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We’ve been talking a lot lately about building affiliated arrangements, and that’s, in large part, because everyone’s doing the same. And we’ve also mentioned that our own Aaron Davis and Mike LaRosa have been asked by quite a few trade associations and publications to discuss the matter at length. It’s humbling! We’d also be lying if we didn’t share that our Closingsuite.com brand has been fielding a ton of inquiries: “Should I build an ABA? How do I get started?”
Although there’s a lot of good information out there, and most of the recent conferences and webinars have devoted a lot of time to the topic, there’s just so much to cover. An hour (or two) just doesn’t get it done. That’s why we’ve introduced a new video series: “Build, Grow and Sell: How to Build the Best Title Ops, Including ABAs, From the Ground Up.”
Naturally, Mike and Aaron will be leading the discussion. And we’ve broken the conversation up into short 10 to 15 minute subtopics. Our hope is to cover a wide range of questions and subject matter - related to building title operations – so that we can cover the things you want to hear about.
While much ABA related content sticks to the compliance elements, which are necessary, we’re going to try to dive more into the operational aspects. What will my costs look like? With whom should I partner?
Yes, we’ll also handle some compliance topics as well. And we may bring some familiar guests in along the way, too. But we think the subject of building ABAs is too broad for a one hour webinar. Hopefully, you’ll find this to be a useful resource as we develop it.
Oh, and, by the way…while “Affiliated Arrangements” might have been the phrase that caught your attention, Mike and Aaron feel very strongly that ABAs are NOT the only way a REALTOR or lender or builder can capture title revenue. Nor are ABAs the only ways title agencies seeking to grow geographic footprint can enter new markets without building a brick-and-mortar operation on their own. In fact, they spend a fair amount of time showing clients other, more profitable and sustainable options that are anything but affiliated arrangements. That’s the stuff we’ll try to cover on “Build, Grow and Sell.”
Our first three installments can be found here, here and here!
And if you have a question or topic for us, don’t hesitate. Reach out and let us know. You never know. You could well find yourself joining us as a guest panelists one of these days, too!
Mergers, acquisitions, joint ventures and other varieties of partnership are all great options for growing your business and are particularly effective ways for title insurance agencies to expand their opportunities into new regions and specialties.
Often, when an agent decides to pursue one of these pathways, the first thing they look at is the spreadsheet. What could this mean in terms of new income? Will it increase costs or decrease costs due to shared resources? What will the upfront costs look like in terms of combining two entities?
The one consideration that often falls to the bottom of the list is the challenge of combining two distinct cultures when bringing the companies together to forge a new entity.
In the first bright glow of falling in love with the idea of merger, acquisition or joint venture, one might convince oneself that you and the other business owner want the exact same outcome and in fact it might feel that way in the initial euphoria of putting the deal together.
It’s like the early days of an engagement when two people raised in drastically different cultures, with opposing religious views and burdened by wildly different upbringings may believe that in spite their disparate realities they somehow will be on the same page about how to keep the house clean, raise children and handle money.
Spreadsheets are great, but they are not people. Ensuring you are on the same page when it comes to culture involves a lot of dialogue, which means sharing your truth, listening intently to other views, and coming to terms with where you intend to take this new venture.
Because in truth, culture is complicated.
Culture can be as simple as dress code (jeans or suits) and adherence to rules and norms (showing up on time and how we treat one another) and as complex as shared values and vision.
Make cultural alignment a priority from the outset and commit to putting in the time to explore each company’s culture. This must begin with a frank conversation between the owners and extend deep into each company, whether that means getting on site to view operations, conducting employee surveys or meeting with each other’s top managers.
This whole process requires a tremendous commitment to being open and frank, as well as listening and observing. Every company has its strengths and its challenges. Being candid about how each of you approach management, planning, communication and a plethora of other topics can help you create a much stronger culture than either of you may have had on your own.
After gathering information from these efforts, put pen to paper to craft a statement or outline of what characteristics you feel are important in this new shared culture. This is critical. If you are not on the same page from the beginning, you can bet your employees will struggle with a disjointed culture that does not have a clear set of parameters and goals for growing the company in the future.
