Key points from Seth Godin’s post titled Advice for real estate agents (quit now!):

• Order takers (those genetically programed dinosaurs who know the answer to every question, but bring nothing of real value to the table) are as good as extinct. 
  
• The down market offers infinite opportunities for real champions.
  
• You’re either fanatical about your product or you’re “invisible.”
• All real estate marketing is hyper-localized.
• Become the local go to person for anyone and everyone, even your enemies, that can benefit from hearing your message.
• Build blogs to communicate the “real information, not just data” that’s important to past and prospective customers alike.
  

Now comes the title industry …

Real estate agents have done a far better job branding themselves than have title agents.  There’s little risk of short term disintermediation for real estate agents because they’ve wisely positioned themselves as the point of contact within local communities.  They’ve aggregated audiences of loyal fans.  Real estate brokers, considering current models, couldn’t exist without their agents, particularly the top producers.

The title industry has employed a decidedly different business model.   Chronic anonymity complicated by a self imposed identity crises has been the by-product of decades of bad marketing choices by title companies.  I think it’s safe to say that many title companies have no marketing, branding, or positioning strategy at all.  It’s an error that can’t be corrected when boom markets turn sour.  The silent closure of a title company for lack of business goes unnoticed.  Why?  Most consumers don’t know what a title company is, what it does, or that it exists.

The title industry’s favored marketing tool of the past, a box of donuts featuring a stapled business card, is no longer an effective option.

Could title insurers replace their agents with a team of aggressive sales reps?  It wouldn’t be an easy accomplishment on the operations side, but I think it could be done quickly on the marketing side.  It’s something to think about in light of underwriter affinity for direct operations.  If title agents were to instantly disappear, I suspect that title orders would flow to underwriters in direct proportion to current industry dominance.  First American and Fidelity National would control about 70% of the market with the remaining players competing for any remaining business.  It really has nothing to do with technical superiority or claims ratios.  Underwriter dominance is determined wholly by management’s commitment to attracting and developing marketing talent.

As a value proposition, title companies have to build solid brands within their targeted audiences.  While many of you will continue to market only real estate and lender sources, the importance of internet transparency on consumer decision models can’t be ignored.

Title order pipelines have to swell with increasing percentages of consumer directed orders to remain viable in the future.

Title companies have to start championing themselves and the communities which they serve.  You don’t sell title insurance.  Your product is a complicated mix of reputation, credibility, and service.  And yes, the future of title company marketing lies in the power of Web 2.0 and the power to communicate interactively and selectively.  If you’ve never heard of Web 2.0, we need to talk. 

The boring, static web-sites that are the title industry standard have anthropological value at best.  They do nothing to promote business in the Web 2.0 business environment.   It’s not unusual to find underwriter logos featured on title company web-sites.  The practice results in confusion and possibly the branding of underwriters at the expense of title company irrelevance. 

Keep in mind: the underwriters that you’re marketing on your sites are often your direct competition for title orders.

This post is getting lengthy so I’ll hit my key points:

• Hyper-localized blogs offer unlimited opportunities for title companies to connect with consumers and other local sources of business.
• There’s no excuse for not blogging because it’s inexpensive and most title companies aren’t busy.
• Stop selling title insurance and title insurers.  Sell yourselves!  You are the product!  Become your own product champion.  Become fanatical about your title company.
  
• Use blogging to offer valuable information about your company, your community, and anything else that matters to real people.
• Use the internet to engage others.  It works.

Shortly, I’ll share links to some of my favorite real estate blogs with hyper-localized content.

 

The Atlanta Business Chronicle reports that a federal judge issued a 28 year prison sentence for the king-pin of a massive property flipping scheme.  Phillip Hill had orchestrated the sale of hundreds of homes and condo units in the Atlanta Area.  The article mentions nothing of title industry involvement in the case, but I suspect that one or more title companies were implicated because flipping schemes can’t exist without the manipulation of Schedule A of title commitments.

My first question to prospective clients: What are your employees trained to do when confronted with fraudulent situations? 

It’s something of a loaded question because it implies that employees are equipped with formal skills to recognize the warning signs of mortgage fraud.  It also implies that management is visibly committed to battling mortgage fraud.  It’s sometimes difficult for title company management to make proper decisions when asked to do something inappropriate by a significant source of business.  I’m basically opposed to reverse competition and the AfBA because both business models severely limit the number of business sources that a title company is likely to have. 

