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Wanted: New Crystal Ball
by Robert Franco | 2008/05/21 |

We are starting to see more clients sending us commercial work.  Ordinarily that would be a good thing, however, some clients just don't seem to understand the nature of commercial searches.  The same "cheap and fast" mentality that dominates residential work these days just doesn't translate well in the commercial realm.  Some of these clients call and ask if you do can do a commercial search, then they want to know how much it will cost and how long it will take to get it done.  My crystal ball must be broken because I can never find a good answer to those questions.

Source of Title Blog ::

We always give the client a "starting price" for commercial work, and we let them know that the actual price will depend on the amount of work involved, plus copies, of course.  As for how long it takes, we let them know that we will get it done as soon as we can, but again, it depends on how complicated the search is.  Unfortunately, that is never good enough for some clients - they want a fixed price and they want it back in a couple of days.

At one point, I decided that I was just going to quote commercial searches high enough that I could offer them a set price and give them an estimated turn around time that would leave us plenty of time to get it done.  That backfired on the very first order.  I quoted the search at $1,500 and told them that we would need a week to get it back to them.  The chain of title wound up splitting into seven separate chains and involved railroad property.  It tied one of my examiners up for the better part of three weeks, but we didn't charge them any more for the search.  My thought was that we might make it up on the next search that might turn out to be a little easier, but that didn't work either.  The next few times this client called, they cancelled the search after we gave them the quote.  Something tells me that they knew that search was going to be particularly involved when they agreed to the $1,500.

There is no good way to establish a price for a commercial search in advance.  You just never know how tough it is going to be until you have several hours in it running the chain of title.  I'm not going to risk putting in that much time and then having the client cancel the search if it turns out to be complicated and expensive.

Our traditional commercial clients understand the nature of commercial searches and they just trust us to charge them a fair price.  We have a good relationship with these clients and if we get one that turns out to be particularly difficult, we keep them apprised so they are not shocked when they get the bill. We know that they aren't going to cancel the search mid-way through.  And, with commercial work, that is the way it needs to be.  If the client doesn't trust their abstractor, they should find a new one.  But, they have to understand that some searches are going to take longer and cost more.  Asking the abstractor to guess at a price and expecting to hold them to it is ludicrous.

Searching commercial property takes a depth of knowledge that the average "current owner searcher" just doesn't have.  Commercial searches cannot be commoditized like the residential current owners have been.  However, I have a feeling that might be the direction that the industry is headed.  The less experienced current owner searchers are struggling right now, as are the rest of us.  They may be willing to dabble in commercial work and without an understanding of the complexities involved, they will more that likely be willing to quote ridiculous prices that would not be possible if they were to do a thorough commercial search.

Without some kind of crystal ball, you just don't know what might be involved in a commercial search.  Some are very easy - others are extremely difficult.  Until you do it, you just don't know.  You might find complicated leasehold interests that need to be searched, adding multiple parties to your list of names to check.  You might find an appurtenant easement that would require a search of an adjacent parcel, not even owned by anyone in your chain of title.  You might find a lawsuit involving the property owner, several leasehold tenants and creditors that could take hours to decipher.  Or... you could get lucky and find a deed, mortgage and assignment of rents with nothing else filed.

So, if you need a commercial search, use an experienced abstractor that you know can handle the job.  Give him the freedom to do what is necessary and trust them to bill you a fair price for the search.  And, don't rush the process!  Ask for a "ballpark" price, but understand that it could change dramatically depending on what comes up during the search.  If you can't deal with that, you shouldn't be doing commercial work; leave it for the more experienced firms.  Or, get your own crystal ball and hope for the best!

Robert A. Franco


Categories: Abstractors, Commercial Searches

1148 words | 2987 views | 7 comments | log in or register to post a comment

Amen! Preach on, brother!

I very rarely read anything with which I agree completely. I have read this post three times and have not found anything that I wouldn't have written myself if I had taken the time to do it.

Well, maybe I could say I wouldn't have written the first paragraph. But that is simply because I am a one-man operation and specialize in commercial search work. My customers are almost exclusively the commercial divisions of national underwriters, and large law firms. I do very little that comes to me indirectly through VMC-type companies. I feel your pain.

One thing I enjoy about commercial title work is that my customers are non-idiots; they expect good work and are willing to pay for it, and they actually understand what I report to them. But I think that is changing, as I see commercial work being VMC-ized.

I have overheard conversation in the record rooms lately among people who normally crank out current-owner residential searches saying that they are starting to get orders for commercial work. These are folks who do a fine job of delivering exactly what their customers want in residential searches, but they don't know an outparcel from an SNDA. And I've got the feeling that the people they are sending their reports to probably don't know the difference either.




by David Robertson | 2008/05/22 | log in or register to post a reply

Commercial Work

Robert, very well said. 

This is something we've been having to contend with as well. We've noticed a surge in new loan officers on the commercial lending side. As you mentioned their "cheap and fast" mentality just doesn’t fly in commercial. Commercial transactions can be complex, costly and very time consuming. Once most of these newcomers realize this they will simply move on. 

It has been my experience that very few residential loan professionals successfully make the transition to commercial. It's just a completely different ball game.

by Shane Kane | 2008/05/23 | log in or register to post a reply

This is what I do:

I charge a flat fee for the first day or 8 hours, then if the search takes longer than that, I tell my clients they will be billed at an hourly rate for every hour after that. I'd like to know how others have handled this issue as well.

by Melinda Barcum, J.D. | 2008/05/23 | log in or register to post a reply

That sounds like a good plan...

Melinda:  We try to do the same thing, but we "estimate" the hours it will take to give the client our "best guess."  Our good commercial clients understand that if it takes longer than we expected, it will cost more.  Lately, I have had several clients, who seem to be new to commercial work, demanding a set fee before they will okay the order.  I just don't know what to tell them - we do need the work right now, but I'm not psychic. 

We have our examiners take a look at it.  They look for the current deed to see how long the owner has been in title and check the names in the computer to see how many entires there are.  We might be able to tell if its in a strip mall or industrial park from the maps.  That gives a bit of an idea - but you never know what you will run into when you start running the chain. 

I like the way you do it - and that is they way it should be. 

by Robert Franco | 2008/05/24 | log in or register to post a reply



by charles jetter | 2008/05/27 | log in or register to post a reply

Disclose Extra Fees for Splits Upfront

I always disclose to our clients that they are ordering research on one assessed parcel and if that parcel splits going backwards in time, then we would be researching an additional parcel at cost to them.  The costs increase in proportion to each split and at each junction we stop research and acquire written (email) approval to continue forward with the searches.  We also note that this increases the amount of time that it will take to complete the whole project.  Some clients choose to cancel and pay the cost of the research already provided with disclosures about their decision included about this by us in our report, others feel that they need the work done and continue onward.  Communication with the client or customer is the key to accomplishing successful research and with the internet it is hardly a difficult task now-a-days.

by William Pattison | 2008/05/27 | log in or register to post a reply

Right on William

'Communication with the client or customer is the key to accomplishing successful research...'


That's a fact, and this is where some examiners fail to realize that the client does NOT always know the difficulties of a commercial search (or should I say, potential difficulties)... and get sticker shock.... AFTER the work is completed.

by Rob Robinson | 2008/05/28 | log in or register to post a reply
Source of Title Blog

Robert A. FrancoThe 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



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