Editor’s Note: Tim Kane owns and manages (with his wife Lynlee) Legacy Escrow, a local escrow company and has been a regular fixture of the Seattle blogosphere for the past year or so… Not only does he run his own blog, the closing table, but he has contributed to numerous threads on RCG under the names of Chief Errand Boy, S-Crow, and Tim. I’m definitely excited to bring him on as a regular contributor!
“I have a special interest in Ethics in Business, particularly in the industry of real estate. A good many of future posts and comments will address ethics, much of which is drawn upon the experiences our small escrow office encounters in working with our clients, loan officers, title insurance companies, and Realtors every day.
State and federal authorities have been trying to clean up the title insurance industry for decades, with no success. At one time I was certain that Chicago Title & Trust had a Vice-president-in-charge-of-going-to-jail.
All of the law enforcement efforts have had little impact on the industry. It goes about its merry way because of the full-throttle corruption of a large number of real estate agents. If the real estate industry ever paid more than lip service to its code of ethics the title insurance industry would clean up its act overnight.
Is one of the Big Four “Lawyer’s Title”?
I was absolutely appalled at the “extra services” Title was offering me when I first moved to the West Coast back in 1998. “I’ll make your flyers, do your mailings, provide address labels. I’ll sit your Open House for you and bring food to the Broker’s Open! and if you put a little square about me in your full page color glossy ad in Homes and Land, I’ll pay for the Whole AD!”
I said, “Excuse Me???, Can you leave NOW, please?”
“Title” is also “Closing Agent”, in a large part of the Country. The “Title Clerk” does the closing, as in one stop shopping. The fees seemed more appropriate when there was no extra escrow layer of “escrow fees” in the mix. I think it’s a lot harder for a Title Rep to “add value” than it is for real estate agents, these days…hence they keep tacking on “added value services” that are really just kickbacks.
Is one of the Big Four “Lawyer’s Title”?
I was absolutely appalled at the “extra services” Title was offering me when I first moved to the West Coast back in 1998. “I’ll make your flyers, do your mailings, provide address labels. I’ll sit your Open House for you and bring food to the Broker’s Open! and if you put a little square about me in your full page color glossy ad in Homes and Land, I’ll pay for the Whole AD!”
I said, “Excuse Me???, Can you leave NOW, please?”
“Title” is also “Closing Agent”, in a large part of the Country. The “Title Clerk” does the closing, as in one stop shopping. The fees seemed more appropriate when there was no extra escrow layer of “escrow fees” in the mix. I think it’s a lot harder for a Title Rep to “add value” than it is for real estate agents, these days…hence they keep tacking on “added value services” that are really just kickbacks.
RESPA – Real Estate Settlement and Procedures Act: a federal regulation in place and authored by the Department of Housing and Urban Development (HUD) to largely protect consumers in a variety of ways.
What would agents construe as a kickback? There still seems to be a lot of wiggle room and gray area, but HUD is trying to tighten the definition.
Would anyone agree with RESPA in that it is a violation to receive or give anything of value for referrals of settlement service business, which is an abbreviated part of HUD’s definition?
In the Everett area, I can’t go to lunch with my wife without seeing a title rep having lunch with a Realtor or Loan officer. Is there a limit on how many times a title rep can take someone to lunch? Title reps, chime in?
RESPA – Real Estate Settlement and Procedures Act: a federal regulation in place and authored by the Department of Housing and Urban Development (HUD) to largely protect consumers in a variety of ways.
What would agents construe as a kickback? There still seems to be a lot of wiggle room and gray area, but HUD is trying to tighten the definition.
Would anyone agree with RESPA in that it is a violation to receive or give anything of value for referrals of settlement service business, which is an abbreviated part of HUD’s definition?
In the Everett area, I can’t go to lunch with my wife without seeing a title rep having lunch with a Realtor or Loan officer. Is there a limit on how many times a title rep can take someone to lunch? Title reps, chime in?
Tim,
I am reminded this morning of HUD’s great example of what is a “kickback” and what is not.
It says (I paraphase) that if an ancillary service provider gives you A THOUSAND PENS with THEIR name on it, that’s OK.
But they can’t give you even ONE pen with YOUR name on it 🙂
I’ve always found that explanation to be crystal clear.
I was so “confused” when I moved out of the Philadelphia area, when I saw Title and Lender reps providing food for Broker’s Open Houses and paying big bucks for the agent’s ads. So I had a nice little “sit down” on this topic with a CAR attorney, who was from my neck of the woods, some year’s back. He explained it all from the East Coast/West Coast perspective.
