The Six Percent

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Source of Title Blog

The Six Percent
by Robert Franco | 2007/01/19 |

I often wonder why the title industry is so viciously attacked in the media as being unnecessary and over-priced. As a title agent, I see that the title insurance premium usually accounts for about half of one percent of the purchase price and my other fees might be another quarter of a percent. So on a $100,000 purchase transaction, I charge about $750 total. The Realtor, on the other hand, walks away with six percent, or $6,000, and nobody ever questions that fee. Huh, how about that?

It sure isn't the liability issue causing that divide. I don't think anyone would argue that the title agent has much more liability in the process.

Is it marketing? The Realtors do have to advertise to get people interested in purchasing the home. But, my last Realtor only placed a sign in my front yard and waited for someone to call them. Does that justify a six percent commission? Even if they do utilize the MLS and their weekly "homes for sale" publication, it still can't amount much more than a few hundred dollars in costs.

What about the labor? Well, the Realtor has to bring people though the home, or be present for an open house or two. On the other hand, the title agents have to have a staff of people to handle the title search, escrow, closing, issue the policy, etc. That doesn't seem to be the deciding factor either.

I attribute the six percent to the National Association of Realtors (NAR) and their 1.2 million members. The NAR is constantly promoting the value of using a Realtor and it seems to be working.

So what about our professional association, the American Land Title Association? What does membership in ALTA do for me? Well, since I was unable to figure that out, I did not renew my membership last year.

ALTA is in an unenviable position. They have two main categories of members, the Big 5 (major underwriters) and the small agents. The large agencies probably fit in both categories at times, depending on the particular issue. Affiliated Business Arrangements (AfBAs); "instant title" products, such as TitleSmart; and the underwriters' direct operations all create different problems and concerns for these two categories. How can ALTA represent them both?

The NAR has a much more simple task... they represent Realtors, they have WAY more members, and the general public is at least familiar with what they do. Their message is a simple one... they promote the value of their members.

ALTA, on the other hand, to whom would they direct their message? The Realtors, lenders, builders? Or, the general public? And, what would that message be? The benefits of using your local title agent? Or, the benefits of an AfBA, or an "instant title" product?

Even ALTA's lobbying efforts keep them walking a tight rope. When it comes to RESPA reform, should they lobby against AfBAs, or, should they lobby to make them easier to create and operate?

I guess that depends on which segment of their membership they choose to represent. There are fewer and fewer issues that the Big 5 and small agents have in common. Yet, they are all asked to join and support the same association.

My advice to ALTA: Think long and hard about what is truly best for the consumer. Ask yourself if the direction we have been going is working. Title claims are up... underwriting standards are down. Why does the media keep bringing up the Iowa Title Guaranty Program?

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com

Source of Title Blog ::

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Categories: Title Industry, Title Standards

817 words | 2852 views | 3 comments | log in or register to post a comment

	May be time for a new trade associa...
	May be time for a new trade association that has a real code of ethics and actually defends its members.
	by Diane Cipa, General Manager, The Closing Specialists® \| 2007/01/19 \| log in or register to post a reply

	Maybe. The problem is that there i...
	Maybe. The problem is that there is strength in numbers and dividing the members between two groups would certainly mean less power to accomplish all that needs done. I would like ALTA to evaluate the needs of ALL of their members and devise a plan for addressing those needs. If they can't do that, then you may be right.
	by Robert Franco \| 2007/01/19 \| log in or register to post a reply

	They won't and they don't.
	They won't and they don't. Funny. My agency qualifies for their "big" agency category - probably just barely. I was invited to the "big" agency annual meetings each year since becoming a member until I finally went to one. I spoke my piece - quietly and clearly - and was not invited back last year. Maybe the invitation was lost in the mail. ;)
	by Diane Cipa, General Manager, The Closing Specialists® \| 2007/01/19 \| log in or register to post a reply

Source of Title Blog

Robert A. Franco The focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

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