Best practices to employ when dealing with the possibility of mortgage fraud:

Separate the players from the facts.  Mortgage fraudsters are often very charming and persuasive.  They are often important sources of business for title companies.  Cache phrase are often used like: “everybody gets paid”, or “the buyer and seller get what they want”, or “tell me what’s wrong with this deal.”  In effect, the criminal nature of a scheme could easily be blurred by the noise level that’s intentionally created by the fraudster.  Don’t think for a minute that you’re immune to the charismatic qualities of many white collar criminals.  Trust me, you’re not!  These people are natural predators who know how to find human weaknesses and leverage circumstances.  The weak market and plight of many sellers are exactly the types of conditions that incubate fraudulent activity.

Distance yourself from the situation to fairly assess the facts.  When red flags are present you need an opportunity to think clearly.  Don’t rush to judgment at this point.

Compare the circumstances in question to the normal flow of a transaction.  Don’t be afraid to list your concerns about a transaction on a piece of paper.  Create two distinct columns, one that shows things the way they should be and another that shows things the way that they appear to be.  Richard Nixon did this often when making difficult decisions during his presidency.  Visual tools of this type are very useful in revealing the finer points of fraud.  Remember one simple premise: You can’t do indirectly that which you can’t do directly.

Discuss the situation with someone else.  Every title professional needs a trusted someone to rely on as a source of second opinions.  The person can be a spouse, colleague, or friend.  It’s not enough to write an email, the discussion has to take place in person or on the phone.   You might find that answers present themselves while exploring your fears in an environment where honesty is the only expectation.  It’s possible that the other person would simply listen without adding much to the dialog.  Hopefully, you feel comfortable approaching your underwriter when dealing with difficult business situations.

Take a stand.  This seemingly simple statement has far reaching implications.  A title provider’s license is essentially a social contract and a promise to protect the interests of others.  I usually recommend a verbal confrontation with fraudsters with a follow up letter to the FBI. 

My points:

• Mortgage fraud convictions are much harsher today than in the past.
• Mortgage fraud can’t exist without title company involvement.
• Title industry models lack competitive attributes to deter mortgage fraud.
• Corporate culture presents a practical dynamic for mortgage fraud prevention.
• Best practices that identify and prevent mortgage fraud can be implemented through training.

 

We need to admit that the industry, at this time, knows very little about offshored title orders or the long term effects of the practice.  We don’t know who is physically checking indexes, reviewing judgments, drawing descriptions, etc. or that traditional principles of abstracting are being upheld.  We know nothing of the training of personnel or the credentials of management. Why haven’t we seen virtual tours of the now notorious title plants sprinkled around the globe?  Are these places “digital sweatshops” that exploit innocent youths and other sources of cheap, untrained labor?  We don’t know because we have been intentionally kept in the dark.

The one thing we do know for certain: offshore title entrepreneurs lack access to the thorough compilations of information available domestically in local courthouses.

Perhaps underwriters are guilty only of failing to make a case for offshoring in the court of public opinion, but I have my doubts.  There’s clearly a general expectation that title work is completed by highly skilled, local professionals.  We live and work in an age of presumed transparency, yet title insurers incorrectly make the assumption that they are somehow exempt.

Underwriters could, if they wanted, eradicate any fallacies associated with the practice by commissioning a research project.  Title to a predetermined number of addresses could be searched by trusted domestic abstractors and their foreign counterparts.  Comparisons could be drawn and the validity of the study verified by independent sources.  The quality of a title search is quantifiable and associated risks measurable.   The question arises: at what quality low point should an abstracting source be eliminated?  In my opinion, any identified, heightened risk of claim above the accepted historical norm is a cause for concern by title agents, consumers, and regulators.  

I find any argument that offshored searches are cost effective to be misleading.  Cost effective for whom? Consumers would be more than willing to spend the extra money for a superior search product if they understood the claims dynamic.   For the most part, it appears that offshored title searches are used to increase the profitability of individual title companies who should consider charging appropriately for their professional services.

Have underwriters recently adopted a practice of instantly writing checks to accommodative the woes of their insureds who have filed claims.  I think not.  A title agent shouldn’t assume that all is well because underwriters have agreed to assume the inherent risk of offshored title searches.  Underwriters are notorious for pursuing their own agendas and time-frames while investigating claims without prioritizing the emotional and financial needs of their insureds.  A single claim holds the potential of destroying the reputation of a title company with hyper-localized business sources.   A claim is often a lengthy, nightmarish experience for consumers who are certain to publicize the fact that their title company screwed up.  It doesn’t matter that a consumer is ultimately made whole by the title insurer, the title company that issued the policy faces the distinct risk of losing business due to a loss of credibility.