He said on the East Coast, they follow the spirit of the law, as I do. And so it is normal for me to draw big lines and see everything in black and white and right and wrong. But on the West Coast (California that is, not Pacific Nortwest) they say, who has ever been caught and how much did they have to pay?. They weigh the benefits against the potential consequences, and continue to do business as usual, until there is a crackdown.
It’s how I learned NOT to “do as the Romans do”. I go with my gut.
I can remember two times in 16 years that I took up the offer of going to lunch, once from a Title Company and once from a Lender. Usually I just say, I don’t need you to take me out to eat, I need you to be the best you can be for my clients’ needs. It isn’t THAT someone went to lunch, it’s WHY they went to lunch and what they discussed that determines the basis for kickback or not kickback.
Ancillary service providers can do anything and everything to promote THEIR business…they cannot do anthing at all to PROMOTE THE AGENT’S business.
So when someone asks to take me to lunch to show me what they can do for ME…I “Just Say NO!” Simple as that. No gray area there…
Tim,
I am reminded this morning of HUD’s great example of what is a “kickback” and what is not.
It says (I paraphase) that if an ancillary service provider gives you A THOUSAND PENS with THEIR name on it, that’s OK.
But they can’t give you even ONE pen with YOUR name on it 🙂
I’ve always found that explanation to be crystal clear.
I was so “confused” when I moved out of the Philadelphia area, when I saw Title and Lender reps providing food for Broker’s Open Houses and paying big bucks for the agent’s ads. So I had a nice little “sit down” on this topic with a CAR attorney, who was from my neck of the woods, some year’s back. He explained it all from the East Coast/West Coast perspective.
He said on the East Coast, they follow the spirit of the law, as I do. And so it is normal for me to draw big lines and see everything in black and white and right and wrong. But on the West Coast (California that is, not Pacific Nortwest) they say, who has ever been caught and how much did they have to pay?. They weigh the benefits against the potential consequences, and continue to do business as usual, until there is a crackdown.
It’s how I learned NOT to “do as the Romans do”. I go with my gut.
I can remember two times in 16 years that I took up the offer of going to lunch, once from a Title Company and once from a Lender. Usually I just say, I don’t need you to take me out to eat, I need you to be the best you can be for my clients’ needs. It isn’t THAT someone went to lunch, it’s WHY they went to lunch and what they discussed that determines the basis for kickback or not kickback.
Ancillary service providers can do anything and everything to promote THEIR business…they cannot do anthing at all to PROMOTE THE AGENT’S business.
So when someone asks to take me to lunch to show me what they can do for ME…I “Just Say NO!” Simple as that. No gray area there…
I recommend the following: When a vendor asks a real estate agent for business, real estate agents can ask this question in return:
“So, you want my business. Well, what do you know about RESPA?”
How the vendor answers that question will tell you everything you need to know about that vendor and how that company trains their employees on compliance with federal law.
Managers and employees of companies who make the decision to “buy” business by violating federal laws do so because their products or service sucks. Managers make a risk-based business decision not to comply with laws in exchange for paying the fine if caught. All we have to do is read one day’s worth of inman.com news to see yet another AfBA sham title operation busted.
It’s a business decision grounded in economics.
I recommend the following: When a vendor asks a real estate agent for business, real estate agents can ask this question in return:
“So, you want my business. Well, what do you know about RESPA?”
How the vendor answers that question will tell you everything you need to know about that vendor and how that company trains their employees on compliance with federal law.
Managers and employees of companies who make the decision to “buy” business by violating federal laws do so because their products or service sucks. Managers make a risk-based business decision not to comply with laws in exchange for paying the fine if caught. All we have to do is read one day’s worth of inman.com news to see yet another AfBA sham title operation busted.
It’s a business decision grounded in economics.
Hope I’m not too late to join this discussion. Our entire marketing program is directed to consumers. Its been tough going and almost impossible in the Greater Pittsburgh market. This weekend we placed an ad on the mortgage rate page of the Pittsburgh Post Gazette. I can’t wait to see the response. It s simple, short letter to consumers that says:
Did you know that you can CHOOSE your title insurance agent?
Did you know that if you don’t decide for yourself, your lender or real estate agent will make that choice for you?
When you deal with The Closing Specialists, you can be assured of superior service with a fair price that has not been padded to cover any sharing or affiliated business referral program.
You shop carefully for other consumer goods.
Why not shop carefully for your title insurance services?