Communicating the vision of the new combined venture is critical to its ultimate success. In addition, inviting employees from both sides of the table to participate in the development of the particulars that make up the vision can ensure they are invested in the outcome. This may feel like “your” company, but if your employees don’t feel like it is “their” company, too, you will never achieve the kind of cohesive teamwork it takes to build a really great company.
The #1 rule of blending two company cultures into a new venture is, “Don’t do nothing.” Don’t think you can successfully steamroll your way into a merger, acquisition or joint venture and everyone on both sides will happily fall into line. Just as you are judicious in investigating the financial and technological particulars on both sides, be equally judicious in discussing, defining and implementing a shared culture.
At FAN, we can offer additional capabilities that will strength your M&A or joint venture efforts. Call us today to learn the many ways we can assist you in building a stronger agency for the future.
October and November always seem to be among the busiest seasons of the year, even as “seasonal” sales begin to decline. (Then again, thankfully, there’s not a whole lot of “seasonality” here in Florida!). You’ve probably seen that our own Aaron Davis and Mike LaRosa have been busy sharing their thoughts with a number of respected trade publications. Aaron spoke with The Title Report not long ago about the exploding insurance crisis in Florida while Mike was approached by Housing Wire in October to discuss one of the hottest topics there is right now—affiliated arrangements.
And then, of course, there’s conference season, and this year was no less busy than ever. Aaron and Mike have both made the rounds speaking on affiliated arrangements this year, thanks to RESPRO and ALTA. In fact, Aaron also spoke on digital closings at ALTA ONE. We’ve also attended several shows too, and hope to see everyone at the FLTA Annual or Premier One’s TitleCON in November. Our own Amy Gregory will be presenting at FLTA and Andrea Somers will be discussing cyber insurance at TitleCON, so come hear what they have to share if you can!
Speaking of ABAs and joint ventures, expect a new video series from Aaron and Mike any time now. They’ll take a dive into the elements of building an ABA (or non-ABA operation) that don’t get talked about too often. We’ll keep you updated as to the launch of that series right here.
As busy as we’ve been, it’s always great to take a breath and take in the annual industry gatherings, where the content, exhibit halls and cocktail hour conversations give us all a little perspective on what’s going on in our space.
Several members of the FAN leadership team headed out to Colorado Springs this October to take in ALTA ONE. In addition to being a spectacular venue, the trip was a great opportunity to network and share insights. You didn’t have to be there to know that building affiliated arrangements is one of the hottest topics in the industry right now, but we can confirm it remains hot and may get even hotter! Remember, title revenue can be captured in many ways, and although ABAs are certainly one approach, they’re not always or automatically the best approach.
We’re seeing a lot more interest in capturing revenue—anywhere, everywhere—as rates remain high as well. Aaron and Mike, in their Closingsuite.com roles, have been hearing from quite a few agents across the country seeking ways to enter new geographic markets or partner with lenders, builders and REALTORS to build new operations. That was true at the ALTA show as well.
Much like last year’s event, we can’t say that the attitude in the proverbial room was rosy. But many were guardedly optimistic that we’ve at least bottomed out when it comes to rates and order volume. By some accounts, the magic “turnaround” date will be sometime in April or May, 2024, but, by now, we know better than to make assumptions. Instead, we were impressed by the focus on building partnerships and optimizing processes to help ride out the current downturn. The Broadmoor is a great resort destination, but the folks we talked to were all business.
That’s a great approach to take these days.
Remember, we’re happy to help you consider your options—maybe even offer some you hadn’t thought of previously—if you’re seeking to grow your footprint or open a new title operation. That goes for title agents, real estate brokerages or teams, lenders or builders. Just drop us a note and let’s talk.
FOR MANY SETTLEMENT SERVICES BUSINESSES, 2023 HAS BEEN A CHALLENGING YEAR. Although there will certainly be a rebound at some point, the most successful firms and owners have rolled out several new strategies to bolster revenue until then. After all, Fannie Mae forecasted an overall origination volume of $1.69 trillion this year. It’s not the jaw-dropping number we saw in 2021, but many industry veterans can remember years when a forecasted volume of over $1 trillion was reason for excitement.
