This is a problem that is going to continue and will only become worse with the passage of time. The escalation of expenses (primarily gasoline) and the constant pressures to reduce our prices has only one result...declining profit margin. I suppose we could hold firm on our prices in the hope that clients will eventually come to their senses and realize that the quality of the search justifies a fair price for the work entailed therein, but in a profit driven industry that does not seem to be working. It seems to result in declining client bases because as we all know there are the unskilled and uninsured abstractors that will perform the searches.

Some of us can take solice in the belief (no matter how mistaken) that we have a hard core list of clients that will never leave, but as we all know there is no such thing as client loyalty, and the belief is unfounded. The problem seems to be in the desire of clients to maximize their profit at the expense of the abstractor. For those of you that perform closings in addition to abstracting, I think you have all seen the prices shown on HUD 1 forms that borrowers are charged for searches/recordings and closings. I think you will agree that the prices are a far cry from what the abstractors and signing agents actually receive for their work. There is a huge mark up. It seems to stem from the title companies desire to maximize profit. However, such is life in a free enterprize system. From what I have seen on this board and research I have performed, it is not clear whether RESPA governs third party mark ups depending on the Federal Circuit in which you reside...there are other laws that may however govern this issue.

The abstractors are losing ground everyday, and are going to continue to be victimized by clients with low ball pricing, unreasonable requests for additional service with no corresponding additional charge and delinquent payments. The challenge for the abstractor is to find a way to compete effectively. 

At the risk of being repetitious, I am going to revisit a discussion that we had on this board a while back. For those of you that are not interested, I will understand if you want to tune out now.

Last October we explored the idea of forming a Vendor Management/Title Company in the form of either our own corporation or LLC. Anyone out there think that it may be time to take a second look at this? 

There were a number of concerns at that time:

     How do we fund it?  As with all new businesses, initially it would take
     an infusion of capital from shareholders or LLC members buying in.
     Subsequently it could be self supporting just as any other title company.
     If there are profits at the end of the year they can be dividended back
     to the shareholders or LLC members.

     Fair prices for work performed? The work would be assigned to
     shareholders/LLC members first. It is a closed system. We go to the
     outside only if there is no abstractor or signing agent available in the
     area for an assignment. We set the prices for our work. We by pass
     the title companies entirely, and approach the lenders directly as client's.
     We charge the lenders fair prices ...possibly more competitive than the 
     title companies with which they are currently dealing, but taking into
     account the prices we want for our services. The problem we
     seem to be running into currently is with our clients pressuring us for 
     price reductions, not the lenders. The lenders just factor the search
     fees and closing costs into their expenses, and pass them along to the
     borrowers.

     Blue sky laws? There was some concern as to having to conform
     to a patch work of state laws protecting individuals from business
     opporntunity scams. These laws are good and do in fact protect people
     from predatory scam artists, but it is difficult for a legitimate company to
     conform its business model to many different state laws which are often
     not uniform in their application.

     There is a simple solution. We can opt for federal regulation under the
     Federal Trade Commission rather than state regulation. It is designed
     for companies engaged in interstate commerce rather than intrastate
     commerce.If we are under federal jurisdiction we need to conform to
     only one uniform law rather than 50 conflicting statutes.

     Will we be competing with ourselves? There was much concern as
     to whether individuals buying into the LLC would be competing with
     themselves or losing business which they had already built up over the
     years. The answer to your question is no. In addition from taking
     assignments from the corporation/LLC that you own, you retain all the
     clients you previously had, and continue to develop your business on
     the side. You are currently dealing with vendor managers and title
     companies as clients. Your LLC is going to be dealing directly with
     lenders as clients, and assigning the work to its members. If the
     corporation/LLC is organized properly you could potentially receive
     higher fees for your work than those for which you are struggling to
     maintain now with your current list of clients.

It is time to start thinking big.