Hope I’m not too late to join this discussion. Our entire marketing program is directed to consumers. Its been tough going and almost impossible in the Greater Pittsburgh market. This weekend we placed an ad on the mortgage rate page of the Pittsburgh Post Gazette. I can’t wait to see the response. It s simple, short letter to consumers that says:
Did you know that you can CHOOSE your title insurance agent?
Did you know that if you don’t decide for yourself, your lender or real estate agent will make that choice for you?
When you deal with The Closing Specialists, you can be assured of superior service with a fair price that has not been padded to cover any sharing or affiliated business referral program.
You shop carefully for other consumer goods.
Why not shop carefully for your title insurance services?
Diane, most consumers do not know that they can shop for different service providers and typically are given service providers by the agent they are working with. In many cases, this ends up costing the consumers heavily. Many title companies that have affiliations (Affiliated Business Relationships) or are owned by real estate firms indicate they give disclosures to the consumer that they can shop. The problem is that most of these disclosures of ABR’s ARE GIVEN WITH THE LOAN DOCS a day or two prior to closing. It’s a joke!
Using our escrow office as an example, consumers have saved over $75,000 just this year alone—more if you count all the junk fees consumers are subject to by other firms. Of course there are those that say, you left $75K on the table. We disagree and say, no, the consumers and agents who use our service for their own purchases and refinances didn’t waste their hard earned money. And, they received better support and service than elsewhere.
The way in which title companies receive business is one of THE larger issues regarding title insurance and the kickbacks that title insurance companies have “allegedly” been involved with.
The primary uniqueness of the title insurance business is the sole fact that they do not market to the public. They market solely to real estate agents and lenders/mortgage brokers.
State Insurance commissioners from across the country investigating kickbacks and captive re-insurance companies affiliated with title companies routinely state that, unlike traditional insurance companies, title insurance claims for real estate is rediculously low. Somewhere between 3-5% of the premium charged actually goes to claims. For pure profit, title insurance is a VERY lucrative business.
Diane, most consumers do not know that they can shop for different service providers and typically are given service providers by the agent they are working with. In many cases, this ends up costing the consumers heavily. Many title companies that have affiliations (Affiliated Business Relationships) or are owned by real estate firms indicate they give disclosures to the consumer that they can shop. The problem is that most of these disclosures of ABR’s ARE GIVEN WITH THE LOAN DOCS a day or two prior to closing. It’s a joke!
Using our escrow office as an example, consumers have saved over $75,000 just this year alone—more if you count all the junk fees consumers are subject to by other firms. Of course there are those that say, you left $75K on the table. We disagree and say, no, the consumers and agents who use our service for their own purchases and refinances didn’t waste their hard earned money. And, they received better support and service than elsewhere.
The way in which title companies receive business is one of THE larger issues regarding title insurance and the kickbacks that title insurance companies have “allegedly” been involved with.
The primary uniqueness of the title insurance business is the sole fact that they do not market to the public. They market solely to real estate agents and lenders/mortgage brokers.
State Insurance commissioners from across the country investigating kickbacks and captive re-insurance companies affiliated with title companies routinely state that, unlike traditional insurance companies, title insurance claims for real estate is rediculously low. Somewhere between 3-5% of the premium charged actually goes to claims. For pure profit, title insurance is a VERY lucrative business.
Tim,
At the behest of the Seller’s Agent, I used a company similar to yours in fee structure last week located in Seattle. It was a downright awful experience.
Cost is clearly not the only factor and my buyer clients would likely have gladly paid more for a better escrow company and I clearly would have been more than willing to pay the difference in cost, if they wouldn’t.
I agreed to use the seller’s escrow, because the buyers might not have gotten the house if I did not. In multiple offer situations, when the seller’s agent says “use xyz escrow”, it clearly is not worth “betting the house” to choose escrow. An identical offer who DID agree to the seller’s requested escrow company, could get the house on that one minor difference point between the offers.
In my opinion, the seller should choose Title and the buyer should choose Escrow. But many agent remarks say “Use x Title and x Escrow”. I think the mls should prohibit an agent from dictating escrow to be used. Title is ordered before the property is listed, most times, so noting Title Company and Order# in the agent remarks is needed for the offer. But choice of escrow should be “buyer’s choice of escrow” IMNSHO.
Ardell, cost is clearly a factor. I have rarely run into a loan officer or agent who has not asked within 30 seconds, what our fee structure is.
You bring up a great point about service and price. Price is meaningless at any price point, when you get lousy service.