The bottom line is that there is business out there, somewhere, for title agents and settlement services firms. But how do you go about finding it?
It’s a solid approach to take many of the usual, proven steps we all rely on when a market becomes soft. We’re all building or shoring up our relationships with local brokerages and Realtors. We’re checking in on loan originators and executives at the regional banks and lenders. And, although it’s not something any of us wants to do, we’ve cut our costs and traded fixed expenses for variable expenses.
However, in especially tough market cycles, those steps may not be enough. We’ve seen considerable contraction throughout the market already, and capital infusions are hard to come by. Revenue is the lifeblood of any business, and there are no true substitutes.
One proven approach to locating and tapping into real estate volume that may not be taking place in our local markets is partnership, whether through a joint venture or other means. Not every title agency is national in its geographic footprint. Not every firm is positioned for maximum operating efficiency. When revenue is down, it’s not easy for most to simply acquire another brick-and-mortar operation in a new market or make a massive investment in operational technology. That’s where partnership comes in, and it’s what an increasing number of title firms are doing in a variety of ways.
It’s easy enough to decide to enter a hot market to get a piece of the action. It’s also easier said than done. Licensing and state or local regulations can create a huge barrier to entry. The expense of building a new operation or acquiring an existing operation—while quite plausible for those with cash reserves—is generally not what most are looking for when the order count is low. And then, there’s the obvious reality that unless an incoming title agent or owner is already familiar with the nuances of a new market or the customs of local brokerages and banks, success is anything but guaranteed for the newcomer.
Another consideration for expanding one’s footprint is the recruiting and hiring of quality local talent. Start-ups or new firms tend to attract the available talent, rather than the top talent. More often than not, that talent is available for a reason. When it comes to wooing the best title personnel, a new firm may get one shot to win them over. A firm that’s just opened its doors in a new market can get off to a disastrous start if it’s built around the wrong person, the wrong team or wrong culture. Partnering with an established local agency with a reputation for good leadership, culture and service can help a firm avoid potential mistakes from the very start.
Whether via joint venture or other forms of less regulated, informal partnership, we’re seeing an increasing number of title agencies entering new geographic markets by partnering with firms that are already well established there. Although we’re also seeing some make the effort to enter new markets with affiliated arrangements that forego the participation of a local title agency, relying instead on their banking or realty joint venture partners, there are quite a few potential pitfalls to going that route, not the least of which is the increasing regulatory scrutiny on suchventures.
Better to rely on the experience and expertise of a local firm when partnering to enter a new market. An established local title business should be comfortable with the in’s and out’s of its home territory. It’s also likely they have the resources and experience to assemble a compliant arrangement without rankling local enforcement agencies.
One doesn’t need to enter new geographic markets to weather the storm, either. Cutting expenses effectively while improving an operation’s effectiveness not only helps margins when times are tough, but also positions businesses to ramp up quickly when order counts start to rise again. After all, a lender isn’t going to gradually increase the order count in deference to the title agent who’s frantically onboarding new staff. Entering new partnerships also makes great sense for agents who don’t have the means or expertise to centralize their operations or trim inefficiencies without harming their core businesses.
There are a number of title businesses out there that have turned to a model that relies on the optimal use of effective technology, staffing and training that aligns with what lenders are seeking (such as digital closings and/or RON, cybersecurity, etc.) and a workflow that relies as little as possible on manual or inefficient processes. Partnering with such a business can lead to immediate benefits, not to mention positioning the incoming partner for success when the market turns.
Of course, not every potential partner is right for the title business seeking a partnership. Demonstrated experience is important. Has the potential partner done this before? What were the results? Does that partner have equally tough questions for the inquiring firm? While it’s understandable that a business might not want to share every element of its “secret sauce,” it’s also critical that both partners considering a joint venture or other form of partnership understand how the other works and what each firm values and strives for.
