Private Property Matters

In the News  


Presented by Prairie Title           
Commentary by Frank Pellegrini, Prairie Title CEO  

I was recently thinking about an old “friend” of mine. I put that in quotes because I’ve never actually met him, though I’ve admired the man’s work for years. His name is Hernando de Soto. Mirroring the curiosity-driven nature of the famous Spanish explorer with whom he shares a name, our Hernando de Soto is an explorer in his own right. Rather than land itself, he explores land-oriented economic concepts. Today’s de Soto is a globally respected Peruvian economist whose advice is sought by heads of state and world leaders, including many U.S. politicians, economists and business leaders. So why should we, as real estate professionals, be interested in de Soto’s economic musings?

De Soto believes that a very important characteristic of capitalism is the ability to protect individual property rights through an established system based on “economic facts” in which transactions are formally documented and recorded and ownership and other rights may be clearly determined. He argues strongly that a formal land title system empowers economically disadvantaged people by assuring them rights and assets that are critical to becoming economically self-sufficient.

“Until you have universal, well-protected, clear, and transferable private property rights, you cannot have a market economy in Peru … or anywhere else,” de Soto once told Reason magazine. His strong belief in private property rights reflects the long-established position of those of us who work in the U.S. real estate industry. Private ownership of real estate is a bedrock of our economy and the foundation upon which developed nations have been built.

We see reports in the mainstream and industry media every day about the real estate market — interest rate movement, or lack thereof, price changes, home sales, new home construction, etc. Why is real estate such a popular subject? Because it matters. Real estate ownership and the transfer of ownership rights is one of the main engines that can drive our economy forward. In today’s market, with real estate helping lead the way back to a stable, growing national economy, ensuring that property rights are respected and enforced has never been more important

Real Estate agents, lenders, lawyers, appraisers and other professionals who work in our industry make vital contributions every day to our economy. In the title insurance industry, our focus is on protecting the integrity of vital land records and providing the assurances that make the ability to clearly establish formal property rights possible. We are proud to provide that service.

Let’s keep the conversation going. Call or email me: 708-386-7900; frank@prairietitle.com.

Other stories we’re following:            
Bankers Concerned about TILA-RESPA Impact.
Commercial, Multi-Family Thriving.    
Realtors Ask for TRID Grace Period.
Prepared Remarks by CFPB Director Cordray at NAR.

So, you don't think title insurance is important.

For decades title insurance was the quiet, back-room side of the real estate industry. It was far from the glow of the spotlight enjoyed by other segments of the business. But, lately, greater attention is being directed our way; and much of that has to do with the writings and work of Hernando de Soto. No, not the 16th century Spaniard who, with Francisco Pizarro, witnessed the conquest of Peru; but, a contemporary de Soto who is wielding even more profound influence on that country than the conquistadors of old. In fact, this modern de Soto's has left his mark on many other countries, as well; from Central and South America to Africa and as far away as the Philippines. Our de Soto is a Peruvian economist and author of the international best-seller, The Mystery of Capital - Why Capitalism Triumphs in the West and Fails Everywhere Else.
Now, what does this have to do with title insurance? Simple. Professor de Soto teaches us that it is the very lack of formal property rights in many parts of the world that is the true source of poverty. Since 1979, de Soto has been studying the complicated and convoluted structures in many countries that present overwhelming obstacles to those seeking to establish ownership of property. He found that these hurdles force the majority of the poor to live and work outside of the established legal system. They build informal structures, arrangements, and understandings recognized generally by their own communities, but of no consequence to any beyond their narrow borders. The gravity of this reality is astounding when you consider that, unless you can firmly prove ownership of any property, you are unable to sell it at a profit, or, more importantly, leverage it to acquire more property, thereby building wealth.
Western legal mechanisms allow owners of property to clearly evidence their titles. This is so deeply entrenched in our economic psyche that we are not always conscious of this crucial aspect of our success. In fact, de Soto thinks that we take our system so much for granted that we have actually lost all awareness of its existence.
Now, when you couple our tradition of establishing enforceable property rights with a written guarantee of protection, you have a very powerful weapon in the arsenal of a vibrant economy.
Title insurance provides the guarantee of protection of property rights. Because of title insurance, real estate titles can be leveraged with greater fluidity and universal acceptance. This allows owners to employ their holdings to acquire more assets, achieve greater goals, and build wealth. When considered in this light, title insurance is at the very foundation of our success as a developed nation and economy. I daresay that we should no longer be thought of as the behind-the-scene player on the real estate stage; but, rather, as the star of the show.

To learn more about de Soto, you may check out the article I wrote in December of 2006 for Metro Chicago Real Estate Magazine and which is posted on the Prairie Title website. You may also want to visit www.alta.org to read a more extensive piece written for the September/October 2008 issue of Title News.