What is worse? Finding out that you received lousy service AND learned you wasted money by paying more than you should have. But, when you get good service and price, it’s a phenominal value. Price is tangible, service is difficult to sell, because by it’s very nature, good service is defined by each individual. One persons experience of good service may be marginal to someone else.
For example, I always get a kick out of it when Lynn and I are out rubbing elbows with agents at brokers opens and we hear the comment, you escrow folks all do the same thing. Lynn’s response is great. She mentions, “I understand we are all the same, so why would you and your clients pay more?”
Just last week, we had an agent “remind us” that our company was to match the title company price since they were “giving” a 30% discount when they close escrow too. So, as you can imagine, we informed the agent that our rate not only matched theirs but our standard rate was still less. Naturally, the agent was exceptionally pleased.
I agree with you, inserting advertising to use x company should be banned in the MLS. Also, I believe that to comply with RESPA, all mortgage & title/escrow company ads should be separate from agents altogether in Harmon Homes, The Real Estate Book, Home n Land etc…..pay full fare on your own page or don’t advertise.
The cozy relationships reek of inferred business kickbacks. I’ve talked with a few mortgage brokers and reps that have pulled ads due to “agent not giving me business.” So the inferred kickbacks are rampant, real and have been ongoing for quite some time.
Ardell, cost is clearly a factor. I have rarely run into a loan officer or agent who has not asked within 30 seconds, what our fee structure is.
You bring up a great point about service and price. Price is meaningless at any price point, when you get lousy service.
What is worse? Finding out that you received lousy service AND learned you wasted money by paying more than you should have. But, when you get good service and price, it’s a phenominal value. Price is tangible, service is difficult to sell, because by it’s very nature, good service is defined by each individual. One persons experience of good service may be marginal to someone else.
For example, I always get a kick out of it when Lynn and I are out rubbing elbows with agents at brokers opens and we hear the comment, you escrow folks all do the same thing. Lynn’s response is great. She mentions, “I understand we are all the same, so why would you and your clients pay more?”
Just last week, we had an agent “remind us” that our company was to match the title company price since they were “giving” a 30% discount when they close escrow too. So, as you can imagine, we informed the agent that our rate not only matched theirs but our standard rate was still less. Naturally, the agent was exceptionally pleased.
I agree with you, inserting advertising to use x company should be banned in the MLS. Also, I believe that to comply with RESPA, all mortgage & title/escrow company ads should be separate from agents altogether in Harmon Homes, The Real Estate Book, Home n Land etc…..pay full fare on your own page or don’t advertise.
The cozy relationships reek of inferred business kickbacks. I’ve talked with a few mortgage brokers and reps that have pulled ads due to “agent not giving me business.” So the inferred kickbacks are rampant, real and have been ongoing for quite some time.
Tim,
We should meet in person soon. Never has cost been a factor in the selection of Title, Escrow, Home Inspector, Warranty Company…I’d have to think of a full list. If I ask you your cost, it is not because I am comparison shopping, it is because I need to know how much the closing costs are going to be, to match against the buyer’s available funds prior to the buyer making an offer. Just because someone wants to know the cost, doesn’t mean they are choosing services based on cost.
Anyone who thinks every escrow company and every escrow closing officer within the company is the same is brain dead or just isn’t paying any attention whatsoever to the process.
Inserting “Use xyz escrow” is not advertising. It’s making it a condition of purchase unless negotiated out. It should be banned…for sure. Technically Title should be out as well, except that Title was already ordered. That’s why I say Title Seller/Escrow Buyer. For that reason and others of greater importance.
As to RESPA and ads, you are completely wrong. I say that as you make it look like every real estate company with a lender or Title Company ad is breaking the law with regard to RESPA. That’s strong language and a very bad accusation and totally not true, Tim. Recant that.
That last paragraph should really be stricken, because you obviously don’t understand the law in that regard. It is so bad, that if you don’t strike it, I’m going to have to pull it up to a post devoted to it, and answer it in a full post that negates your accusation. Too many joint ads out there to let you lead the public to believe that all of those agents and brokers are breaking the law. They are not and there are NO kickbacks involved.
RESPA has the ruler rule…as in 1/8 of ad space equals 1/8 of cost. Any Lender or ancillary service can share an ad with an agent or broker as long as they do not pay more than their fair share of the cost based on actual ad space. When an advertiser on that page pulls the ad because the ad isn’t bringing them enough business for the cost of their space there, that’s a business decision.