The title industry can be a competitive place—sometimes inordinately so. But in challenging times, there are numerous opportunities to at least have a share of the business that is out there through partnership. But it’s important to go about things the right way. Just as a successful joint venture can lead to improved revenue and even new opportunities, a bad arrangement can sink a business or hurt its brand for future potential partnerships. Better to get it right the first time!
We’ve been asked a lot about building affiliated title businesses lately. During market cycles like this, everyone’s scrambling to take in as much revenue from as many proverbial spigots as possible. Some folks think an easy solution is to capture as much title revenue as possible. That can be a great solution, but it’s never truly “easy.” After all, you’re really building a new business. That said, having a solid strategy and planning to build a sustainable operation for the long term is the difference between a a very short run and success.
For home builders, real estate brokerages mortgage lenders and even other title agencies (perhaps seeking to enter a new market without truly building their own brick-and-mortar operation there), the first step is finding the right title pro (or pros) to help build the operation. Title insurance and closings vary from state to state and even city to city. Unless you’ve got experienced (and that experience should be recent!) title operators in house, partnering with a consultant or, better yet, a firm equipped to build ABAs is the safest way to go.
There are a few fairly obvious but all-too-often overlooked things you’ll want to know about your potential ABA partner.
Especially for businesses that don’t perform their own title insurance and closing operations, it’s easy to understand that, to run a successful title operation, you’ll need someone who…well, who knows title!
But title insurance and settlement services are anything but universal or monolithic. Every state has its own rules, its own customs, its own enforcement tendencies and its own quirks. In most states, it even varies county to county. So an experienced title professional who has built successful operations in New York doesn’t automatically understand how to do the same thing in Texas.
On the other hand, just because a seasoned title professional hasn’t helped build title operations in the market you’re seeking to enter doesn’t automatically disqualify that person, either. The key is to drill down as you vet your potential partners. Have they built successful title operations? If so, where? When? How many? If they haven’t built businesses in the market you’re targeting, why do they feel qualified to do so? Do they have partners who are? And the biggest question…
“How did you build out successful title operations in the past?” may be the most important question of all when vetting potential ABA partners. RESPA and ABA experts will quickly (and correctly) point out to you that things like ABAs (or workshares) are prime targets for regulatory scrutiny when they’re basically shells of the typical title operation. You may already know that your title ABA’s partner (be it a brokerage or a builder) will need to offer choices other than their own title operations to consumers. You know that you’ll have to staff up your operation and that you’ll want to automate the operation as well for the best margins.
But do you know which technologies are ideal fits for your strategic planning? Or which processes should be outsourced? Or which processes are better kept “in-house,” with shared resources supporting them? Or which local brokerages (or loan officers, etc.) are open-minded to using newly opened title agencies?
These are the details that can make all the difference. If your potential partner doesn’t have a grasp of those details and why they should apply to your operation, you may want to move on in the vetting process to others.
There’s no out-of-the-box solution for building a successful title operation—and beware of those who claim there is!
We at FAN talk to other title agents, home builders, real estate brokerages and lenders all the time about building ABAs that fit their needs. In fact, many times an ABA is not the best way to go. If you’re seeking to enter the market with a new title operation, get in touch. We can help.
FAN and Closingsuite.com Founder and CEO Aaron Davis and COO Mike LaRosa were approached recently by RESPA News for their thoughts on building a successful JV or ABA title operation. You can see the full articles here (subscription required).
As we’ve been saying, affiliated businesses are the hot topic right now. In a soft market, lenders, home builders, brokerages and title agencies alike are seeking new revenue sources. Unfortunately, some are doing it the wrong way. More than a few regulatory enforcement agencies tend to keep a careful eye on ABAs. While speaking at a RESPRO event earlier this year, Mike joined co-presenter Marx Sterbcow, managing attorney for The Sterbcow Law Group, in reminding potential ABA operators that building a shell of a business and calling it an ABA will only result in enforcement action: “Why are you in business, if you can only employ one person?”
Building an ABA the right way means building a full-fledged title operation from the ground up, and planning for the long term.