Title agents need to consider other collateral damages that might surface in the “long tail” of a claim.  Though the underwriter has agreed to exculpate the title agent from any liability associated with an offshored search, there are other claims associated costs to factor into the equation.  Will the title agent be compensated fully, inclusive of possible loss of business, if required to spend time in depositions or to give testimony in court?  If, in fact, offshored title searches are more likely to cause claims than traditional searches: isn’t it reasonable to expect class action litigation or regulatory action?  Will title insurers assume the risk of the unforeseen or will title agents be left to fend for themselves?

Knowingly subjecting consumers to a heightened risk of claims is bad business that can only further tarnish the reputation of the title industry.  Underwriters have a moral obligation to fully explore the increased risks associated with offshored titles and to publicly disclose their findings.  A quality title search is the title industry’s most time honored tradition.  Who has the right to subvert its importance to perceived expediency or cost effective?  The definitive answer: no one, not even underwriters making false claims of increased profitability without liability.  Let’s not forget about the accountability of title agents and the mandate of the profession to promote the best interests of the public.  I normally advocate the rights of consumers above all else.  In the case of offshored title searches, I firmly believe that it’s a practice that promises detrimental consequences for consumers and title agents alike.

Yesterday, I received the following comment on my Active Rain blog:

“I am new to your site - google-alerts linked me to you.  I have 25 years experience as a Searcher/Examiner, primarily from Southern California working for most of the major underwriters.  The Title Industry has undergone tremendous change in those 25 years, probably more so than in any other time in it’s history.  This is true of any industry, and in most cases “change” in necessary and beneficial.  However, in the case of Title Insurance, this practice of outsourcing searching/examining and policy production is not necessary nor is it beneficial.  Those types of positions have traditionally been the training grounds for higher level positions within the industry.  When I came into the industry, all of the Managers and Executives in the Title Companies had worked there way from the entry level jobs.  However, today, fewer and fewer of the Managers and Executives in the Title Industry have that background.  These new Managers and Executives are implementing changes to an Industry that they have very little understanding of, and the effects of those changes have diminished what was once a high quality, low risk product.  Today, title insurance is all about short-sighted “bottom-line” and shareholder profits.  This is an industry that is under more and more scrutiny from regulators and consumer advocacy groups.  Title Insurance is a vital product, considering the amount of money consumers are investing in real estate.  The leadership of the Title Industry, being those Executives that are trying to maximize profits for shareholders, better come to the realization that conservative underwriting practices, which can only be applied by seasoned, experienced professionals, is the only way to plan for future success and longevity.  That cannot be accomplished by outsourcing. 

Okay, I’ll get off the soapbox and let someone else have a turn.  I’m glad to see there are so many other people out there that seem to share my opinions on this issue.”

Key Points as Talking Points:

• The title industry has undergone tremendous change in the past 25 years
• Change is necessary; Change is good
  
• The practice of offshoring title searches and policy production isn’t necessary … nor is it beneficial
• Title searching was once the training grounds for industry execs … it’s no longer true
• The change agents are corporate decision makers who don’t truly understand the industry dynamic
• Title insurance is, or should be, a low risk, high quality product that consumers … and real estate agents … and lenders can trust
• Title insurance is a vital product
• Conservative underwriting practices ensure the industry’s success and longevity
• Offshoring is not the answer to the industry’s profitability and credibility woes

On May 11, 2006, I had the pleasure of addressing a group of title professionals in Roanoke, VA.  This morning, by chance, I came across my speaking points from the event.  My introduction, which is rewritten for every presentation, was a bit surprising and revealing given the nature of recent discussions on this site.  The consumer was the primary focus of my talk.  I surmised then, as I fully accept now, that the future of the title professional lies solely in the consumer.

In Roanoke, I said:

My goal is to convince each of you of the need to step out of the role of a business person and assume the more serious role of a professional. 

A professional earns respect. 

A professional understands that there will be times when the answer must be no. 

A professional understands that all decisions aren’t necessarily business decisions. 

A professional places the interests of others ahead of personal interests. 

A professional understands that his, or her, services have great meaning to the community and are of great importance to others.

A professional weighs the moral and ethical implications of every decision.

Today you will frequently hear words that aren’t often used in our industry, words like: accountability, loyalty, duty, credibility, respect, obligation, responsibility, and courage.

Focus only on the consumer and you will depart this earth having left behind the legacy of a professional triumph.

Focus only on the consumer and you will be able to sleep at night.