If half the ad space is a lender, then half the cost is the lender’s cost. That is OK by RESPA. It’s when the agent was asking the lender to pay for the whole page to be there in a business cards sized ad, that it was illegal.
Sorry, sometimes you really go sideways without the facts on your side, Tim. Accusing people of kickbacks and breaking the law is not ideal chatter for a blog.
Tim,
We should meet in person soon. Never has cost been a factor in the selection of Title, Escrow, Home Inspector, Warranty Company…I’d have to think of a full list. If I ask you your cost, it is not because I am comparison shopping, it is because I need to know how much the closing costs are going to be, to match against the buyer’s available funds prior to the buyer making an offer. Just because someone wants to know the cost, doesn’t mean they are choosing services based on cost.
Anyone who thinks every escrow company and every escrow closing officer within the company is the same is brain dead or just isn’t paying any attention whatsoever to the process.
Inserting “Use xyz escrow” is not advertising. It’s making it a condition of purchase unless negotiated out. It should be banned…for sure. Technically Title should be out as well, except that Title was already ordered. That’s why I say Title Seller/Escrow Buyer. For that reason and others of greater importance.
As to RESPA and ads, you are completely wrong. I say that as you make it look like every real estate company with a lender or Title Company ad is breaking the law with regard to RESPA. That’s strong language and a very bad accusation and totally not true, Tim. Recant that.
That last paragraph should really be stricken, because you obviously don’t understand the law in that regard. It is so bad, that if you don’t strike it, I’m going to have to pull it up to a post devoted to it, and answer it in a full post that negates your accusation. Too many joint ads out there to let you lead the public to believe that all of those agents and brokers are breaking the law. They are not and there are NO kickbacks involved.
RESPA has the ruler rule…as in 1/8 of ad space equals 1/8 of cost. Any Lender or ancillary service can share an ad with an agent or broker as long as they do not pay more than their fair share of the cost based on actual ad space. When an advertiser on that page pulls the ad because the ad isn’t bringing them enough business for the cost of their space there, that’s a business decision.
If half the ad space is a lender, then half the cost is the lender’s cost. That is OK by RESPA. It’s when the agent was asking the lender to pay for the whole page to be there in a business cards sized ad, that it was illegal.
Sorry, sometimes you really go sideways without the facts on your side, Tim. Accusing people of kickbacks and breaking the law is not ideal chatter for a blog.
Ardell, you also mention :
“I agreed to use the seller’s escrow, because the buyers might not have gotten the house if I did not”
This happens more frequently than should. Really, this a control issue and is sad to see. This appears to be section 9 RESPA violation: One cannot require a buyer to use a specific settlement service provider/title in connection with a HUD/Fed. backed loan. So,all the agents with “must use” x title/lender/escrow company or similar language should revisit the potential risk this may create, not only for themselves but for their client. See the claims on the HUD site for real cases. Unfortunately, in some instances, consumers may end up with more expense due to agents who play the control card over what title company to use.
How some builders get away with this by requiring consumers to use x company or lender is beyond me. Many consumers/buyers across the country are led to believe, particularly in a hot market, that if they don’t use a builders specific lender or settlement/title agent, they will lose out on the house. Sad, but true.
Ardell, your heart is in the right place and I know that you would gracefully allow another agent to dictate title or escrow so as to not jeopardize the big picture: the best interest of your client in getting the home they desire. But, if you ever run into a situation where someone is really laying it on thick playing the control card and gives you the ultimatum of use my guy or else…note the conversation and politely warn the agent of their boo-boo. This is tough to do without alienating the other agent or ticking them off. I suppose you have to choose your timing or battle.
Tim,
A small clarification: It’s not a “requirement”, it’s a negotiating point once they ask you to use xyz escrow. If there are no other offers, it’s not a problem and I don’t meet their request. But if there are multiple offers, the agent could influence the seller on that point, so its not worth squabbling over.
You didn’t comment on the RESPA issue. Are you looking it up? LOL
Are you really suggesting that buyers and sellers choose Title and Escrow, and not their agents? Most wouldn’t want the extra job of picking one. Sure, if a buyer or seller knows one and asks for that one, but really Tim, do you think buyers and sellers want to be bothered with that part most of the time?
Sequence, Agent orders Title when they list the property. Seller is way too busy worrying about other things to order their own Title. Escrow is decided at time of offer so Earnest Money check can be written. When a buyer is ready to make an offer, they are not thinking about choice of escrow company. They say “Who do I make this check payable to.”
People do not pick, nor do they give a hoot.