RESPA News readers were also privy to Aaron’s insights about building a successful ABA in the publication’s recent “The ABCs of RESPA: Getting Back to Basics” report.
Mike and Aaron are no strangers to ABAs. They’ve helped build or helped others build successful ABAs for years. In fact, they’ve also talked some potential operators out of ABAs where a different structure of partnership made more sense. They both feel strongly that building a successful ABA is not much different than planning a successful independent title operation. If you can’t support the costs of running a true agency operation, you’re probably not in a position to build an ABA.
There are still many ways to plan for a profitable business, however. Aaron, also a presenter at the RESPRO event, reminded potential ABA (or JV) operators that technology can really help streamline your workflow—especially for non-core services. “You can outsource typing, you can outsource scanning, and some of those post-closing functions,” he said. “Technology that didn’t exist when RESPA was written now allows some pieces of the puzzle to be outsourced. Title production software allows so much more to be done than when these guidelines were written.”
Anyone interested in building title JVs or ABAs should really have a look at the RESPA News report. Also, feel free to email Aaron or Mike with questions. We’d be happy to discuss!
The rapid shift to online transactions during the pandemic has opened up new avenues for fraudulent activities. According to FloridaRealtors.org, one such alarming trend seen among realtors in Florida is an increase in 'fake sellers'—scammers posing as property owners to dupe unsuspecting buyers. Below, we dive into this type of land fraud, how to spot it and what measures to take to avoid it.
Land fraud is an illegal scheme in which scammers pose as property owners and attempt to sell properties they don't actually own. This deception can take various forms, from selling non-existent land to selling properties others own. The fraudsters can resort to several strategies to complete their ruse, like forging documents, making excuses for not providing proper identification, or claiming they are out of the country and cannot attend in-person meetings. With digital transactions making fully remote closings more common, these scammers have adapted their tactics to exploit the new opportunities.
Whether you are concerned over this growing predicament or not, you should always follow the advice below to ensure your transaction goes as smoothly as possible.
By staying alert and following these guidelines, you can identify and avoid falling victim to land fraud and move into your dream home with peace of mind. Despite the growing complexity of these scams, constant vigilance can go a long way in protecting yourself and your investment.
If you'd like to learn more about these threats and how to combat them, we'd be happy to help. Give us a call at 866-259-4440.
A real estate professional must ensure that homebuyers find the home of their dreams and remain secure throughout the transaction process. Unfortunately, according to a recent Florida Realtors article, the threat of fraud is only increasing. As real estate scams become more sophisticated, adopting vigilant and proactive measures to safeguard your clients is essential. Below are some helpful tips from the article that you can use to ensure you are well-prepared to protect your clients from fraud.
Stay Informed: Stay updated on the latest fraud techniques targeting homebuyers. Sites like the U.S. Federal Trade Commission or AARP.org are reliable sources. The National Association of Realtors also offers a comprehensive data privacy and security toolkit that is instrumental in understanding your responsibilities around client data.
Educate Your Clients: Remember to warn your clients about potential scams like wire fraud or fake buyer text messages during your first meeting and throughout the homebuying process. Make them aware of the red flags, such as requests for personal information or payments via email or text.
Implement Secure Practices: Use strong, unique passwords and two-factor authentication for all your accounts. Make sure to install timely computer updates and security patches.
Practice Email and Text Safety: Never click on links from an unknown or suspicious email or text message. Always verify the sender's identity before opening attachments or following links. If you receive a suspicious text message, report it as spam and block the number.
Secure Client Data: Handle your client's personal and financial data with extreme care. Ensure all information is stored securely and only share it with trusted contacts.
The ever-evolving tactics of fraudsters can make the real estate transaction process seem daunting for clients. Realtors can feel like the only line of defense to provide a secure environment for your clients. Thankfully, you're not alone.
Florida Agency Network can be by your side to help protect your clients through the closing process and beyond. We know how hard you work to protect your clients from these threats because we take the same precautions to assure homebuyers that their dream home is in safe hands. To learn more about how we can protect your clients from fraud, visit our website or call us at 866-259-4440.
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