueling changes that are expected to substantially impact the real property attorney. These include industry consolidation among realtors® and lenders; continued sustained monetary losses by almost 40% of the real estate brokers; commercial title company promotion of joint ventures with realtors® and lenders that exclude the traditional legal and title services by attorneys; lack of regulatory or unauthorized practice of law hurdles; and pending legislation that will considerably encourage "one stop shopping" to the demise of the real property bar.
According to author Jennifer James in her book, Thinking In The Future Tense, professions have lodge mentalities. Ten years ago, most doctors never thought that the world of medicine could change as drastically as it has. Attorney/consultant Charles Robinson predicts lawyers will be next if we don’t start visioning and looking at what our future may be and begin assertively taking advantage of our opportunities. According to authors James and Robinson, in a lodge mentality, when things get tough, the first thing you do is kill the visionaries. The second thing you do is make the rules tougher on the practitioner who wants to vary from them. Regrettably, for real estate lawyers, "tougher rules" designed to protect the profession have been swept aside by an overwhelming number of factors that include new forms of competition.
Some lawyers discount the present threat posed by the cross-selling of services citing the abandoned efforts of Sears, Merrill Lynch and others to effectively market new and diversified services. As attorneys, we are trained to look "backward" at such prior cases in order to determine future outcomes. Unfortunately, the business side of the practice does not treat such "rear view" thinking kindly. The problem is that there may be little relevance to historical events that are even remotely similar to the sweeping changes that are predicted to transform the staid world of residential conveyancing. Furthermore, there is evidence to suggest that prior cross marketing efforts were showing some signs of success when the parent companies for unrelated reasons, retreated to concentrate in their core services. As learned the hard way by other professionals, it is a completely different environment than existed over a decade ago. For these reasons, "stare decisis" based decision making may not be the best road map available to the non-legal side of a real property practice.
As Charles Robinson puts it, attorneys have exacerbated the coming challenge by hiding behind "professionalism" for years, using it as an excuse to avoid adopting change. Real competitors to the legal profession aren’t necessarily other lawyers:
• AARP Legal Services and other rapidly developing pre-paid legal services will set the pricing for commodity legal services including real estate transfers
• Lay "representation" of buyers and sellers of real estate
• Self help and pro-se litigators are on the rise in most jurisdictions
• CPA’s providing an array of services previously considered within the domain of the legal profession
• State and national mortgage lenders are already planning on adding title insurance services to the detriment of attorneys currently providing that service
• Controlled business vehicles with commercial title companies and real estate brokers are rapidly proliferating at the direct expense of the independent attorney now performing legal and title work
Exacerbating the above, as attorneys, we have taken our role in residential conveyancing for granted. We have not made the persuasive argument for the value of our legal services. Furthermore, the Illinois professional rules against qualifying as a real estate "specialist" have been strained to the point where it is commonly perceived that "anyone" can do a house closing. Yet if it is so simple, how does one reconcile the fact that residential real property practice remains one of the highest categories of attorney malpractice claims?
As lawyers, we have not consistently made the convincing public case that competent professional legal representation does indeed add value to the transaction that can not be replicated by lay scriveners who merely produce form documents. Given the parochial nature of a real estate practice, only consumers relocating from a non-lawyer conveyancing state realize the lower closing costs, greater efficiencies and legal protections derived from their retention of competent independent counsel-a consumer group too small and infrequent to overcome changing customs.
Much has been written about the national battle between lenders and real estate brokers for influence over consumer choices and, we must position our professional services for alternative paradigms. For example, at least two events could forseeably result in a future shift in "point of sale" influence currently enjoyed by realtors® and lenders. One is legislation reforming RESPA and TIL which is currently playing out in Washington with the realtor® position thus far prevailing over that of the lenders. The other factor in shifting of existing controls is that of emerging electronic-commerce technologies. The Internet availability of MLS data coupled with Microsoft’s property listing program allowing consumers access to information previously available only through realtors® will undoubtedly change the existing environment. Realtor®- associations are beginning to realize this potential threat and now make the argument that the MLS data constitutes legally protectable intellectual property.
The real property bar can not afford to wait to see which group prevails as to do so will eliminate any opportunity to shape or influence the ultimate market. Pro-active steps designed to protect the consumer’s ability to retain independent legal counsel for title and legal services must be taken now. For largely self-serving reasons, experienced realtors® still prefer utilization of competent real estate attorneys and national studies conclude that consumers pay lower overall closing costs when they retain counsel. Notwithstanding this, history indicates that once realtors® and lenders become accustomed to utilizing in-house settlement service providers, rarely does the business revert back to external source [witness California and other lay escrow states].
Upon the realization that changes are imminent, what can be done to help preserve the traditional role of the real property attorney?
Considering the following:
• Improve service levels to clients and business sources to blunt the encroachment of the "in-house" service providers
• Utilize any available influence over local title companies that care covertly working to eliminate the role of title/legal counsel
• Document cases of avoidable consumer harm as a result of their failing to retain competent legal counsel and report same to the American Bar Association LTGF Committee, the Illinois Real Estates Lawyers Association and other bar groups that are establishing data bases and web sites for that purpose to be followed by a media campaign
• Participate in and promote consumer grass roots campaigns on the value of independent legal counsel in residential conveyancing
• Embrace changing technology in order to be in a position to benefit from future Internet driven changes
• Support bar-related and other title groups that are working to reinforce the traditional role of legal counsel
As attorney Robinson posits, "lawyers are like the great buffalo of the 1800’s locked in a stampede for extinction with the cliff two to five years away. Those in the middle of the herd won’t survive because they won’t be able to turn unless they start to move now. Even those with the physical ability to avoid the cliff will have to understand the need to change direction. Six out of 10 American lawyers will go over the cliff."
The survivors will realize that in fact there is no "lawyer exception" for change.
Kevin J. Cooney is the President of Professional National Title Network. He is on the forefront of the battle to preserve our profession.