Todd Costigan is the former senior manager of industry relations for the Center for REALTOR® Technology at the NATIONAL ASSOCIATION OF REALTORS®.
Automated Closings: Why You Should Use Transaction Management
Using a transaction management system can save you time, simplify the closing process, and provide better service to your clients.
January 1, 2006
You may be hearing the phrase transaction management system, or TMS, a lot these days. What’s all the hoopla about these systems—and more important, why should you care?
Implementing TMS successfully into your business operations can make you more productive, lower your costs for doing business, and result in more satisfied customers by providing clients with the kind of service they’ll increasingly expect.
What is TMS?
TMS is a Web-based software application that:
- Can be used by any individual sales associate, brokerage office, or multi-office company. TMS systems don’t have to be hosted and provided in-house. In fact, many TMS services are provided by MLSs or state and local REALTOR® associations. Vendors also provide a hosted TMS solution that can be used by individual practitioners.
- Automates the transaction process. It monitors due dates and sends reminders to those responsible for completing tasks.
- Takes the guesswork out of what tasks need to be completed, what deadlines need to be met, and who needs to do what. It makes sure that nothing falls through the cracks and everything moves smoothly toward closing.
- Allows all the parties involved in a transaction to manage, view, and share information in real time during every step of the process. By using electronic signatures and integrated electronic forms, TMS eliminates the need for tedious manual tasks and overnight deliveries of packages.
TMS also can lead to more satisfied customers because they know the transaction is moving ahead smoothly, can review transaction status online at any time, and need to perform fewer manual steps previously required of them.
In order to set up and start using TMS, just follow these steps:
During the initial configuration of the TMS, you set up:
- A template of the typical steps and deadlines involved in a transaction to get to closing. The steps and timelines can vary slightly depending on your locale. For example, if a pest inspection is always required, it would be included in the template. The system allows you to mark which steps are mandatory, standard, or optional, and the timeframe for completing each.
- Roles for the different participants to a transaction. This feature allows you to determine what parts of the transaction a participant can see and change. For example, a pest inspector shouldn’t have the ability to change or view the mortgage commitment information, while the broker would have access to review all the steps required to complete the transaction.
- Alerts. Alerts are used to notify participants if a task is behind schedule or has been completed. The alerts typically take the form of an e-mail or a phone message.
A good TMS product will allow for the majority of information about a particular transaction to be imported automatically from other systems, such as public records, the MLS, and contact management and brokerage back-office applications.
To set up the TMS for each transaction, you:
- Input all the information about the transaction, preferably through an automatic import as mentioned above.
- Assign all the participants to the transaction, including brokers, salespeople, appraisers, inspectors, attorneys, and service personnel.
- Add or change the normal transaction template to accommodate any special circumstances relevant to a particular transaction. For example, requiring that a faulty appliance be repaired, unsightly waste be removed from the property as a condition of the sale, or a light fixture be omitted from the transaction can all be steps that can be inserted into the TMS.
- Allow extra time for some steps if allowances are made in negotiations. You also can set a specific order for contingencies, i.e., step A must be completed before starting on step B, and so on.
This is where TMS can most benefit the brokers and salespeople involved. When a new transaction is created with TMS, participants:
- Receive notice of the steps and timing required from each of them.
- Receive updates on which steps have been completed and which steps are behind schedule.
- Receive notices of changes in timing for a particular step of a transaction if an extension is granted or exception made.
In addition, TMS adds a level of security to the transaction because only the parties authorized for a particular part of a transaction will be able to view that information.
TMS enables practitioners to spend more time prospecting, getting listings, and selling—true value-added activities that affect your bottom line—instead of spending time on administrative tasks. Most important, you’ll have more time to ensure that clients enjoy exceptional service with you.
In addition, other benefits of using TMS include:
- Efficiency. The integrated nature of TMS eliminates paperwork, speeds processing not only for brokers, buyers, and sellers but also for inspectors, appraisers, and insurers.
- Lower costs. The automation of a TMS eliminates many of the administrative costs associated with a transaction.
- Competitive edge. Providing TMS to sellers and buyers lets you differentiate yourself from your competitors.
- Timely data. The systems use timestamps when transaction steps are assigned, initiated, and completed, providing irrefutable proof of deadlines. It also contains an electronic repository of the documents.
- Better communication. TMS enables a better consumer experience by letting buyers and sellers know in advance when items or tasks are needed, so there are no surprises.
- Better customer service. TMS can provide the level of service and responsiveness consumers want. The systems are especially appealing to sophisticated buyers and sellers at the upper-end of the market. Many of them shop, perform research, and communicate online—and have the same expectations for a real estate transaction.
- Security. Through the use of secure logins, authentication, and encryption, and by limiting access to only those parties involved with a particular aspect of a transaction, TMS protects the integrity of the transaction and the confidentiality of the parties. TMS providers also can demonstrate their commitment to information security by completing a best practices assessment such as REALTOR® Secure. When you make customers more comfortable, you gain trust that can lead to a long-term or repeat business.
Taking the Plunge
Because TMS is still fairly new, standards haven’t yet been established for the technology. As TMS standards continue to evolve, they’ll lead to further efficiencies and benefits and allow for easier exchange of information among all the parties to a transaction.
No single TMS provider has a significant share of the market. That competition provides you with better pricing. If you decide to implement TMS into your business, insist on working with a vendor that will commit to standards as they’re developed.