Tim,
A small clarification: It’s not a “requirement”, it’s a negotiating point once they ask you to use xyz escrow. If there are no other offers, it’s not a problem and I don’t meet their request. But if there are multiple offers, the agent could influence the seller on that point, so its not worth squabbling over.
You didn’t comment on the RESPA issue. Are you looking it up? LOL
Are you really suggesting that buyers and sellers choose Title and Escrow, and not their agents? Most wouldn’t want the extra job of picking one. Sure, if a buyer or seller knows one and asks for that one, but really Tim, do you think buyers and sellers want to be bothered with that part most of the time?
Sequence, Agent orders Title when they list the property. Seller is way too busy worrying about other things to order their own Title. Escrow is decided at time of offer so Earnest Money check can be written. When a buyer is ready to make an offer, they are not thinking about choice of escrow company. They say “Who do I make this check payable to.”
People do not pick, nor do they give a hoot.
LOL.
Ardell, I am aware of RESPA and the allowed practice of paying for only the portion of the ad. In escrow we have a variety of RESPA issues to comply with outside of the issue being discussed. So, I agree with you that many are trying to comply with RESPA. Unfortunately, what many people say is not necessarily what they practice.
For example, who are title companies marketing to? The consumers? Nope. To every agent that advertises in those magazines. But that is old news. Why don’t title companies advertise to the public? This is a KEY problem that a report raised to the Subcommitte of Housing & Community Opportunity in Washington DC this past Spring.
How to pass the muster test? Pull the ads and see who starts complaining. Is it the public? No. It would it be the real estate community losing the subsidy of ad dollars. Another suggestion I had was to not allow title and settlement service providers to advertise on the same page of agents. Make them independant.
Am I the one shedding light on this issue? Hardly. Title companies CAN’T stay out of the media. Title companies are being investigated by both HUD and State Attorney Generals. They are having a hard time NOT being charged with “alleged” kickbacks. Every major title company has paid out tens of millions this year alone to settle these cases. This is chump change in a mutli billion dollar industry dominated by only 4 -5 major players across the county. A senior title officer of one of the largest insurers in the country just received jail sentencing this past week for “alleged” kickbacks and the same company THIS WEEK was fined millions in California for “alleged” kickbacks.
From the report submitted to the ‘Subcommitte on Housing & Community Opportunity’ this past April 2006 by former Director of Insurance, Robert Hunter:
“As mentioned, title insurance is not marketed directly to the consumers who buy it, but instead is marketed to the intermediaries that service real estate transactions. As a result, there is almost no competition for consumers as there is with the marketing of auto and homeownership policies. Instead, title insurers compete to secure referrals from the real estate service providers who steer title insurance buyers to their businesses. For example, Stewart Information Services Corporation, the nation’s fourth largest title insurer, does not include homebuyers in its list of customers in its Securities and Exchange Commission filing, only “attorneys, builders,
developers, lenders and real estate brokers.
LOL.
Ardell, I am aware of RESPA and the allowed practice of paying for only the portion of the ad. In escrow we have a variety of RESPA issues to comply with outside of the issue being discussed. So, I agree with you that many are trying to comply with RESPA. Unfortunately, what many people say is not necessarily what they practice.
For example, who are title companies marketing to? The consumers? Nope. To every agent that advertises in those magazines. But that is old news. Why don’t title companies advertise to the public? This is a KEY problem that a report raised to the Subcommitte of Housing & Community Opportunity in Washington DC this past Spring.
How to pass the muster test? Pull the ads and see who starts complaining. Is it the public? No. It would it be the real estate community losing the subsidy of ad dollars. Another suggestion I had was to not allow title and settlement service providers to advertise on the same page of agents. Make them independant.
Am I the one shedding light on this issue? Hardly. Title companies CAN’T stay out of the media. Title companies are being investigated by both HUD and State Attorney Generals. They are having a hard time NOT being charged with “alleged” kickbacks. Every major title company has paid out tens of millions this year alone to settle these cases. This is chump change in a mutli billion dollar industry dominated by only 4 -5 major players across the county. A senior title officer of one of the largest insurers in the country just received jail sentencing this past week for “alleged” kickbacks and the same company THIS WEEK was fined millions in California for “alleged” kickbacks.