Focus only on the consumer and your children will respect you and you will respect yourself.

My thoughts nearly two years later: 

My greatest fear is the industry’s subversion of professional standards to strictly pecuniary pursuits.  I feel that it’s possible for professionalism and business practices to converge and exist harmoniously, but I reject any argument that the title industry has attained such lofty heights, nor does it have the potential of doing so any time soon.  For the title community, the word “professionalism” only has meaning in the context of the consumer.   As the trend towards the foreign production of title abstracts and commitments gains popularity, the professional endeavor that is a title examination will follow the path of the horse drawn carriage.  Of course claims statistics will increase dramatically causing great harm to consumers.  

That is, unless title professionals set aside their differences to unite for a cause greater than themselves.

 The public at large, inclusive of public officials, has fallen prey to a canard that deceitfully portrays a title policy as having merit in and of itself.  You and I know that a title policy is worthless, possibly dangerous, if the process leading to its completion is dysfunctional.  And dysfunctional it is in January, 2008.  The public isn’t aware of the critical “back room” activities performed by “traditional” title agents because the activities have inexplicably been kept secret.  We’ve made the grievous, possibly fatal, error of selling title policies and settlement convenience, when we should have been been selling the importance of our skills, judgment, and experience.

At the end of the day, it could be said that the industry’s leadership is concerned only about the interests of the five largest players, soon to be four.

Recently, I was asked if I’ve published a list of upcoming speaking engagements.  I have not to date and probably won’t in the future.  Most of my speaking invitations come from corporations or professional trade associations.  The events are typically closed to the public.  My unusual credentials almost always draw a full house.

As you might imagine, the current housing crises has been “center stage” during my recent presentations.

This past Wednesday, I spoke to a responsive group of real estate agents in Frederick, Md.  The elevated degree of receptiveness to my perspectives was a pleasant surprise.

My talking points:

• Only by examining its causes do we surmise that mortgage fraud is properly characterized as a national epidemic, not a series of isolated incidents.  
• Only by scrutinizing the motives of mortgage fraudsters do we recognize the cultural corruption of an entire industry. 
• Mortgage fraud statistics correlate directly to foreclosure statistics which in turn point to a breakdown of professional protocol, and standards, in residential real estate markets.
• The disparities between mortgage fraud and predatory lending are academic at best.  Unethical, often criminal, behavior demonstrated by loan originators, appraisers, real estate agents, and title professionals is the real world nexus that definitively binds mortgage fraud to predatory lending. 
• Legislation and judicial interpretation are not the answers.  Heightened professional standards among real estate practitioners are the crux of the solution.
• Class action litigation will change the form and function of the real estate industry in the next decade.

In light of the subsequently released Bush initiative, I would add that it’s apparent that the feds don’t see housing values rebounding anytime soon.  If they did, the proposal would include a recapture provision if gains were realized when the select group of properties were sold.
  
Bob Carney, who extended the invitation to speak, graciously wrote a post about the presentation for his blog, Focus On Frederick.com.

Click here to read Bob’s thoughts about the lecture.

While preparing for the Frederick invitation, I prepared my own analysis of current foreclosure statistics. 

The results are startling:

It’s a generally accepted fact that 1 in every 196 U.S. households is currently in foreclosure.  Notice I said households.

The U.S. Census Bureau estimates that there were 116,011,000 households in this country in 2006.

Using that number as the basis, simple math tells us that 591,893 U.S. households face the distinct possibility of losing their homes at this time.

A recently released study commissioned by the The United States Conference of Mayors estimates that an additional 1,400,000 at least, will occur in 2008 representing a market value of $316,000,000,000.  You read it correctly, I said 316 billion dollars.

What’s all this mean in practical terms?  In the absence of intervention in one form or another, roughly 5,178,922 men, women, and children could lose their homes between now and the end of next year, or sometime soon thereafter.

The numbers above represent a situation where every person living in the Washington Metropolitan Area were to almost simultaneously lose their homes.  The densely populated area includes the District of Columbia, 5 Maryland counties, 9 Virginia counties, and 1 county in West Virginia.

It’s as though every person living in the Tampa - St. Petersburg Clearwater Area and the Denver - Aurora Area combined were to lose their homes.

It’s the numerical equivalent to every person residing in the state of Minnesota finding themselves without a place to live.

In 2008, a citizen of this country will be 9.25 times more likely to lose their home to foreclosure than to die of cancer in any form.

I still have date availability for 2008.  Let me know if your professional group, learning institution, non-profit, or company is interested in bringing me in for a presentation.