In mid-2004, we lost a very good client that we had been doing work for since 1997.  I remember it vividly.  A representative of the company actually stopped by to see me in person to explain that in order to remain competitive, they had to ask for a reduction in our fees. He was polite and professional, but it was not something we felt we were in a position to do.

I attempted to explain to him that our costs had continued to rise - health insurance, E&O insurance, gas, copies, etc. But, in the end, it was a business decision.  There were other abstractors that were willing to work for significantly less than we were charging at the time.  We held our ground... and they found someone else to do their searches.

Today, that company sent out an email that indicates that their 2004 decision may not have worked out so well.

Let me preface my comments by saying that I respect the person who sent this email.  I think he truly understands our business and even though we lost this client, I appreciate the visit and discussion we had prior to our "falling out."  We do still do some work for this company; generally it is the rare commercial order that they still send to us.  However, in light of the following email, we may not be able to agree to do those anymore.

17 of my 23 years with [the company] have been spent as a field abstractor, so I am quite familiar with the trials and tribulations of completing title work in the field.  Recently, we have noticed a substantial increase in the number of missed mortgages, missed releases/reconveyances, incorrect mortgage amounts, reporting mortgages that encumber another property and searches completed on the wrong property.  In my experience, many of these errors can be attributed to miss-indexing by county, improper completion of mortgage documents and releases by lenders, and conflicting address information for the subject property.  I have also found that these documents are often simply "missed"  by the abstractor/title examiner during the indexing process or they are careless in his or her searching responsibilities.  I myself have been guilty of this, and though it is not intentional, such errors do occur.  Regardless, we consider these errors to be a serious breach of our commitment to provide quality title reports to our lending partners.  Therefore, the following changes will become effective for any assignment that is ordered and completed on after 2/15/2011
 
    - [the company] will withhold payment for any assignment on which the abstractor/title examiner:
        a) misses a recorded mortgage
        b) reports a mortgage that encumbers another property
        c) reports a mortgage when a recorded release/reconveyance is of record
        d) reports an incorrect mortgage amount
        e) conducts a search on the wrong property     
  
This non-payment guideline will be enforced only if the abstractor/title examiner fails to provide [the company] with a logical explanation as to why these items where not accurately reported (examples include a county miss-index, incorrect name spelling, etc.  In the past, [the company] has foregone its own charges to the lender in an effort to show "goodwill" to clients, and to admit to poor quality.  We, in turn, hope that you, our partners, will return the the same show of goodwill to us.  This is a very difficult decision, but one we are confident can be understood and accepted by our partners. 
 
To many of you, this will apply to only isolated instances.  To those of you that continually provide inaccurate reports or careless searching  this will force [the company] to stop utilizing your services.  We cannot jeopardize future business by accepting poor quality reports.

I am intentionally not identifying this company because I don't believe they are alone.  Many of the companies that have demanded lower fees in the past are probably all dealing with similar issues.  To get to the price point they "needed to remain competitive," they are using the cheapest abstractor they can find, regardless of quality... and clearly, quality is becoming an issue.

We all know that mistakes happen; we can all make them.  But, when "missed mortgages" and searches "on the wrong property" become so common that it is necessary to make a change in policy, one has to start to wonder if the "cheapest abstractor" is the best way to continue.

To me, these types of mistakes indicate inexperienced, unqualified abstractors (or maybe even lazy abstractors) are being used by the company.  While I recognize that any abstractor can "have a bad day" and "make a mistake," these errors can easily be attributed to plain ol' poor abstracting.

"Reporting a mortgage that encumbers another property" would mean that the abstractor isn't reading the legal descriptions - or can't properly read a legal description.  This might also explain why one "conducts a search on the wrong property."  And, "reporting a mortgage when a recorded release/reconveyance is of record" is an example of inattentiveness - simply not taking the time to properly search the property records. 

I do understand the need for the company to address these concerns.  However, I don't think this is the best way to go about it.  Clearly, this company is in dire need of better abstractors.  We would have been happy to pick this client up again, but rather than find better abstractors (who obviously charge more) their solution is to penalize the poor ones by withholding payment when mistakes are made.  While this may save some money, it will not likely fix the underlying problem.  They will still have lousy abstractors.

Unfortunately, we will not complete any work for this company, with this new policy.  Like I said, any abstractor can make a mistake.  I will be the first to admit that we have made mistakes.  When it happens, we are more than willing to provide corrective services at no charge; we work with our clients to take care of any problems that may arise due to a mistake.  However, when the mistake doesn't result in a claim - and it is an "isolated" incident," we do expect to be paid for our work.  Our fees are simply too low to waive fees for harmless errors that can easily be corrected. And, I am pleased to say that our mistakes truly are very rare.

It is very sad that the state of the industry has come to this.  The "cheaper, faster" mentality has led to a flourishing of the lousy abstractors.  Work is sparse; and, much of this work that used to be the "bread and butter" for many abstractors is now going to those who would be better serving society pumping gas or flipping burgers. 

This new policy just doesn't send the right message.  It says "poor quality is unacceptable... unless it's free."  While, maybe raising their prices and paying good abstractors to complete their work would send a message to their clients that says "we care enough about your work to make sure it's right... and that's worth a few dollars more."

I could ask this company, "So, how's that workin' for ya?"  But, I think I already know the answer.