From the report submitted to the ‘Subcommitte on Housing & Community Opportunity’ this past April 2006 by former Director of Insurance, Robert Hunter:
“As mentioned, title insurance is not marketed directly to the consumers who buy it, but instead is marketed to the intermediaries that service real estate transactions. As a result, there is almost no competition for consumers as there is with the marketing of auto and homeownership policies. Instead, title insurers compete to secure referrals from the real estate service providers who steer title insurance buyers to their businesses. For example, Stewart Information Services Corporation, the nation’s fourth largest title insurer, does not include homebuyers in its list of customers in its Securities and Exchange Commission filing, only “attorneys, builders,
developers, lenders and real estate brokers.
Lynlee would like to also suggest a major muster test to smoke out kickbacks:
Ask a title rep if THEY WOULD CARE if they advertised with an agent and the agent was found to steer business to another competitor. 9 out of 10 would REALLY care.
For example, when we did an ad with an agent from the major r.e. company in our area, the title company that also had an ad with the agent got ticked off and pulled her ad.
Gotta go make lunches for the kids tomorrow…..bye!
Lynlee would like to also suggest a major muster test to smoke out kickbacks:
Ask a title rep if THEY WOULD CARE if they advertised with an agent and the agent was found to steer business to another competitor. 9 out of 10 would REALLY care.
For example, when we did an ad with an agent from the major r.e. company in our area, the title company that also had an ad with the agent got ticked off and pulled her ad.
Gotta go make lunches for the kids tomorrow…..bye!
Tim, I don’t know that you can categorically state that title companies do not market directly to the public. In Bellingham, both Chicago and Stewart run radio ads aimed at consumers.
Bob
Bob-
Thanks for the feedback. That is the first time I’ve heard of a title company doing ads on the radio. Interesting that they are targeting Bellingham. What stations are they advertising on? That would probably give us a hint at the the audience they are trying to reach.
Tim, that would be 790 KGMI, the house that Rush built. O”Reilley took over Dr Lauras earky afternoon slot and they have some locals on for late afternoon all bookended by news, then Clark Howard in the evening with Kim Komando, Dr Dean Edell and Bob Brinker filling the weekend.
It would be the talk radio demographics, with the ads aimed at customer service. I think the Chicago spots are in conjunction with RE agents, but am not sure about Stewarts’.
bob
Tim, that would be 790 KGMI, the house that Rush built. O”Reilley took over Dr Lauras earky afternoon slot and they have some locals on for late afternoon all bookended by news, then Clark Howard in the evening with Kim Komando, Dr Dean Edell and Bob Brinker filling the weekend.
It would be the talk radio demographics, with the ads aimed at customer service. I think the Chicago spots are in conjunction with RE agents, but am not sure about Stewarts’.
bob
I’ve been testing consumer directed advertising since 2000. I’ve run two radio campaigns. One was terrific. It prompted a competitor to do the same thing. Guess what? We were both selling title insurance and it was great. We also run TV ads on some real estate agent Sunday morning programs. We pay a fair market price for all advertising whether its a joint promotion or on our own. Most of our advertising is done on our own.
The wonderful thing about all of the media focus on title insurance is that the light of day is shining on the industry. Economic laws will prevail given a fair playing field. Consumers acting in their own self interest – using all available tools will select title/escrow/closing providers based on price, quality of service, convenience and all the factors everyone uses when they shop. Our industry is morphing in a way to will raise the level of service and lower the price. I expect that the businesses that rely on kickbacks and shams won’t be able to compete. There just won’t be enough money in it to pass around. This is a natural selection process. I fully trust the consumer’s ability to serve their own self interest. My attention is targeted on their needs. BTW the Post Gazette ad ran last Sunday and I am pleased with the response from consumers and some industry professionals. Its really separating the wheat from the chaff. If you are of like mind and a title professional, I strongly suggest you take a stand publicly and start promoting that your fees are not padded to cover referral programs. Something big is happening and I think our industry is about to come clean. 😉
Rip off is everywhere in the real estate industry. Everyone takes a dip in the process, from realtor to loan agent to title insurance. An interest article to share:
http://money.cnn.com/2006/01/11/real_estate/title_insurance_exposed/index.htm?cnn=yes
Good information from California Dept of Insurance.
Jargons:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0300-compare-premiums/title-terms.cfm#Escrow
Compare Premiums:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0300-compare-premiums/index.cfm
Complaints ratios:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0500-complaint-study/index.cfm
Rip off is everywhere in the real estate industry. Everyone takes a dip in the process, from realtor to loan agent to title insurance. An interest article to share:
http://money.cnn.com/2006/01/11/real_estate/title_insurance_exposed/index.htm?cnn=yes
Good information from California Dept of Insurance.
