As the host of Source of Title for the past four years, the question I get asked the most is "how do I become a title abstractor?" I guess it's the glamor of the profession that attracts so many people to the profession. My first thought is always "WHY!?" I will address that question later, first I'll share my opinion on what it takes to lean to abstract titles.
There are no short-cuts to learning how to be an abstractor - it takes on-the-job training with an experienced abstractor. The duration of the training is nothing concrete, but I would suggest that it would take a minimum of three to six months before you should be completing searches on your own. Even after that, it is important to have a good mentor that you can ask questions. And, you will have many questions. No matter how long an abstractor has been working in the business, they always come across something new. That is one reason it is so tough to learn to be an abstractor. It's not so much knowing how to abstract - its knowing what an abstractor should do when they find something they have never seen before and recognizing the situation when it arises.
When we train a new employee abstractor, we have them shadow an experienced abstractor for at least three months and after that we still review their work closely and explain new concepts to them.
It is also very important for an abstractor to be familiar with the state's real estate laws. If your state has title standards promulgated by the bar association, they are a "must read." In Ohio, we also rely heavily on a book published by the Ohio Land Title Association, Principles of Ohio Real Estate Titles, now in the fourth edition. An abstractor should be very familiar with any resources on the subject. For more on this, see a previous post from February - The Red Book.
There is a common misconception in this business that it's easy. You just have to report the deeds, mortgages and any liens that affect the title. But, its really more complicated than that. To do the search, you have to know who has an interest in the property so you can search them in the indices. That requires that the abstractor be able to determine the validity of the documents. You can't just assume that because it was filed it is a valid document.
For example, we recently did a search that showed the two most recent transfers as a transfer on death (TOD) deed, and an affidavit of death to transfer the interest to the TOD beneficiaries. Upon examining the TOD deed, we noted that the deed only conveyed a one-half interest. According to the Ohio Revised Code section that deals with the TOD deeds, the interest must be the "entire separate interest" of the grantor. Thus, we were able to determine that the deed was void and title was actually still vested in the estate of the grantor. For more on this transaction see Avoid The Use Of The Transfer On Death Deed.
Another sticky situation is knowing when an encumbrance on an adjacent parcel affects the title to your subject property. For instance, an appurtenant easement granting access to your parcel may require a limited search of the adjacent parcel to determine the validity of the easement. Because title insurance insures access, it is important to make sure that the easement is enforceable.
The most troubling aspect of abstracting for new abstractors is probably pending suits, i.e. foreclosures and probate cases. Was everyone with an interest in the property properly served notice? When does lis pendens attach? Were the proper taxes and fees paid? Not all interests in property are neatly conveyed by deed, some are transferred or extinguished by court order or operation of law.
These are but a few of the aspects to searching titles that new abstractors need to understand. They are not simple concepts, but they are important.
Over the past several years online courses have popped up on the Internet promising to teach you everything you need to know to become an abstractor. Some even promise you clients when you complete the course. However, real estate laws vary significantly from state to state and an online course cannot possibly prepare you for this line of work, nor the liability the abstractor has in performing his duties.
And, that brings me to the "WHY." Why would anyone want to get into this business right now? One of the biggest complaints that abstractors have is the low fees that are paid for their work. Abstractors are extremely under-compensated for the amount of liability they assume in their duties. There has been a trend of declining fees for past few years, in some cases the fees are actually lower than they were 10 years ago. Yet, the operating expenses of abstractors have been increasing significantly - gas prices and errors and omissions insurance are two such examples.
When you factor in the liability, along with the increase in operating costs and the low fees, abstracting is not all that appealing. Take for example a court case from 2004, Fidelity National Title Insurance Company v. Suburban West Abstractors. An abstractor was held liable for a $176,000 loss incurred by Fidelity after it settled with a creditor who held a $380,000 judgment missed by the abstractor. The abstractor's fee for the search was only $25. The abstractor had a disclaimer on the search limiting its liability to the $25 paid for the search, and also argued that its fee sheet limited its liability under their E&O insurance to $10,000. The court held the disclaimers to be invalid. For more on this case, see the Source of Title article Searcher Owes Insurer For Missed Judgement.
The second largest complaint, behind the low fees, is the difficulty abstractors have actually getting paid for their services. There are numerous complaints about several companies on the Source of Title forums that companies do not pay their abstractors. It is customary for abstractors to bill at the end of the month with NET30 terms. By the time the first invoice is due, the abstractor has completed 2 months worth of work. Some clients run up bills with their abstractors and when the abstractor ceases to complete more work, they simply switch abstractors. In some cases, the clients change their name and start over again.
So, in addition to being a profession that many abstractors must invest considerable time and effort in learning, they have to deal with an extraordinary amount of potential liability for very little compensation and they bear a substantial risk of not getting paid at all. Before you decide you want to become an abstractor, you need to be sure you know what you are doing and you must be willing to dedicate a considerable amount of time to keeping on top of your collections.
So you still want to be an abstractor? Can you accept the fact that you will always be learning new things and you could potentially be liable for hundreds of thousands of dollars for a search you were only paid $25 to complete? When you look at the facts, there are certainly other professions that are easier to master, with less liability and more profit potential... McDonald's comes to mind, but I'm sure there are others.
Robert A. Franco
SOURCE OF TITLE