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Source of Title Blog

So, How's That Workin' For Ya?
by Robert Franco | 2011/02/15 |

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.

Source of Title Blog ::

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.




Rating: 

Categories: Abstractors

1714 words | 4010 views | 10 comments | log in or register to post a comment


Right on the mark

It is amazing that this company is still even in business.   How can they possibly compete if they can't provide accurate abstract information.  Penny wise, pound foolish

 
by Leigh Attridge | 2011/02/15 | log in or register to post a reply

That was interesting...

I read your blog and thought to myself "that must have been a smaller company". THEN I got the email myself. It is interesting that this is one of the big fish.

I only hope that there are no rash moves or decisions made. I know that it can be very easy when things are looking alarming to go in guns blazing. I very much like their team and hope that it all sorts out rapidly.

We maintain a below %2 error ratio across the boards, yet this email worries me.

 

Amy at Timely Documents

 
by Kristine Bjorge | 2011/02/15 | log in or register to post a reply

Hurry up!
I think a major reason for all the mistakes is that, if you are going to do the work for half what you used to charge, you have to do the work faster to survive. The faster you search the more likely you are to make mistakes. Obviously no one can afford to take a cut of 50 percent and survive unless you complete twice as much work. I remember when potential clients were most interested in your experience and the quality of your work. Now the questions are how much, how fast and, most importantly, do you have E&O? Rarely does anyone seem to care if I am qualified to do the the work. Of course if you are going lower your fees you cannot afford to pay your employees at the same rates. So you replace your trained employees with inexperienced unqualified searchers. With a new county computer system there are many mistakes being made by the county indexing system and there is constant tweaking of the system in my county. Those of us who work there every day are constantly refining our searching methods and discussing among ourselves new procedures to ensure accuracy. Those who travel to several counties, which all have different computer programs, are not privy to these discussions and are prone to errors. It is depressing to see that the company that you write about is too stupid to make the connection between lower fees and inferior work. We can only hope that such companies either learn the reason for the mistakes or go out of business and are replaced by companies that are willing to pay a fee that encourages quality work. I've had no claims in 35 years of searching about 40,000 searches. I say that because no one ever asks me. It's only how much, how soon and do you have insurance?  
by john franz | 2011/02/16 | log in or register to post a reply

I Responded to this Email and they didn't like my counter proposal

  When I got this note, I offered them back the opportunity to pay us double with penalties if the search was done on a wrong property because THEY sent us the wrong search parameters. 

  I also offerred to put the burden on them to show that we failed to perform in a specific manner, as I make sure that our reports are very clear and very comprehensive.  We do explain in excruciating detail why items on our report are placed there;  i.e. the specific nature of the mispost or of the documentary execution error or otherwise.

  They didn't want the added cost of document copies that they felt were posted wrong and not needed.  Weird.  Sounds like a game show:  Cost Cutting for Quality. 

  Needless to say, we don't accept their projects either.

 
by William Pattison | 2011/02/16 | log in or register to post a reply

Ironic point

As a side note, I have found that when you put time and effort on something that was not an issue - you start having those issues. I trust our staff very much and attempt to hold back on vague information or invalid correction.

We got an email from a client... that was a generic mass email letting us know that there had been a lot of errors on counties searches and attachments. We had to that data, having received ZERO queries to this effect. Sure enough, I forwarded this along to my staff and within 48 hours we had sent along THREE incorrectly attached documents to THAT client.

Putting care into the product and being as streamlined as possible to keep prices reasonable is what we concentrate on.

Alarm spreads and general communications are alarming.

 

 

 
by Kristine Bjorge | 2011/02/17 | log in or register to post a reply

My response to them

We know this company.  With us, they use us in only a couple of counties because I'm certain they found cheaper prices amongst some other cheaper (and less experienced) abstractors.  When I protested and said I could not agree to the letter, I was assured that our record is excellent.  (They didn't say "spotless" but I believe that to be the case.)  I said many of the same things I'm reading here.  I finally told them I would agree to their guidelines, if they would agree to mine:  If we are sent out again to check on a "missed" mortgage and it is not found or discovered that it covers other property, then we will charge a doc retrieval fee.  They said that is acceptable....however, I have a feeling this will be the end of the matter.

 
by Alix Ott | 2011/02/21 | log in or register to post a reply

Comment on John Franz's comment

First off, I don't work for the title co. corporate office, so I don't know how our company chooses its abstractors and examiners. I work for a fee attorney office. So the corp. office gets a split of each closing we complete.

But I do know that since RESPA reform, we are having to pay a lot of costs that used to get passed on to the borrowers. For instance FedEx/courier fees, copy & download fees, bank fees. Notary closers charge on average $150 per transaction. These costs used to be passed onto the borrower.

Now they come out  of our "Escrow Fee."  They were never meant to come out of our Escrow Fee. The escrow fee was just that. For escrow. You'd be surprised how much paper we go through each month and toner. These things are not cheap. On top of that, lenders and realtors are wanting us to lower fees.

After we pay the 15% of title premium to the underwriters and then half to the corporate office and if its out of county, another split, usually 60% or more, its no wonder so many title companies are going out of business.

And with all of the new regulations coming down the pike, its a wonder anyone can make any kind of profit. Plus that, our office pays for everything. Most offices in Texas are "fee attorney" offices. That means that that fee attorney pays for all of their own rent, utilities, employee compensation, computers, office furniture and equipment, etc.

We have only 9 people in our office so we don't even have any health insurance. Just knowing what our office goes through, I'd be surprised if the corporate office is not being squeezed too. We have had to change title companies 3 times because they keep going out of business.

 
by KELLY CASKEY | 2011/02/21 | log in or register to post a reply

Don't budge on prices

I have been approached by companies that I had done work for asking for a reduced price in my searches; and also by new companies who want searches done at an unbelievably low cost.   I cannot accommodate them because, as your blog says, my E&O insurance goes up every year (but not my prices); gas, copy costs, etc.  When these companies realize that quality costs far less than the mistakes they will incur by other abstractors who make many mistakes, it will be too late.

 

By Cheryl Santamaria

 
by Cheryl Santamaria | 2011/02/21 | log in or register to post a reply

Right to use report.

Let's hope while they (clients) are withholding the payment for reports with excessive information not pertinent to the request and with minor errors that could be readily corrected, they are not using the report to endice them  to effectuate a transfer of any interest in the subject property based on  that report.

I believe, It is not allowable to use a property report to effectuate (or endice a party to) a transfer of any interest, unless that property report is paid for. it is my belief it (the Property Report) is the vendors property and doesn't become the vendees property until paid for....just my opinion

 
by Matthew Sharpe | 2011/02/22 | log in or register to post a reply

The Buyer's Risk

"It's unwise to pay too much but it's unwise to pay too little. When you pay too much you lose a little money, that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing you bought it to do. The common law of business balance prohibits paying a little and getting a lot. It can't be done. If you deal with the lowest bidder, it's well to add something for the risk you run. And if you do that, you will have enough to pay for something better!" – John Ruskin (1819-1900).

 

Most consumers are convinced that real estate agents make less money on each deal than title insurance agents. Nobody will be satisfied until all of us are outsourced and paperless. Great article and great discussion. Thanks.

 

 
by Lawrence Lacombe | 2011/02/26 | 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
SOURCE OF TITLE

 

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