Jargons:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0300-compare-premiums/title-terms.cfm#Escrow
Compare Premiums:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0300-compare-premiums/index.cfm
Complaints ratios:
http://www.insurance.ca.gov/0100-consumers/0200-consumer-tools/0500-complaint-study/index.cfm
Contributors:
In October, the Washington Insurance Commissioner issued a report concluding that title insurers have paid inducements in violation of Washington law. The Commissioner concluded that “this industry is rife with practices gone haywire.”
You can read the report at: http://www.insurance.wa.gov/publications/news/Investigation_Title_Insurance.pdf
My law firm, Phillips Law Group, PLLC, has filed a suit against some of the title insurance companies identified in that report on behalf of insured home purchasers and refinancers If you are interested in this case and are not an employee of a title insurance company, we would be happy to speak with you regarding your own experiences as we continue to conduct our factual investigation of the case. My contact information is set forth below.
Thomas E. Loeser
Phillips Law Group, PLLC
315 Fifth Avenue South, Suite 1000
Seattle, WA 98104-2682
t 206-382-8808
f 206-382-6168
tloeser@jphillipslaw.com
http://www.jphillipslaw.com
Contributors:
In October, the Washington Insurance Commissioner issued a report concluding that title insurers have paid inducements in violation of Washington law. The Commissioner concluded that “this industry is rife with practices gone haywire.”
You can read the report at: http://www.insurance.wa.gov/publications/news/Investigation_Title_Insurance.pdf
My law firm, Phillips Law Group, PLLC, has filed a suit against some of the title insurance companies identified in that report on behalf of insured home purchasers and refinancers If you are interested in this case and are not an employee of a title insurance company, we would be happy to speak with you regarding your own experiences as we continue to conduct our factual investigation of the case. My contact information is set forth below.
Thomas E. Loeser
Phillips Law Group, PLLC
315 Fifth Avenue South, Suite 1000
Seattle, WA 98104-2682
t 206-382-8808
f 206-382-6168
tloeser@jphillipslaw.com
http://www.jphillipslaw.com
I think that part of what makes the Iowa program so successful is the regulation of the title searchers. In most states, the title abstractors are not required to be licesned and in the few others where they are, it is a meaningless fee paid to the department of insurance.
Even the most careful agent, issuing the most scrutinized policy is worthless without a good title search as the foundation. The major underwriters have continually reduced their requirements for the title search. Many agents now sub-contract out the search to unqualified, unregulated title searchers for the lowest fee they can negotiate.
Ask yourself why every other person involved in a real estate closing is required to have a license and continuing education; real estate agents, mortgage brokers, surveyors, appriasers, and, of course the title agents. Yet, independent abstractors are free to take an online course and begin selling title searches with no oversight.
The Iowa program is most often critisized because it takes longer to close. That is mainly because they still require a thorough title search by a professional title searcher. In most parts of the country, its all about short-cuts, turn-around time, and low fees. Unfortunately, the fees get marked up before the consumer pays them so the only party that benefits from the “reduced cost” of the search is the title company.
For the process to work at its best, the whole process needs to be regulated from top to bottom. So heavily regulating the rest of the industry and ignoring the title searchers is very much like closing the barn door after the horses get out.
Robert A. Franco
SOURCE OF TITLE
http://www.sourceoftitle.com
I think that part of what makes the Iowa program so successful is the regulation of the title searchers. In most states, the title abstractors are not required to be licesned and in the few others where they are, it is a meaningless fee paid to the department of insurance.
Even the most careful agent, issuing the most scrutinized policy is worthless without a good title search as the foundation. The major underwriters have continually reduced their requirements for the title search. Many agents now sub-contract out the search to unqualified, unregulated title searchers for the lowest fee they can negotiate.
Ask yourself why every other person involved in a real estate closing is required to have a license and continuing education; real estate agents, mortgage brokers, surveyors, appriasers, and, of course the title agents. Yet, independent abstractors are free to take an online course and begin selling title searches with no oversight.
The Iowa program is most often critisized because it takes longer to close. That is mainly because they still require a thorough title search by a professional title searcher. In most parts of the country, its all about short-cuts, turn-around time, and low fees. Unfortunately, the fees get marked up before the consumer pays them so the only party that benefits from the “reduced cost” of the search is the title company.
For the process to work at its best, the whole process needs to be regulated from top to bottom. So heavily regulating the rest of the industry and ignoring the title searchers is very much like closing the barn door after the horses get out.
Robert A. Franco
SOURCE OF TITLE
http://www.sourceoftitle.com
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