I speak with real estate agents, lenders, developers and consumers regularly, and I’m always amazed at the lack of vetting taking place in our industry when it comes to title agents. Perhaps it’s a compliment and reflects how well we do our jobs. But this is a problem because we’re not all created equal. In fact, you must be very careful in who you choose.
Before choosing a title agent, here are just a few important considerations that should be made:
- Are they well capitalized?
- Like any business, your title agent should have a healthy amount of operating capital, in cash, in the bank. I suggest a minimum of 3, but 6 is preferred. These reserves improve the odds that your title agent will not be tempted to comingle funds held in escrow, a risk that should be considered.
- What is their claims history?
- Are there open claims against insurance policies they have issued in the past? What is the exposure? How many claims have they paid out in the past year, three years, five years and for how much money?
- Have they adapted and instituted “Best Practices” and other compliance initiatives suggested by the American Land Title Association and the Consumer Financial Protection Bureau (CFPB)?
- More importantly, have they done this as a reactionary measure? Have their practices been vetted, tested or audited by a third party to certify they encompass the entire compliance spectrum?
- Are they collecting the necessary information required under “Data Call” and reporting it timely to the Office of Insurance Regulation?
- Is their work being performed in-house? Or are they outsourcing important aspects that fall within the parameters of what licensed title agents are responsible for?
- How often are they reconciling their escrow accounts? Third party reconciliations are required monthly. However, I would be hesitant to work with an agent that follows required minimums. At TitleTeam, our escrow account is reconciled daily. Additionally, we have instituted a system called “Positive Pay”, which requires our Escrow Officers to manually approve each check presented to a financial institution against our software before the banks will clear it.
- What steps are taken to safeguard your client’s money?
- Do they have quality measures in place to combat the increased phishing and spoofing hacker attempts that are plaguing our industry? Are they tested?
- Are they engaging in questionable activities that could be considered violations of the Real Estate Settlement Procedures Act and risking sanctions by the CFPB that could endanger your business relationships and your client’s best interest?
- Is the business “owner operated”? Or is the owner out of office working on other things. While we applaud entrepreneurship, the business of title requires active owner engagement and leadership regularly.
- Is the day to day operator a licensed title agent in good standing with the Department of Financial Services? The State of Florida simply requires one licensed title agent per agency. This agent can theoretically be in name only leaving behind the lion’s share of licensed activity to an unlicensed group of employees. At TitleTeam, many of our employees are licensed title agents in good standing with the State.
- Are they profitable? Ask them.
The list goes on and on, but this should be a good place to start. Engage in healthy discussion and perform proper due diligence before exposing your referral business and your clients’ best interest to unnecessary risk. Feel free to call our office directly to discuss any of the above in detail with me directly.