Real estate transactions are complex, document-heavy and long-running. As such, they present a significant number of challenges for the lawyers working on them. Despite this, little has changed in terms of how these transactions are managed – with lawyers carrying out due diligence on the same volume of paperwork, and carrying out the same manual admin work using the same tools as they did more than a decade ago!
In this article, we look at how legaltech can challenge the status quo – equipping lawyers with tools that are up to the job of managing these transactions.
What makes real estate transactions so challenging?
Real estate transactions are distinct from transactions in other practice areas, and can be difficult to manage for a number of reasons, including:
1) Large volume of documents
These transactions typically involve a substantial amount of documentation. Managing the sheer volume of documents and the queries associated with them is a job in and of itself.
2) Complex due diligence
Lawyers are responsible for carrying out comprehensive due diligence for real estate transactions. This process is in-depth and critical to the success and legality of any real estate deal. It involves meticulous examination of several areas, including contractual obligations, property titles, and other legal intricacies. It also involves collaboration with a range of teams and third parties to gain the necessary information, including those from construction, taxation, planning and property management backgrounds, for example.
3) Enquiries on title
The enquiries on title process typically involves a lot of back and forth between the buyer and seller to resolve any queries that may impact the purchase. Documenting these queries as they progress can be time-consuming and is prone to human error.
4) Financing and mortgages
Real estate transactions by their nature often involve a financing element, as the purchaser requires funding to procure the asset. Managing the conditions precedent (CP) process can often extend to hundreds of CPs, and involves communicating and coordinating with multiple parties and teams. These include banking, taxation, planning, real estate and construction lawyers, as well as third parties such as lenders, property managers and sub-contractors.
5) Complex closing process
Due to the many parties involved in real estate transactions, the closing process is complex and involves a substantial amount of work in preparing and reviewing the necessary documents.
How do lawyers manage real estate transactions?
Despite the many advances in legaltech in recent years, many lawyers are still using tools like Word, Excel – and even Outlook reminders – to manage their real estate transactions. In fact, a survey originally undertaken by Epinion indicated that 68% of lawyers and auditors viewed Word as crucially important to their work, with 56% spending over three hours a day using the software.
Some law firms also use data room software to share and store their real estate documents. Data rooms allow for bulk uploads and can hold all of the relevant documents securely, for users to organise the documents into appropriate folders within the data room or in another file management system.
However, despite their benefits, data rooms are not without risk – with users missing email notifications when new files are uploaded, resulting in version control issues and ‘overlooked’ files. They also offer no capacity for managing the status of document review.
Attempting to manage real estate transactions using Word and Excel, to create lists or to deal with enquiries on title for example, is far from efficient, time-consuming and increases the potential for human error.
Using Word and Excel to run your transactions is like using a typewriter in the age of AI.
How does legaltech improve the management of real estate transactions?
Transaction management software can do a number of things that Word and Excel can’t! Using a platform like Legatics to create and manage lists, for example, saves lawyers a significant amount of time and creates a single source of truth – reducing version control issues and the risk of documents being misfiled or misplaced.
Lists in Legatics are fully customisable, with specialised columns you can resize, rename and re-order with ease. The platform also has a full audit trail to log every action taken, advanced permissions so you can set who has access to what information, and automatic notifications to alert parties of actions assigned to them.
As real estate transactions rely on coordinating and communicating with multiple parties, like surveyors, architects, technical experts and lenders, having a central platform to store all of the relevant information is invaluable. This significantly improves convenience and collaboration – with features like notifications for assigned tasks enhancing this further and reducing manual admin.
It also greatly streamlines the management of queries with them being visible within the platform, rather than hidden in email chains. On top of this, parties can see at a glance how their deal is progressing.
‘Enquiries on title’ use case
Let’s take the ‘enquiries on title’ process as an example use case. Lawyers typically manage this process using an Excel spreadsheet, with the seller’s side logging their queries in a column and additional columns being added to manage the responses from the buyer’s side, or to include any associated files or links to relevant information.
The correspondence concerning the queries is generally emailed back and forth, then copied into the spreadsheet to record their progress. This is not only time-consuming, but it is also subject to risk – with responses being missed or copied into the wrong place in the spreadsheet.
Using Legatics to manage this process, simplifies it significantly and offers the following benefits:
What can legaltech do for you?
Legaltech has the potential to significantly improve the management of real estate transactions, particularly due to their complex, long-running and multi-party nature. The technology exists, so why continue to struggle with tools that are decades old and simply not fit for purpose?
Switching to a platform like Legatics also upholds a secure environment that maintains confidentiality and minimises data and security risks. The platform intuitively reflects the way in which lawyers run their transactions, to facilitate easy onboarding and adoption. For the lawyer, Legatics can significantly reduce time spent on non-billable work – freeing up time for more fulfilling, strategic work that matters most to their clients.
For more information about how Legatics can transform your real estate transaction management, book a demo with our knowledgeable team!